International economics: International Finance Exchange rate theories: (a) What does the uncovered interest rate parity condition state? (b) What happens according to the uncovered interest rate parity to the exchange rate if the domestic central bank increases its interest rate? Please be able to explain with a graphical representation! (c) What is the empirical relevance of interest rate parity in explaining exchange rates? (d) What does purchasing power parity and the law of one price state? (e) What do both theories tell us about the effectiveness of sterilized and unsterilized foreign exchange interventions (make sure you understand the difference between sterilized and unsterilized interventions)? (f) What does empirical evidence tell us about the effectiveness of sterilized and unsterilized foreign exchange interventions? (g) What is the empirical relevance of PPP? Why might this be the case