PRINCIPLES OF MACROECONOMICS-CONNECT ACC
7th Edition
ISBN: 9781264088485
Author: Frank
Publisher: MCG
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Chapter 5, Problem 11P
To determine
Labor force, working age population, and the number of employed and unemployed.
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Two countries, Country N in North America and Country S in South America, have the same
CPI basket. Year 2000 is the CPI base year for both countries. In that year, the cost of CPI
basket in Country N is $N100, and in country S is $s1000, where $N and $s are their respective
currencies. Twenty years later, in 2020, the CPI in Country N rose to 240, and in Country S to
360.
a) In the ideal world in which the purchasing power parity (PPP) holds true, what should be
the nominal exchange between $s and $N in Year 2000 and in Year 2020. Show
calculations and explain the change in nominal exchange rate.
b) Suppose in reality, the nominal exchange rage between the two currencies is 18 $s per $N
in Year 2020. First, explain why the nominal exchange rate differs from your calculation
above. Second, calculate the real exchange rate between the two countries, and explain
the meaning of your calculated result.
c) During Year 2021, the growth of the real GDP in the two countries are, 0% in country…
Assume that people in an economy only consume the following goods shown in the table:
Rice
Meat
Juice
Year 1 price
P2
P4
P1
Year 1 quantity
100
100
200
Year 2 price
P2
P6
P2
Year 2 quantity
100
100
200
Calculate the % change in the price of every goods.
Using the same method with the CPI, calculate the % change of the overall price level.
If you were to learn that juice increased in size from Year 1 to Year 2, should that information affects your calculation of the inflation rate? If so, how?
If you were to learn that juice introduced new flavors in Year 2, should that information affect your calculation of the inflation rate? If so, how?
Hey! Need help with this question which divides into two subquestions:
In 2014, the San Francisco–Oakland–San Jose CPI was 251.985, while the Los Angeles–Riverside–Orange County CPI was 243.434. From this information, can we assert that 2014 prices were higher in San Francisco–Oakland–San Jose than in Los Angeles–Riverside–Orange County? Explain.
Suppose a San Francisco resident and a Los Angeles resident each make the same nominal wage every year from 2007 to 2014: $60,000.00 a year. Using the table above, determine the percentage change in real wage in each city from 2007 to 2014 (Hint: Start by determining how much the $60,000 in 2007 dollars would be worth in 2014 dollars, then compare it to what was actually earned in 2014).
Thank you in advance!
Chapter 5 Solutions
PRINCIPLES OF MACROECONOMICS-CONNECT ACC
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