Between 1995 and 2005 the Euro/$ exchange rate moved from Euro 1.7/$ to Euro 1.4/$. During the same time period the consumer price index in Europe rose from 90 to 100 and the US CPI rose from 80 to 115.

a) if PPP held over the period what would the Euro /$ exchange rate have been in 2005?

b) what is the real value of the Euro in 2005?

c) what was the percent change in the real value of the Euro over this time period? what has happened to the purchasing power of the euro?