The following sub-questions are about different factors that determine the exchange rate.

a)Suppose that Wonderland has a fixed exchange rate versus the U.S. dollar. If foreign investors become convinced that Wonderland's currency is overvalued, what actions might they take to profit from this conviction? How would these actions affect Wonderland in maintaining the value of its currency versus the dollar? Explain. [5 marks]

b) A country experiences a fall in its exports while they increase trade barriers on imports. Explain what happens to the country's currency in the long run.[5 marks]

c)If expected inflation drops in the UK, what will happen to the exchange rate for the Euro per British Pound? [ 6 marks]