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sarasmith06 sarasmith06
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Scenario: The price of a standard basket of goods in Country A is 10 pesos. The price of the same basket of goods in country B is 25 francs and $5 in the United States. Country A has an income per capita of 60,000 pesos, and country B has an income per capita of 100,000 francs. Assume full employment in both countries.


Refer to the scenario above. Why could it be the case that the standard of living is higher in country B than in country A?

▸ The exchange rates between pesos and the U.S. dollar and francs and the U.S. $ differ.

▸ The composition of GDP per capita is not homogeneous within each country.

▸ The numbers of workers in the two countries are not equal.

▸ The PPP-adjusted GDPs differ from the exchange-rate-adjusted GDPs.
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Macroeconomics

Macroeconomics


Edition: 3rd
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john a.john a.
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