1. China is being accused by Western countries of setting the value for its domestic currency too low. All else equal, which one of the following statements might describe the impact of an undervalued domestic currency on the Chinese economy?
   1. The prices of imported goods would be artificially low for Chinese consumers.
   2. Inflation pressure would tend to decrease in the Chinese economy.
   3. The Chinese money supply would tend to increase.
   4. The balance in the capital account would improve for China.