Assuming exchange rates are allowed to fluctuate freely, which one of the following factors would likely cause a nation's currency to appreciate on the foreign exchange market?
a. A relatively rapid rate of growth in income that stimulates imports.
b. A high rate of inflation relative to other countries.
c. A slower rate of growth in income than in other countries, which causes imports to lag behind exports.
d. Domestic real interest rates that are lower than real interest rates abroad.
Answer: c.