You Have Recently Been Net Surfing with Your Friends in Russia;the

question 67

Essay

You have recently been net surfing with your friends in Russia;the main topic of your recent e-mail exchange is the newest Drake album.You inform your friends in Russia that you can purchase the album at a U.S.seller for $11.99.You are told that in Russia the album costs 70,000 rubles.Suppose that the current dollar/ruble exchange rate is 1 ruble = $.000175 (or equivalently $1 = 5,714 rubles).According to the purchasing power parity view of exchange rate calculations,does the current exchange rate represent a long-run equilibrium exchange rate? Is the dollar overvalued or undervalued? The ruble? Explain.

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Definitions:

Consistent

Referring to the characteristic of being steady, reliable, and uniform over time.

Over Time

This term refers to the concept of a duration or period extending beyond the usual or expected time, often used in contexts ranging from work hours to the study of change.

Behavioral Economics

The subfield of economics that integrates the insights of psychology

Inconsistent

Lacking compatibility or uniformity, or displaying variance and contradiction within a stated set of facts or values.