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Exam Questions and Answers for Macroeconomics Chapter 20 Rated A+
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Exam Questions and Answers for Macroeconomics Chapter 20 Rated A+ Suppose you are comparing the income per capita in the United States and Ghana. You try two approaches. In the first approach, you convert the Ghana values into U.S. dollars using the current exchange rate between the U.S. dollar an...

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  • October 12, 2024
  • 9
  • 2024/2025
  • Exam (elaborations)
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Exam Questions and Answers for Macroeconomics Chapter 20 Rated A+

Suppose you are comparing the income per capita in the United States and Ghana. You try two
approaches. In the first approach, you convert the Ghana values into U.S. dollars using the current
exchange rate between the U.S. dollar and the Ghanaian cedi. In the second approach, you also convert
both values to U.S. dollars using the purchasing power parity-adjusted exchange rate.



Which approach is likely to give you a more accurate picture of the living standards in both countries? -
Answers The second approach, because it takes into account the relative costs for each country.

Suppose that country A has higher real income per capita than country B.



Explain why this does not imply that most citizens of country A have higher real income than most
citizens of country B. - Answers A high degree of income inequality in country A may result in most of its
citizens having incomes below the average income of country B.

The following table lists 2012 GDP per capita for four countries. The data are given in the national
currencies of the countries. It also lists the price of a Big Mac in local currency in each country in 2012.
The price of a Big Mac in the United States in 2012 was $4.20.



Using the Big Mac as a representative commodity common to the countries, calculate the purchasing
power parity (PPP)-adjustment factor for each country, and then the PPP level of GDP per capita in each
country.




2012 GDP Per capita 2012 Big Mac Price

579,162 41 krone

41,398 9.1 zloty

19,580 6.6 Turkish lira

24,740 2.4 pounds



Purchasing Power Parity(PPP) adjustment factor for each country?

, PPP level of GDP per capita? - Answers PPP:



Norway: 4. = 0.102

Poland: 4.20/ 9.1 = 0.462

Turkey: 4..6 = 0.636

United Kingdom: 4..49 = 1.687



PPP level of GDP per capita:



Norway: 0.102 x 579162 = 59075



Poland : 0.462 x 41398 = 19125.876



Turkey: 0.636 x 19580 = 12452.880



United kingdom : 1.687 x 24740 = 41736.380

Suppose you are given the following information on the country Lusitania:



Population total in Lusitania = 246 mill.

Employment = 110 mill

Real Gross Domestic Product (GDP) = 2,476 bill.



Real income per capita in Lusitania is $ _________.

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