Suppose that there are only two goods produced in the world: Chairs and Pencils. Chairs are the good traded in the world market. The following table shows information on the production and prices of Chairs and Pencils in two countries A and B. Assume that the population is 1.

Quantity and Price (of Chair and Pencil in Countries A and B)

6)Which of the two answers is more accurate? To rely on the market exchange rate or the PPP exchange rate while comparing income among countries? *

Market Exchange Rate

Purchasing Power Parity Exchange Rate

Both of them

None of them

7)Calculate the level of GDP/capita in country A, measured in its own currency.

14

28

208

184

Country Chairs produced Pencils produced Price of Chair in local currency Price of pencil. in local currency Per capita Per capita A A 8 20 6 8 B 4 10 4 2