Describe what is happening in Italy (or you may substitute Argentina or Iran) and how that might impact things like exchange rates, inflation and/or interest rates. Solution Let we take example of Iran, As we all know that USA has put a number of sanctions on Iran due to which trade with Iran is difficult, Country like India which Import a major portion of its crue oil import from Iran, now after these sanctions, India could not buy crude oil from Iran and this will also happen with other countries too. So this types of sanctions will force Countries like India to look for another partner for Oil import and this will have impact on its currency exchange rates as other oil exporting countries may demand different price for the crude oil. on other hand after so many sanctions Supply of curde oil will increase and prices may also increases which will result in more pressure on countries and this will have impact on exchange rate and when prices of crude oil will increase it will impact economy and inflation will also increase and general price level will also increase..