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:

Innervates

Supplies an organ or other body part with nerves.

Olfactory Nerves

The set of nerves responsible for the sense of smell, conveying sensory information from the nose to the brain.

Trochlear Nerves

Cranial nerves responsible for the movement of the eyes, specifically controlling the superior oblique muscle for rotational movement.

Facial Nerves

The seventh cranial nerves that control the muscles of facial expression, convey taste sensations from the anterior two-thirds of the tongue, and supply glands in the head or neck.