In considering the exchange rate and financial flows between two countries, the (uncovered) Interest Rate Parity theory says that: A) the currency of the country with the higher interest rate

In considering the exchange rate and financial flows between two countries, the (uncovered) Interest Rate Parity theory says that: A) the currency of the country with the higher interest rate is expected to depreciate in the future against the currency of the other country. B) the expected future value of the currency with the higher interest rate must be above its current value. C) contrary to popular opinion, an increase in a country’s interest rate, other things equal, will cause that country’s currency to depreciate. D) other things equal, higher inflation will cause a country’s currency to depreciate. E) the central bank must intervene when a country’s currency depreciates by too much. Justify the correct answer

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