This question draws from the tables in the previous question.
Let us try to get an idea of what it would cost an American family at today’s prices to purchase the bundle consumed by an average Swedish family in 1850. In the United States today, the price of flour is about $.40 per kilogram, the price of meat is about $3.75 per kilogram, the price of milk is about $.50 per liter, and the price of potatoes is about $1 per kilogram. We can also compute a Laspeyres price index across time and across countries and use it to estimate the value of a current US dollar relative to the value of an 1850 Swedish kronor.
(a) How much would it cost an American at today’s prices to buy the bundle of staple food commodities purchased by an average Swedish workingclass family in 1850?
(b) Myrdal estimates that in 1850, about 2/3 of the average family’s budget was spent on food. In turn, the four staples discussed in the last question constitute about 2/3 of the average family’s food budget. If the prices of other goods relative to the price of the food staples are similar in the United States today to what they were in Sweden in 1850, about how much would it cost an American at current prices to consume the same overall consumption bundle consumed by a Swedish working-class family in 1850?
(c) Using the Swedish consumption bundle of staple foods in 1850 as weights, calculate a Laspeyres price index to compare prices in current American dollars relative to prices in 1850 Swedish kronor. _____ If we use this to estimate the value of current dollars relative to 1850 Swedish kronor, we would say that a U.S. dollar today is worth about ____ 1850Swedish kronor.