In response to rising global inflation, Central Banks in eight closely integrated trading nations increase interest rates by an average of 2.0%. What is the most likely impact on one of these economies where its Central Bank decides to increase interest rates by only 0.5%?
Hot money will flow in, causing the exchange rate to appreciate
Hot money will flow in, causing the exchange rate to depreciate
Hot money will flow out, causing the exchange rate to appreciate
Hot money will flow out, causing the exchange rate to depreciate
