1. Fill in the blanks. Lets suppose U.S. inflation is 6% and Mexicos inflation is 3%. Further assume the U.S. dollar depreciates about 3% relative to the MXN (meaning the MXN appreciates approximately _____%). The U.S. is not going import more just because Mexicos inflation is lower than the U.S.s. Why? The U.S. importer finds that buying MXN currency at a _________% higher price and then paying __________% higher prices for goods denominated in MXN than they did a year ago results in, effectively, a ________% increase in the cost of buying Mexican goods. Thats the same price increase the U.S. buyer sees at home! Importing from Mexico is no more attractive (but no less either) than it used to be.