EBK PRINCIPLES OF ECONOMICS
8th Edition
ISBN: 8220103600453
Author: Mankiw
Publisher: CENGAGE L
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Chapter 3.2, Problem 2QQ
To determine
Crusoe’s absolute and comparative advantage .
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Responsd to Luis Rodriguez
1800 tons of pomegranates a year is a lot of sweetness!
So, you can get 71 Afghanis for $1? How cool. Does that mean you can buy a lot of stuff in Afghanistan for only $1? How do you know that your purchasing power in Afghanistan is stronger than in the United States?
Yes, with an exchange rate of 71 Afghan Afghani for 1 US dollar, you can buy many things in Afghanistan for just $1. However, purchasing power isn't solely determined by the exchange rate. It also depends on the cost of goods and services in each country. For example, if a meal in Afghanistan costs 200 Afghanis, you would need about $2.82 to buy that meal in US dollars (since 200 Afghanis divided by 71 Afghanis per dollar equals approximately $2.82). So, while the exchange rate allows you to get more Afghanis for your dollars, you also need to consider how much things cost in Afghanistan.
Now that the world seems to like Afghani stuff and is buying more of it, does that mean your…
Chapter 3 Solutions
EBK PRINCIPLES OF ECONOMICS
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- 1. 1800 tons of pomegranates a year is a lot of sweetness! Summertime is approaching, and you decide to spend your summer vacation with your Aunt Zahra who lives in Jalalabad. Jalalabad is one of the major cities in Afghanistan and is known for its rich cultural heritage. It also has economic importance and is especially well-known for its luscious fruits, such as pomegranates, grapes, and mulberries, and also for its beautiful mountains. Your plan is to travel around while there visiting national parks and local villages and to purchase locally made gifts for your family and friends who live in the United States. Part of your trip plan is to figure out how much money you will need to bring with you to Afghanistan. You learned that the exchange rate is 71 Afghan Afghani for 1 US dollar. Now, you are one month away from your departure time to Jalalabad, and as you were surfing the net to learn about the country and to learn a few greeting words in Afghani, you came across a recent…arrow_forwardAn economy originally operates at the full employment output level. Suppose the economy suddenly experiences a rapid growth in aggregate demand. a. With the aid of an AS-AD diagram, explain why there will be inflationary pressure in the short run. b. suppose the government does not intervene. Using the same diagram in part (a) and with reference to the market adjustment mechanism from the short run to the long run, explain whether the inflationary pressure can be relieved in the long run. C. With the aid of another diagram, suggest ONE fiscal policy that can deal with the inflation. Suggest THREE methods that the government can use to promote economic growth in the long run.arrow_forwardThe table below shows pizza topping preferences for Marcus, Dakota, and Austin, and that each individual has strictly transitive preferences. Suppose that three individuals make up our "society." In this society, prefer pepperoni to cheese pizza; _prefer cheese to supreme; and prefer supreme to pepperoni. This example illustrates that _ Person Marcus Dakota Austin 0000 First Preference Pepperoni Supreme Cheese Second Preference Cheese Pepperoni Supreme Third Preference Supreme Cheese Pepperoni two-thirds; two-thirds; two-thirds; even if individuals' preferences might satisfy the transitive property, societal preferences may not. two-thirds; two-thirds; everyone; if individuals' preferences satisfy the transitive property, societal preferences must also. two-thirds; two-thirds; everyone; even if individuals' preferences might satisfy the transitive property, societal preferences may not. two-thirds; two-thirds; two-thirds; if individuals' preferences satisfy the transitive property,…arrow_forward
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