The local currency in Peru is the Peruvian Nuevo Sol (PNS). In 2020, the official exchange rate between the PNS and the USD was 3 (i.e., 3 PNS = 1USD). Table 1 gives local currency prices of three goods in Peru and the United States. Table 1 also gives the expenditure shares of each good (i.e., what fraction of total expenditures do people spend on each good). Item Table 1. Local Prices & Expenditure Shares in Peru and the U.S. Expenditure Share Prices in Local Currencies Corn (1 kg) T-Shirts (1 shirt) Rent (2 bedroom apartment) 0.3 0.2 0.5 PPP Exchange Rate: Peru 6 PNS 45 PNS 1,000 PNS U.S. 2 USD 6. Calculate and report the Purchasing Power Parity (PPP) exchange rate between the PNS and the USD. 15 USD 1,000 USD Peru's GDP per capita in USD using PPP Exchange Rate: 7. Peru's GDP per capita in 2020 was 18,000 PNS. Calculate and report Peru's GDP per capita in USD using the Official Versus PPP exchange rates. Peru's GDP per capita in USD using Official Exchange Rate: 8. Use the space below to discuss the difference in GDP per capita using the two different exchange rates. Which one is larger? Why?

ENGR.ECONOMIC ANALYSIS
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The local currency in Peru is the Peruvian Nuevo Sol (PNS). In 2020, the official exchange rate between
the PNS and the USD was 3 (i.e., 3 PNS = 1USD). Table 1 gives local currency prices of three goods in
Peru and the United States. Table 1 also gives the expenditure shares of each good (i.e., what fraction of
total expenditures do people spend on each good).
Table 1. Local Prices & Expenditure Shares in Peru and the U.S.
Item
Expenditure Share
Prices in Local Currencies
Peru
U.S.
Corn (1 kg)
T-Shirts (1 shirt)
Rent (2 bedroom apartment)
0.3
6 PNS
2 USD
0.2
45 PNS
15 USD
0.5
1,000 PNS
1,000 USD
6. Calculate and report the Purchasing Power Parity (PPP) exchange rate between the PNS and the USD.
PPP Exchange Rate:
7. Peru's GDP per capita in 2020 was 18,000 PNS. Calculate and report Peru's GDP per capita in USD
using the Official Versus PPP exchange rates.
Peru's GDP per capita in USD using Official Exchange Rate:
Peru's GDP per capita in USD using PPP Exchange Rate:
8. Use the space below to discuss the difference in GDP per capita using the two different exchange rates.
Which one is larger? Why?
Transcribed Image Text:The local currency in Peru is the Peruvian Nuevo Sol (PNS). In 2020, the official exchange rate between the PNS and the USD was 3 (i.e., 3 PNS = 1USD). Table 1 gives local currency prices of three goods in Peru and the United States. Table 1 also gives the expenditure shares of each good (i.e., what fraction of total expenditures do people spend on each good). Table 1. Local Prices & Expenditure Shares in Peru and the U.S. Item Expenditure Share Prices in Local Currencies Peru U.S. Corn (1 kg) T-Shirts (1 shirt) Rent (2 bedroom apartment) 0.3 6 PNS 2 USD 0.2 45 PNS 15 USD 0.5 1,000 PNS 1,000 USD 6. Calculate and report the Purchasing Power Parity (PPP) exchange rate between the PNS and the USD. PPP Exchange Rate: 7. Peru's GDP per capita in 2020 was 18,000 PNS. Calculate and report Peru's GDP per capita in USD using the Official Versus PPP exchange rates. Peru's GDP per capita in USD using Official Exchange Rate: Peru's GDP per capita in USD using PPP Exchange Rate: 8. Use the space below to discuss the difference in GDP per capita using the two different exchange rates. Which one is larger? Why?
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