Question

If the Peso depreciates, how does this affect consumers and exporters? are they benefited or negatively affected? explain why

Answer 1

When peso that is Mexican currency depreciates then the for the domestic consumers purchase of imported goods will be costlier. For example earlier exchange rate was

1 Peso = 3 INR

Now, 1 Peso = 2 INR

Before the rate change a good of 300 INR the mexican customer used to pay 100 peso after the devaluation of Mexican peso now for the same good they have to pay 150 peso.

The Mexican consumers are required to to pay more number of pesos after the devaluation.

In case of exporters they will be better of the exporter will be receiving more number of pesos.

Due to depreciation of Mexican Peso the exporters would get benefited while the domestic consumers will be worse off because they will be required to pay more number of pesos to purchase the imported goods.

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