An analyst compares the economic output of two countries, Country X and Country Y. Both countries produce only two goods: widgets and gadgets. The analyst calculates each country's total output value using its own local prices and finds they are identical.
| Country | Good | Quantity | Local Price |
|---|---|---|---|
| X | Widgets | 100 | $10 |
| X | Gadgets | 200 | $5 |
| Total Value for X | $2,000 | ||
| Y | Widgets | 80 | $15 |
| Y | Gadgets | 160 | $5 |
| Total Value for Y | $2,000 |
Based on this data, the analyst concludes that the real economic output of Country X and Country Y is the same. What is the fundamental flaw in this conclusion?
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An analyst compares the economic output of two countries, Country X and Country Y. Both countries produce only two goods: widgets and gadgets. The analyst calculates each country's total output value using its own local prices and finds they are identical.
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