The table below presents the production per capita, and the corresponding price level in two simplified...

 

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The table below presents the production per capita, and the corresponding price level in two simplified economies, rich and poor. The market exchange rate is 1 unit of the rich country's currency = 25,000 units of the poor country's currency. Rich country Poor country Production per capita 120 5 Cars Price (In local currency) 100 30,000,000 Production per capita 6000 250 Edcuation Price (In local currency) 20 5,000 a) Compute the GDP per capita for each country in domestic currencies. b) What is the GDP per capita of the poor country in terms of the rich country's currency, using the available market exchange rate. c) Compute the GDP of the poor country using the purchasing power parity (PPP) based method using an internationally standardized basket of 5 cars and 100 education units. Please provide the rationale for this approach. The table below presents the production per capita, and the corresponding price level in two simplified economies, rich and poor. The market exchange rate is 1 unit of the rich country's currency = 25,000 units of the poor country's currency. Rich country Poor country Production per capita 120 5 Cars Price (In local currency) 100 30,000,000 Production per capita 6000 250 Edcuation Price (In local currency) 20 5,000 a) Compute the GDP per capita for each country in domestic currencies. b) What is the GDP per capita of the poor country in terms of the rich country's currency, using the available market exchange rate. c) Compute the GDP of the poor country using the purchasing power parity (PPP) based method using an internationally standardized basket of 5 cars and 100 education units. Please provide the rationale for this approach.

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a Rich country GDP per capita 120 x 100 5 x 6000 12000 30000 42000 Poor ... View the full answer