Which of the following would cause a rightward shift in the demand for Mexican pesos?

• A. A decrease in the price of Mexican exports
• B. A recession in Mexico that reduces Mexican imports from the U.S.
• C. A decrease in Mexican interest rates relative to U.S. interest rates
• D. An increase in U.S. tourists traveling to Mexico

Answer: (D)

Verified step by step guidance

1. Understand that a rightward shift in the demand curve for Mexican pesos means an increase in the quantity of pesos demanded at every exchange rate, indicating higher demand for pesos.
2. Recall that demand for a foreign currency (like Mexican pesos) increases when there is greater demand for goods, services, or assets priced in that currency, or when more people want to travel to that country.
3. Analyze each option: A decrease in the price of Mexican exports would typically increase demand for those exports, which could increase demand for pesos, but the problem states a decrease, so this might not cause a rightward shift.
4. A recession in Mexico reducing imports from the U.S. affects the supply side of pesos (Mexicans buying dollars), not the demand for pesos by foreigners, so it likely does not shift demand rightward.
5. An increase in U.S. tourists traveling to Mexico means more U.S. residents need pesos to spend in Mexico, directly increasing demand for pesos and causing a rightward shift in the demand curve.