Assume that you are studying exchange rates between India and the US. Assume that the equilibrium exchange rate in India is 76 Indian rupees per US dollar. Now suppose that the inflation rate falls in India. Which of the following choices shows a change we would expect to see in the Indian forex market? The demand for the US dollar would rise, leading to a depreciation of the Indian rupee. The demand for the Indian rupee would increase leading to an appreciation of the US dollar. The supply of the Indian rupee would rise leading to an appreciation of the Indian rupee. The supply of the US dollar would rise leading to an appreciation of the Indian rupee

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