The correct answer is: A reduction in the rate of cost push inflation

Rationale: An increase in the exchange rate makes a country's exports more expensive to overseas buyers, and imports cheaper: it therefore has the opposite of the first three effects. The lower cost of imports, however, is likely to reduce the rate of domestic inflation.

Pitfalls: The permutations of increases/decreases in interest rate can be confusing: ensure that the logic makes sense to you!

Ways in: You could group 'An increase in the costs of imports from Country X' and 'Reducing demand for imports from Country X' together (increased cost = reduce demand): since both cannot be the answer, and there is only one answer, neither of these options can be correct. This gets you quite a long way towards the solution. So if you don't know an answer, don't panic: logic can often help!