4x Mexico is experiencing high inflation while Canada is enjoying a steady GDP and stable inflation "What should happen in the foreign exchange market? A a depreciation of Mexico's currency B B a decrease in the supply of Mexico's currency C a decrease in the demand for Canada's currency D an increase in the supply for Canada's currency E an increase in the demand for Mexico's currency

## Step 1<br />The problem involves understanding the dynamics of the foreign exchange market in relation to economic indicators such as inflation and GDP. The foreign exchange market is a global decentralized market where currencies are traded. The value of a currency in the foreign exchange market is determined by the supply and demand for that currency.<br /><br />## Step 2<br />In this case, Mexico is experiencing high inflation, which means that the purchasing power of its currency is decreasing. This would lead to a decrease in the demand for Mexico's currency, as it becomes less attractive to hold.<br /><br />## Step 3<br />On the other hand, Canada is experiencing steady GDP and stable inflation, which means that the purchasing power of its currency is stable. This would lead to an increase in the demand for Canada's currency, as it becomes more attractive to hold.<br /><br />## Step 4<br />Therefore, the correct answer is A, a depreciation of Mexico's currency. This is because the decrease in demand for Mexico due to high inflation would lead to a depreciation of the currency foreign exchange market.