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The Economist magazine uses prices of McDonald's Big Mac hamburger to calculate the PP values for currencies. The following data are taken the January 2015 Big Max Index.Bug Mac Price in Local CurrencyUS USD$4.79Australia AUD$5.30New Zealand NZD$5.90(i) Calculate the implied PPP values for the Australian dollar against the US dollar and for the Australian dollar against the New Zealand dollar. (ii) Using the daily exchange rate data from the RBA website at https://www.rba.gov.au/statistics/historical-data.html#exchnage-rates what are the values of the $A/$US and $A/$NZ exchange rates for the 31 January 2015?(iii) Compared to its PPP value, is the Australian dollar overvalued or undervalued in terms of the US dollar? Explain(iv) Compared to its PPP value, is the Australian dollar overvalued or undervalued in terms of the NZ dollar? Explain(v) Taking the Australian price as given and ignoring transportation costs, according to the law of one price what should have been the price of a Big Mac in New Zealand on 31 January 2015? Explain whether or not you would expect the law of one price to hold.
Consider a company in a perfectly competitive market. The company has just built a plant that costs $15,000. Each unit of output requires $5 worth of materials.
According to the neoclassical modelof economic growth with a Cobb-Douglas production function, the growth rate ofcapital per effective unit of labor is given byDk/k =ska -1- (d + n +g). For the US economy, s = 0.2, k/y = 2.5, δ= 0.04, α = 0.3,..
Use the data in the table to the right to answer the following questions. What is the external cost per unit of production? What level is produced if there is no regulation of the externality?
A recent news story reported that OPEC is expected to decrease the supply of oil next summer. Summer is traditionally a time of increased demand for oil because of the many families driving and flying to vacation sites
At its current short-run level of production, a firm’s average variable costs equal $30 per unit, and its average fixed costs equal $50 per unit. Its total costs at its current production level equals $8000.
where L1 is the number of workers employed in Sector 1 and L2 is the number of workers employed in Sector 2. The total number of workers in the economy is 1,000. The only difference between the sectors is that in Sector 1 workers are paid their ma..
Explain the purpose of rent control and the intended effect on consumers and suppliers of rental property. Does rent control achieve its purpose Using the Internet or the Virtual Library, give some detail regarding real-world experiments in rent cont..
what is likely to happen to the curve if wage indexation becomes more widespread? Illustrate your answer on the graph.
Assume that a company has a budget of $12,000, that the wage rate is $10 per hour, and that the rental rate of capital is $ 100 per hour.
Describe the recession we have seen a significant increase in unemployment. Use the model of supply and demand to illustrate what has happened.
"The wealth effect on consumption is stronger for older households. The same is true for the marginal propensity to consume out of labour income." explain
If the U.S. economy is operating near full employment and the exhange rate increases(the dollar appreciates),
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