Suppose that there are only two goods produced in the world: Chairs andPencils.Chairs are the good traded in the world market.The following table shows information on the production and prices of Chairsand Pencils in twocountries A and B.Assume that the population is 1.Quantity and Price (of Chair and Pencil in Countries A and B)Chairs producedPencils producedPrice of pencil. inlocal currencyCountryPrice of Chair inlocal currencyPer capitaPer capitaA20B410421)What is the market exchange rate between the currencies the two countries.0.671.50.2542)Calculate the ratio of GDP/capita in country A to GDP/capita in country B,using the PPP exchange rate.3.870.110.17

The market exchange rate refers to the rate at which the economy actually trades. This rate is the…

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1)What is the market exchange rate between the currencies the two countries. 0.67 1.5 0.25 4

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Question

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)
Chairs produced
Pencils produced
Price of pencil. in
local currency
Country
Price of Chair in
local currency
Per capita
Per capita
A
20
B
4
10
4
2
1)What is the market exchange rate between the currencies the two countries.
0.67
1.5
0.25
4
2)Calculate the ratio of GDP/capita in country A to GDP/capita in country B,
using the PPP exchange rate.
3.87
0.11
0.17

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