Suppose that Mexico and Canada both peg their currencies to the U. S. dollar. Now suppose that the U. S. dollar depreciates by 50% against the euro, the pound, and the yen. Which country (Canada or Mexico) will find it more difficult to maintain its peg against the U. S. dollar? Group of answer choices

Mexico will find it more difficult to maintain its peg against the u.s dollar.

Explanation:

A dollar peg is when a country maintains its value of currency at a fixed exchange rate to the U.S. dollar.

Canada does not peg its currency to the US dollar because it wants to persue its own monetary policy. If the Canadian economy needs a boost, then the Bank of Canada is free to reduce its prime inerest rate and the international market to depress the Canadian Dollar(CAD) which would make our exports cheaper.

Canada does not want to be a junior partner of a monetary unit with the US. It is bad enough to be joined at the hip with an elephant you don't want the elephant to roll over on you.

Canada does not want to play a similar role than Greece does inside the European Union and the Euro which is controlled by Germany.

No currency can be said to be worth less or more than others in absolute terms, only how they behave with respect to each other. Otherwise, you would have that Europe and the UK.

In particular, has a currency worth 35% more than the USD, and that is a silly interpretation because it is relative to the cost of living, prices adjust and at the end, the same thing you would buy somewhere else may cost the same in another country after currency conversion. Some countries even undervalue or overvalue their currencies.

So, Mexico finds more difficulties.

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