You have decided to go on vacation to Italy. They use the euro as their country currency.
Assume the U.S. dollar exchange rate with the euro was $1.05 to purchase 1 euro when you planned your trip. The exchange rate goes to $1.30 to purchase 1 euro when you are ready to begin your trip. What has happened to the purchasing power of the U.S. dollar? What will happen to the price of the goods and services you purchase during your trip? Why?