Given the information in the table below, what is country A's real aggregate product in B$ at constant purchasing.power of year 2 for years 1, 2, and 3 respectively? Remember: step 1, make sure that the general price index has the correct base year; step 2, transform the nominal aggregate- product in AS into the real aggregate product in A$ using the correct general price index; and step 3, transform the real aggregate product in AS into the real aggregate product in B$ using the correct exchange rate (and pay attention that exchanges rates are BS/AS, so you may need to use division or multiplication). Year 1 Year 2 Year 3 Country A's nominal aggregate product in the local currency A$. A$1000 A$1500 A$1800 Country A's general price index. 1.000 1.250 1.200 Country B's nominal aggregate product in the local currency BS. B$2160 B$2592 "B$3888 Country B's general price index. 0.500 0.625 1.000 Market exchange rate (BS/AS). 1.00 1.20 1.35 PPP exchange rate (B$/AS). 1.50 1.80 2.00

Given the information in the table below, what is country A's real aggregate product in B$ at constant purchasing.power of year 2 for years 1, 2, and 3 respectively? Remember: step 1, make sure that the general price index has the correct base year; step 2, transform the nominal aggregate- product in AS into the real aggregate product in A$ using the correct general price index; and step 3, transform the real aggregate product in AS into the real aggregate product in B$ using the correct exchange rate (and pay attention that exchanges rates are BS/AS, so you may need to use division or multiplication). Year 1 Year 2 Year 3 Country A's nominal aggregate product in the local currency A$. A$1000 A$1500 A$1800 Country A's general price index. 1.000 1.250 1.200 Country B's nominal aggregate product in the local currency BS. B$2160 B$2592 "B$3888 Country B's general price index. 0.500 0.625 1.000 Market exchange rate (BS/AS). 1.00 1.20 1.35 PPP exchange rate (B$/AS). 1.50 1.80 2.00

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Given the information in the table below, what is country A's real aggregate product in B$ at
constant purchasing.power of year 2 for years 1, 2, and 3 respectively? Remember: step 1, make
sure that the general price index has the correct base year; step 2, transform the nominal aggregate
product in A$ into the real aggregate product in AS using the correct general price index; and step
3, transform the real aggregate product in AS into the real aggregate product in B$ using the
correct exchange rate (and pay attention that exchanges rates are B$/A$, so you may need to use
division or multiplication).
Year 1
Year 2
Year 3
Country A's nominal aggregate
product in the local currency A$.
A$1000
A$1500
A$1800
Country A's general price index.
1.000
1.250
1.200
Country B's nominal aggregate
product in the local currency BS.
B$2160
B$2592
"B$3888
Country B's general price index.
0.500
0.625
1.000
Market exchange rate (BS/AS).
1.00
1.20
1.35
PPP exchange rate (BS/A$).
1.50
1.80
2.00

Year 1
Year 2
Year 3
Country A's nominal aggregate
product in the local currency A$.
A$1000
A$1500
A$1800
Country A's general price index.
1.000
1.250
1.200
Country B's nominal aggregate
product in the local currency B$.
B$2160
B$2592
B$3888
Country B's general price index.
0.500
0.625
1.000
Market exchange rate (B$/A$).
1.00
1.20
1.35
PPP exchange rate (B$/A$).
1.50
1.80
2.00
a.. None of the alternatives is correct.
O b. B$2250, B$2700 and B$3375.
O c. B$694, B$833 and B$1042.
O d. B$1500, B$1800 and B$2250.
O e. B$1875, B$2700 and B$3750.

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