Question: 2. The covered interest parity condition does not hold with i > i't , where i is domestic interest rate, i is foreign interest rate,

2. The covered interest parity condition does not hold with i > i't , where i is domestic interest rate, i is foreign interest rate, F the forward exchange rate, and R is the spot exchange rate. In this situation, which of the following events should occur in the short run. A) The the spot price of foreign exchange rises. B) The forward price of foreign exchange rises. C) Domestic inflation increases. D) Foreign inflation increases

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