1) When a country's goods and services are expensive relative to other countries', we say that its currency is ________ in terms of purchasing power parity.

A) overvalued

B) undervalued

C) rational

D) irrational

2) ________ in the foreign real interest rate causes the demand for domestic assets to increase and the domestic currency to ________, everything else held constant.

A) An increase; appreciate

B) An increase; depreciate

C) A decrease; appreciate

D) A decrease; depreciate