In August $2007,$ a sharp downturn in the U.S. housing market reduced the income of many who worked in the home construction industry. A Wall Street Journal news article reported that Walmart's wire-transfer business was likely to suffer because many construction workers are Hispanics who regularly send part of their wages back to relatives in their home countries via Walmart. With this information, use one of the principles of economy-wide interaction to trace a chain of links that explains how reduced spending for U.S. home purchases is likely to affect the performance of the Mexican economy.

Key Concepts: Us Housing Market, Walmart'S Wire-Transfer Business, Hispanic Construction Workers, Mexican Economy, Principles Of Economy-Wide Interaction, Reduced Spending Explanation: The question discusses a causal chain of links that explains the effect of reduced spending on home purchases in the US on the Mexican economy, through its impact on Hispanic construction workers and Walmart's wire-transfer business. The question requires an application of the principles of economy-wide interaction to understand the interconnectivity of these economic agents. Step by Step Solution: Step 1. The reduction in the US housing market's income led to a decrease in spending on home purchases. This affected construction workers by reducing their wages and cutting hours, especially for the Hispanic workers who are a significant portion of the industry. Step 2. The reduction in wages and hours of Hispanic construction workers led to a decrease in their remittances, i.e., money sent back to their home countries, to support their families. Walmart's wire-transfer business, which is a significant source of remittances for Hispanics, is expected to be negatively impacted by this decrease. Step 3. The decreased demand for Walmart's wire-transfer business services would lead to a reduction in its revenues, profits, and customer base. Furthermore, this could lead to a ripple effect on the Mexican economy, which is heavily dependent on remittances. If the trend continues, it could lead to a decline in the Mexican economy, affecting its growth, investments, and employment rates. Step 4. Overall, the reduced spending on home purchases in the US, due to the sharp downturn in the housing market, is expected to have a direct impact on Hispanic construction workers, Walmart's wire-transfer business, and the Mexican economy. The reaction of all these economic agents can be explained using principles of economy-wide interaction. Final Answer: The reduction in spending on home purchases in the US is expected to lead to a decrease in remittances sent back to Mexico by Hispanic construction workers. Walmart's wire-transfer business is likely to suffer, leading to a decrease in the revenues and profits of the company. The impact of reduced remittances on the Mexican economy, which is heavily dependent on them, could lead to a decline in the growth, investments, and employment rates of the country. Therefore, the reduced spending in the US housing market could have a ripple effect that eventually affects the performance of the Mexican economy.