You are an American, working for a US hospital. The hospital agreed to buy from a German exporter a big piece of diagnostic equipment. The hospital agreed to pay the German exporter 1 million in 90 days. You have heard that the interest rates between the European Union and the US are expected to be quite different in the next 3 months: the European interest rates will be twice as those in the US. According to _____, you should expect the US Dollar to _______ relative to the Euro.

- International Fisher Effect; Appreciate

- Law of one price; Appreciate

- PPP theory; Depreciate