Which of the following would increase the supply of U.S. dollars in the foreign exchange market?

1. inflation in the U.S. economy
2. an increase in U.S. imports
3. an increase in tourism to the United States
4. higher interest rates in the United States
5. higher economic growth abroad

Which of the following is most likely to cause an appreciation of the U.S. dollar against the Mexican peso?

1. an increase in Americans traveling to Mexico
2. an increase in imports from Mexico
3. a decrease in U.S. interest rates
4. an increase in U.S. growth
5. an increase in U.S. exports to Mexico

Suppose the central bank of country X decides to increase interest rates. Which of the following effects will this decision have on the currency and trade balance of country X, assuming country X is operating under a floating exchange rate regime?

1. no effect
2. depreciate the currency and worsen the trade balance
3. depreciate the currency and improve the trade balance
4. appreciate the currency and worsen the trade balance
5. appreciate the currency and improve the trade balance