You have recently been net surfing with your friends in Russia; the main topic of your recent e-mail exchange is the newest Dave Matthews Band CD.You inform your friends in Russia that you can purchase the CD at Tower Records for $11.99.You are told that in Russia the CD 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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The Answer of You have recently been net surfing with your friends in Russia; the main topic of your recent e-mail exchange is the newest Dave Matthews Band CD.You inform your friends in Russia that you can purchase the CD at Tower Records for $11.99.You are told that in Russia the CD 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.

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