Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume there are two countries, one rich and one poor, and the only goods they produce are computers and ice cream. Computers are tradable

Assume there are two countries, one rich and one poor, and the only goods they produce are computers and ice cream. Computers are tradable and ice cream is not. The rich country produces 12 units of computers and 4 units of ice cream per capita, the poor country 3 units of computers and 1 unit of ice cream per capita. In the rich country, the price of computers is 2 and the price of ice cream is 4 (in the currency of the rich country). In the poor country, the price of both computers and ice cream is 1 (in the currency of the poor country). (a) Compute the GDP per capita in the home currency in each country. (b) Determine the market exchange rate between the two currencies. What is the ratio of GDP per capita between the two countries based on the market exchange rate?

Step by Step Solution

3.51 Rating (154 Votes )

There are 3 Steps involved in it

Step: 1

The detailed ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Macroeconomics

Authors: Stephen d. Williamson

5th Canadian edition

133847144, 9780134604794 , 978-0133847147

More Books

Students also viewed these Accounting questions

Question

What are the attributes of a technical decision?

Answered: 1 week ago

Question

Why do macroeconomists work with seasonally adjusted data?

Answered: 1 week ago