Assume: The current dollar-euro exchange rate E is $1.32 per euro. A U.S. basket that costs $120 would cost 100 in the Eurozone. For the next year, U.S. inflation is expected to be 6% and Eurozone inflation is expected to be 1%. d. Assume that 20% (or 1/5) of the deviation from PPP (i.e., 20% of the difference between q and 1) is eliminated each year through gradual adjustment (arbitrage). If so, what would be the expected level of q one year from now? [2] e. Based on the last answer, how much (in %) will the dollar be undervalued versus the euro next year, assuming nothing else happens? And what is the expected rate of change in a (i.e., what is Aq/q) from this year to next year? [2] f. Given the expected rate of change in q (in part e), and the expected inflation differential (in part a), what is the expected rate of nominal depreciation AE/E for the dollar (versus the euro) for the coming year? [2] Assume: The current dollar-euro exchange rate E is $1.32 per euro. A U.S. basket that costs $120 would cost 100 in the Eurozone. For the next year, U.S. inflation is expected to be 6% and Eurozone inflation is expected to be 1%. d. Assume that 20% (or 1/5) of the deviation from PPP (i.e., 20% of the difference between q and 1) is eliminated each year through gradual adjustment (arbitrage). If so, what would be the expected level of q one year from now? [2] e. Based on the last answer, how much (in %) will the dollar be undervalued versus the euro next year, assuming nothing else happens? And what is the expected rate of change in a (i.e., what is Aq/q) from this year to next year? [2] f. Given the expected rate of change in q (in part e), and the expected inflation differential (in part a), what is the expected rate of nominal depreciation AE/E for the dollar (versus the euro) for the coming year? [2]