Suppose that uncovered interest parity holds all the time (both in the short run and in the long run), while the purchasing power parity holds only in the long run because prices are sticky in the short run. What does this imply?
a) Exchange rates will always equalize interest rates in the short run.
b) Exchange rates will equalize interest rates only in the long run.
c) Exchange rates will equalize purchasing power in both the short and long run.
d) Exchange rates will be volatile due to fluctuations in interest rates.
