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This year, the nominal per capita GDP is $48,387 in US and $13,044 in Romania. For the same year, the PPP adjusted GDP per
This year, the nominal per capita GDP is $48,387 in US and $13,044 in Romania. For the same year, the PPP adjusted GDP per capita is $48,387 in U.S. and $16,500 in Romania. Prices are projected to increase twice as fast in Romania as in US for the foreseeable future. a) If the price level is 100 in US today and increases by 2% per year, what will be the price level in Romania in three years? b) A small company in US would like to ensure that, there is enough funds to purchase 10 computers each year beginning next year (forever). A computer that meets company specifications costs $2,000 today. How much should the company invest today to fund all the future computer needs of the company if annual interest rate is 10%? (Assume that computer prices are going up exactly at the rate of inflation each year.)
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