1. For each of the following, determine whether inflation expectations, demand-pull inflation, or cost-push inflation-and hence inflation overall-will change.

a) A rapid influx of foreign investment causes the output gap to become more positive.

b) The president unexpectedly announces a tariff on aluminum and steel.

2. In January 2019, inflation expectations in the United Kingdom fell from 2.9% to 2.6%. What effect will this have on inflation in the United Kingdom if nothing else changes in the economy? Explain your reasoning.

3. Since 2010, the U.S. dollar has appreciated relative to the Mexican peso. What are the direct and indirect effects on inflation? Explain.