The opening of Russias market has resulted in a highly volatile Russian currency (the ruble). Russias inflation
Question:
a. Explain why the high Russian inflation has put severe pressure on the value of the Russian ruble.
b. Does the effect of Russian inflation on the decline in the ruble’s value support the PPP theory? How might the relationship be distorted by political conditions in Russia?
c. Does it appear that the prices of Russian goods will be equal to the prices of U.S. goods from the perspective of Russian consumers (after considering exchange rates)? Explain.
d. Will the effects of the high Russian inflation and the decline in the ruble offset each other for U.S. importers? That is, how will U.S. importers of Russian goods are affected by the conditions?
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