Relative Interest Rate Levels Between Countries Is a Determinant That

Multiple Choice

Relative interest rate levels between countries is a determinant that will,from time to time,impact upon the equilibrium exchange rate.When considering the impact of relative interest rate differentials,which of the following is incorrect?

A) If an increase in the interest rate is a result of an increase in inflationary expectations, all else being constant, the currency will appreciate.
B) If an increase in the interest rate is due to an increase in the real rate of interest, all else being constant, the currency will depreciate.
C) Interest rate differentials must be viewed together with expected percentage changes in exchange rates over the period.
D) All of the given answers are correct.