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    All other things being equal, which one of the following is the most likely effect on the uk economy of a change in the exchange rate from $ 1 = 60p to $1 = 80p

    the two answers I cannot choose between are C+D (answer is C)

    c) A rise in AD and a rise in inflationary pressure
    D) A fall in AD and a fall in inflationary pressure

    A strengthening pound is likely to increase the price of exports so surely AD goes down and thus inflationary pressures do to? Why is it not D?
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    The UK imports a lot of its goods, as imports are more expensive it is an inflationary pressure.

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