Solve the following problem:
Impact of Economy on Exchange Rate
The country of Quinland 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. You expect that the inflation rate in Quinland will be 1 percent this coming year, while the U.S. inflation rate will be 9 percent. You expect that Quinland's interest rate will be 2 percent during the next year, while the U.S. interest rate will rise to 10 percent during the next year. Quinland's currency adjusts in response to market forces. Will Quinland's currency appreciate, depreciate, or remain unchanged against the dollar?