Question: Question 1: Consider a world with two commodities: smartphones, which are traded internationally, and ice cream, which is not. Country 1 2 Smartphones Ice

Question 1: Consider a world with two commodities: smartphones, which are traded

Question 1: Consider a world with two commodities: smartphones, which are traded internationally, and ice cream, which is not. Country 1 2 Smartphones Ice Cream Produced Produced per Capita per Capita 5 3 25 15 Price of Smartphones in Price of Ice Cream in Local Currency Local Currency 10 5 Using the information given in the table, answer the following: a) Calculate the GDP per capita in each country in the local currency. 5 2 b) Calculate the market exchange rate between the currencies of the two countries. c) What is the ratio of GDP per capita in Country 1 to GDP per capita in Country 2, using the market exchange rate? d) Calculate the purchasing power parity (PPP) exchange rate between the two currencies. e) What is the ratio of GDP per capita in Country 1 to GDP per capita in Country 2, using the PPP exchange rate?

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