Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
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Question
Chapter 2, Problem 7E
(a)
To determine
Determine the ratio of Indian GDP to US GDP.
(b)
To determine
Determine the ratio of real GDP.
(c)
To determine
Explain the difference between two numbers.
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India has a GDP of 23,000 billion Indian rupees, and a population of 1.1 billion. The exchange rate is 50 rupees per U.S. dollar. Calculate the GDP per capita of India as measured in U.S. dollars.
The following table shows the nominal and real exchange rates for two countries and two years (OECD, 2020a,b). The column
names are the country codes (not the currency codes) and the exchange rates are expressed as the amount of the currency per
unit of US dollar.
Nominal
Real
Year
FRA
NZL
FRA
NZL
1996
0.7799
1.4548
0.7934
0.9916
2018
0.8468
1.4453
1.1195
0.9968
d. For each countries and each year, what is the ratio P" /P, where Pis the price level in the country and P" is the price
level in the United States. Round your answer to the nearest fourth decimal.
Year
FRA
NZL
Number
1996
Number
2018
Number
Number
e. Answer this question for FRA. If we believe in the theory of purchasing power parity, what is likely to happen after 2018?
i. Indicate whether the currency of FRA will appreciate, depreciate, or remain unchanged, against the US dollar in
nominal term.
Appreciate
Depreciate
Remain unchanged
l. Indicate whether the currency of FRA will appreciate, depreciate, or remain unchanged,…
On June 1, 2016, the exchange rate for U.S. dollars and euros was approximately $1.00 = €0.90,
as shown in the market for U.S. dollars below. Suppose the interest rate is expected to fall in the
European Union (relative to the interest rate in the U.S.). How will this affect the value of the dollar
relative to the euro?
Exchange Rate
(€/S)
0.9
Quantity of Dollars Traded.
D₁
S₁
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