What is the probable effect of each of the following on the exchange rate of a country, other things being equal?
- The quantity of oil imports is greatly decreased, but the value of imported oil is higher due to price increases.
- The country's inflation rate falls well below that of its trading partners.
- Rising labor costs of the country's manufacturers lead to a worsening ability to compete in world markets.
- The government greatly expands its gifts of food and machinery to developing countries.
- A major boom occurs with rising employment.
- The central bank raises interest rates sharply.
- More domestic oil is discovered and developed.
Which two of these do you think would have the greatest impact on the exchange rate?