Finding ratio of GDP per capita using market/ purchasing power parity exchange rate.
Suppose that the only traded good is bicycles and the only non-graded good is visits to the doctor. The following table shows the information on production and prices for bicycles and doctor\'s visits for two countries, USF and FSU.
| |
Bicycles produced per capita |
Visits produced per capita |
Price of bicycles in local currency |
Price of vists in local currency |
| USF |
8 |
4 |
2 |
3 |
| FSU |
4 |
2 |
1.5 |
1 |
1.Calculate the level of GDP per capita in each nation measured in local currency.
2.Calculate the marker exchange rate among the currencies of the two nations.
3.What is the ratio of GDP per capita in USF to GDP per capita in FSU utilizing the market exchange rate?
4.Calculate the purchasing power parity exchange rate between the two currencies.
5.What is the ratio of GDP per capita in USF to GDP per capita in FSU using the purchasing power parity exchange rate?