Question

4. The exchange rate between the US and Mexico is $0.053531/MXN. The US exports $294.0 billion of goods and services to Mexico and Mexico exports MXN 5,972.0 billion of goods and services to the US. (MXN is the symbol for Mexican pesos.) a. Calculate the indirect (USD/MXN) exchange rate to 4 decimal places (for example, Xxxxx). b. Calculate the value of US exports to Mexico in Mexican pesos. C. Calculate the value of US imports from Mexico in US Dollars. d. Calculate the amount of the Mexico trade surplus or (deficit) with the US in Mexican Pesos. e. Calculate the amount of the US trade surplus or (deficit) with Mexico in US Dollars.

Answer 1

G H 1 a) 2 C D E F Exchange rate = $0.053531/MXN i.e 1 Mexicon Peso can buy $0.053531 If we reverse this, we get $1 can buy (1/0.053531) MXN; $1 can buy 18.6808 MXN 6 b) 8 US exports $294 billion to Mexico We know that $1 is same as 18.6808MXN So, $294 billion = 294*18.6808 MXN 5492.14474 billion MXN 11 c) 12 13 US imports MXN 5972 billion from Mexico We know that 1MXN is same as $0.053531 So, MXN 5972 bilion will be 5972*0.053531 $ 319.6871 billion 15 16 d) 18 Mexico imports 5492.144739 billion MXN from US Mexico exports 5972 billion MXN to US Trade surplus = Exports - Imports =5972-5492.144739 Trade surplus 479.8553 billion MXN 19 US imports $319.6871 billion from Mexico US exports $294 billion to Mexico Trade surplus = Exports - Imports = 294-319.6871 Trade surplus : $ (25.6871) billion trade surplus is negative, meaning US has a trade deficit