On February 26, 2018, the market cost of a euro was US$1.23. Assume that a simple tall coffee at Starbucks in Barcelona and elsewhere in the euro zone cost 2.50 euros on that date. Assume too that a comparable tall coffee cost $2.00 at the Somerville, MA Starbucks (and presumably nationwide). Using no more than the naïve measure of competitiveness afforded by these data, calculate (showing your work) by how much (in percentage terms) the dollar is over- or undervalued vis-à-vis the euro. Be sure you have the units right and check your answer for logic.

Answer rating: 100% (QA)

Actual rate should be ... View the full answer