Question 1: A large increase in the income level in Mexico along with no growth in the U.S. income level is normally expected to cause (assuming no change in interest rates or other factors) a(n) ______ in Mexican demand for U.S. goods, and the Mexican peso should _______.
a. increase; appreciate
b. increase; depreciate
c. decrease; depreciate
d. decrease; appreciate
Question 2: Assume that the inflation rate becomes much higher in the U.K. relative to the U.S. This will place ____________ pressure on the value of the British pound. Also, assume that interest rates in the U.K. begin to rise relative to interest rates in the U.S. The change in interest rates will place ____________ pressure on the value of the British pound.
a. upward; downward
b. upward; upward
c. downward; upward
d. downward; downward