00:02
In question one, we have to calculate the market exchange rate expressed as the dollar price of one peso.
00:09
So the market exchange rate can be calculated as the ratio of prices for the tradable good in the two countries.
00:17
So market exchange rate is equal to us tradable price divided by argentina tradable price, which is equal to dollar five divided by 50 pesos is equal to we get dollar 0 .1 per peso.
01:10
Now in question two, we have to calculate the price levels in the us and argentina expressed in dollar and pesos respectively.
01:18
So price in sorry, in the us is equal to quantity of tradable multiplied by price of tradable added to quantity of non -tradable multiplied by price of non -tradable which is equal to putting the values 10 multiplied by dollar 5 added to 20 multiplied by 15 is equal to we get dollar 50 added to dollar 300 evaluating it we get dollar 350.
02:28
Now price level in argentina is equal to quantity of tradable multiplied by price of tradable added to quantity of non -tradable multiplied by price of non -tradable.
03:21
So putting in the values for multiplied by 50 pesos added to 8 multiplied by 100 pesos is equal to we get 200 pesos added to 800 pesos.
03:43
So evaluating it we get the answer that is thousand pesos in question three, we have to find the dollar per peso real exchange rate and also in which country is it cheaper to live.
04:00
So the real exchange rate can be calculated as the ratio of price levels in the two countries expressed in the same currency.
04:11
So let's express the price of argentina in dollars using the market exchange rate.
04:16
So price level in argentina in dollars is equal to price level in argentina in pesos multiplied by market exchange rate, which is equal to thousand pesos multiplied by dollar 0 .1 peso.
04:58
So we get dollar hundred now we can calculate the real exchange rate.
05:07
So real exchange rate is equal to price level in us divided by price level in argentina both expressed in dollars, which is equal to we get dollar 350 divided by dollar hundred which is equal to 3 .5.
05:48
So a higher real exchange rate means the us is relatively more expensive compared to argentina question for we have to calculate gdp in the us and argentina at market prices.
06:35
So according to this measure, how big is argentina related to us? so gdp can be calculated as the sum of the value of all final goods produced in each country at market prices.
06:46
So gdp in the us is equal to quantity of tradable multiplied by price of tradable added to quantity of non -tradable multiplied by price of non -tradable is now is equal to putting the values 10 multiplied by dollar 5 added to 20 multiplied by dollar 15 is equal to dollar 50 added to dollar 300 is equal to we get dollar 350.
07:48
If we in argentina is equal to quantity of tradable multiplied by price of tradable added to quantity of non -tradable multiplied by price of non -tradable now putting in the values 4 multiplied by 50 pesos added to 8 multiplied by 100 pesos is equal to 200 added to 800 pesos.
08:47
So evaluating it we get thousand pesos...