Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Do not only give the solutions, but also clearly explain your derivations.Macro help please Exercise 2 Suppose that there are two countries, The Netherlands (NL)

image text in transcribed

Do not only give the solutions, but also clearly explain your derivations.Macro help please

image text in transcribed
Exercise 2 Suppose that there are two countries, The Netherlands (NL) and the U.S. Both countries produce two goods, good 1 and good 2. Prices in The Netherlands are expressed in euro (E), U.S. prices are expressed in U.S. dollars ($). The table below gives production quantities and prices of both goods in both countries. NL U.S. Quantity . of good 1 35 150 . of good 2 40 75 Price . of good 1 Eg $15 . of good 2 E20 $20 Construct a basket of good 1 and good 2 that costs $1 in the U.S., with the same composition as U.S. GDP (i.e. make sure that the share of each of both goods in the basket is the same as their share in U.S. GDP). Compute then the following variables: 1. Compute the quantity of good 1 in this basket (91.b). 2. Compute the quantity of good 2 in this basket (q2,b). Introduce now a fictitious currency, called the international dollar (IS). Assume that the price in international dollars of the basket which you constructed above (i.e. of the basket that consists of the quantities of goods 1 and 2 which you computed in the two previous questions) is exactly I$ 1. Compute then the following variables: 3. Compute GDP in the U.S. in I$ (Yus). 4. Compute the price in The Netherlands in euro of the basket which you constructed above (pb, NL). 5. Compute GDP in The Netherlands in I$ (YNL)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

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

Step: 3

blur-text-image

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

Foundations Of Global Financial Markets And Institutions

Authors: Frank J. Fabozzi, Frank J. Jones, Francesco A. Fabozzi, Steven V. Mann

5th Edition

0262039540, 978-0262039543

More Books

Students also viewed these Economics questions

Question

8. How can an interpreter influence the message?

Answered: 1 week ago

Question

Subjective norms, i.e. the norms of the target group

Answered: 1 week ago