a. Countries A and B use different currencies. Per capita incomes and prices of Big Macs,...

 

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a. Countries A and B use different currencies. Per capita incomes and prices of Big Macs, both represented in country A's currency at market exchange rates, are given in the table. Which country is richer? b. Consumers in the countries A and B Per Capita Income Price of Big Mac Country A 60,000 Country B 70,000 Price of 5 7 Price of Tradeable Goods Non-Tradeable Goods spend half their income on tradeable goods and half on non- tradeable goods. The prices of Country A 3 tradeable and non-tradeable goods are given in the table. Prices in Country B 2 27 18 each country are represented in terms of local currency (e.g., country A's prices are represented in country A's currency). Assume that PPP holds for tradeable goods. What is the real exchange rate (the number of baskets of A's goods that have the same value as one basket of country B's)? a. Countries A and B use different currencies. Per capita incomes and prices of Big Macs, both represented in country A's currency at market exchange rates, are given in the table. Which country is richer? b. Consumers in the countries A and B Per Capita Income Price of Big Mac Country A 60,000 Country B 70,000 Price of 5 7 Price of Tradeable Goods Non-Tradeable Goods spend half their income on tradeable goods and half on non- tradeable goods. The prices of Country A 3 tradeable and non-tradeable goods are given in the table. Prices in Country B 2 27 18 each country are represented in terms of local currency (e.g., country A's prices are represented in country A's currency). Assume that PPP holds for tradeable goods. What is the real exchange rate (the number of baskets of A's goods that have the same value as one basket of country B's)?