_ 13. Suppose spot exchange rate Ef$ = 85. If the price of a music compact disc (CD) is $18 in the US. and the 14. _ 15. same CD costs 1,900 yen in Japan, then the dollar price ofCDs sold in Japan is , which implies the law of one price a. $105.55; does not hold b. $13; holds c. $10.5; does not hold d. $21; does not hold e. $22.35; does not hold Suppose the spot exchange rate between the euro and the dollar is Eye = 1.29. while the purchasing power parity rate is 1.02. This implies: a. the dollar is overvalued with respect to the euro. b. the cost of a European market basket converted to dollars is lower than the cost of the U.S. market basket. 0. on an average goods cost more in the U.S. than in Europe. d. the euro is overvalued with respect to the dollar. e. the dollar will buy more in other countries than in the U.S. Suppose the interest rate parity holds between Mexico (domestic country) and England (foreign country). Suppose the pesofpound exchange rate is expected to increase. Ceteris parihus, this would increase , cause investors to demand more and increase the a. the Mexican rate of return; pesos; poundr'peso exchange rate b. the British rate of return; pounds; pesolpound exchange rate 0. the Mexican rate of return; pesos; peso/pound exchange rate d. the British rate of return; pesos; pesofpound exchange rate e. the British rate of return; pounds; poundr'peso exchange rate _ 16. Consider a F orex market where dollars are traded for pounds. Suppose the US. interest rate rises, leading to an increase in the demand for dollars. This will cause the demand curve of pounds to , the supply curve of pounds to ; leading to a(n) in E\". a. shift rightward; shift leftward, increase b. shift leftward; shift rightward; fall c. shift rightward; remain unchanged; increase d. remain unchanged; shift leftward; increase e. shi leftward; remain unchanged; fall