Suppose that in December 2005, the euro exchange rate with the RON (the Romaniancurrency) is 0.2620 €/RON. Over the year 2006, the Romanian inflation rate is 9.7%, and theEuro area inflation rate is 2%. If the exchange rate at the end of the year 2006 is 0.2735 €/RON,does the RON appear to be overvalued, undervalued, or at the PPP level? Explain. What if instead Romanian inflation were 2% and the Euro area inflation rate were 10% over the year? Explain why your answer changes.