1.Which of the following is not an example of direct intervention in foreign exchange markets?

a. exchanging dollars for foreign currency.

b. increasing the inflation rate.

c. b and c above.

d. lowering interest rates.

2.Assume that interest rate parity holds. The Mexican interest rate is 15%, and the U.S. interest rate is 8%.Subsequently, the U.S. interest rate decreases to 7%. According to interest rate parity, the peso's forward ____will ____.

	a.	premium; decrease
	b.	premium; increase
	c.	discount; decrease
	d.	discount; increase