The U.S. bi-lateral real exchange rate with Mexico is defined as S/(PMEX/PUS), where S is the nominal exchange rate in pesos per U.S. dollar (pesos/$), PMEX is the Mexican consumer price level, and PUS is the U.S. consumer price level. What would the effect on U.S. competitiveness be, other things being equal, of: a. A fall in the peso relative to the dollar? b. A rise in Mexican inflation? c. A rise in U.S. inflation? d. A simultaneous rise in the peso and.

1. The U.S. bi-lateral real exchange rate with Mexico is defined as S/(PMEX/PUS), where S is the
nominal exchange rate in pesos per U.S. dollar (pesos/$), PMEX is the Mexican consumer price
level, and PUS is the U.S. consumer price level. What would the effect on U.S. competitiveness
be, other things being equal, of: a. A fall in the peso relative to the dollar? b. A rise in Mexican
inflation? c. A rise in U.S. inflation? d. A simultaneous rise in the peso and