Under a floating exchange rate system, which of the following combinations of macroeconomic developments is most likely to cause a country's currency to depreciate?
A fall in the domestic rate of inflation relative to trading partners and a rise in domestic interest rates relative to those abroad
An increase in foreign tourism into the country and a rise in foreign demand for domestic government bonds
A decrease in domestic interest rates relative to those abroad and an increase in the domestic rate of inflation relative to trading partners
A decline in domestic consumer preferences for imported products and an increase in the volume of goods exported
30 exam-style questions on OCR A Level Economics Exchange rates. Each one has a worked solution and a mark scheme showing where the marks go.