Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![Suppose that there are only two goods produced in the world: Chairs and
Pencils.
Chairs are the good traded in the world market.
The following table shows information on the production and prices of Chairs
and Pencils in two
countries A and B.
Assume that the population is 1.
Quantity and Price (of Chair and Pencil in Countries A and B)
Chairs produced
Pencils produced
Price of pencil. in
local currency
Country
Price of Chair in
local currency
Per capita
Per capita
A
20
B
4
10
4
2
1)What is the market exchange rate between the currencies the two countries.
0.67
1.5
0.25
4
2)Calculate the ratio of GDP/capita in country A to GDP/capita in country B,
using the PPP exchange rate.
3.87
0.11
0.17](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc4dab013-1a77-42fd-a905-ca25e3c98bb6%2Fe06faefc-dfbc-478e-bb62-60da538b9a71%2F8swaapj_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Suppose that there are only two goods produced in the world: Chairs and
Pencils.
Chairs are the good traded in the world market.
The following table shows information on the production and prices of Chairs
and Pencils in two
countries A and B.
Assume that the population is 1.
Quantity and Price (of Chair and Pencil in Countries A and B)
Chairs produced
Pencils produced
Price of pencil. in
local currency
Country
Price of Chair in
local currency
Per capita
Per capita
A
20
B
4
10
4
2
1)What is the market exchange rate between the currencies the two countries.
0.67
1.5
0.25
4
2)Calculate the ratio of GDP/capita in country A to GDP/capita in country B,
using the PPP exchange rate.
3.87
0.11
0.17
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