The

country of Luta has large capital flows with the United

States. It has no trade with the United States and will

not have trade with the United States in the future. Its

interest rate is 6 percent, the same as the U.S. interest

rate. Its rate of inflation is 5 percent, the same as the

U.S. inflation rate. You expect that the inflation rate in

Luta will rise to 8 percent this coming year, while the

U.S. inflation rate will remain at 5 percent. You expect

that Luta's interest rate will rise to 9 percent during the

next year. You expect that the U.S. interest rate will

remain at 6 percent this year. Do you think Luta's

currency will appreciate, depreciate, or remain

unchanged against the dollar? Briefly explain.