Q4 (30 points) This question asks you to work with the numbers that the Table below reports for 2010. LCU stands for local currency unit and ER stands for Exchange Rate. The PPP exchange rate is the LCU price divided by the $ price of a basket of goods and service (in the lecture we used the Big Mac basket; here the basket is broader, but the basic idea is the same). Country pc GDP Market ER (LCU) (LCU per 8) China France India J apan Mexico U.S. 30 , 334 30,655 66,751 3,779,807 116,201 46,820 6.77 0.753 45.7 87.8 12.6 1.0 pc GDP 4 , 481 40,710 46,820 2 PPP ER (LCU per 8) 3.89 0.913 18.9 111.3 7.1 1.0 pc GDP (US$ at PPP) 7,798 33,576 3,532 46,820 THIS VERSION: AUGUST 19, 2021 ECN 313 FALL 2021 PROF. BERTHOLD HERRENDORF W. P. Carey School of Business Arizona State University (a) (5 points) How many dollars can the average Mexican get from a bank if he takes the per capita GDP in pesos and exchanges it for dollars? (b) (5 points) How many dollars would it take in the U.S. to buy what the average Mexican can buy with his per capita GDP in pesos in Mexico? (c) (5 points) Are French prices higher or lower than U.S. prices? (d) (5 points) Use the market exchange rate to convert the Japanese per capita GDP into U.S. $. How much lower is the resulting per capita GDP than in the U.S.? (e) (5 points) Use the PPP exchange rate to convert the Japanese per capita GDP into U.S. $. How much lower is the resulting per capita GDP than in the U.S.? (f) (5 points) Why are the last two answers different? Which one is a better measure of the difference in the standard of living between Japan and the U.S.?