1. **State the problem:** Expand the expression $ (xy)^3 $. 2. **Formula used:** The power of a product rule states that $ (ab)^n = a^n b^n $. 3. **Apply the rule:** Using this, we get $$ (xy)^3 = x^3 y^3 $$ 4. **Explanation:** When raising a product to a power, each factor inside the parentheses is raised to that power separately. 5. **Final answer:** $$ (xy)^3 = x^3 y^3 $$