1. A basket of goods costs $3,850 in the U.S. Exact same goods basket costs €3,100 in Europe. The exchange rate is $1.26/€
A. What is the over/undervaluation of the USD? (percent)
B. What is the over/undervaluation of the €? (percent)
2. Regarding Q1, how much cheaper/more expensive is the U.S. basket than the European basket? (in percentage terms)