An economist wants to compare the real economic output of two countries, Country A and Country B, which each produce only apples and bananas. To eliminate the effect of different price levels, the economist decides to value the production of both countries using the prices from Country A.
| Country | Good | Quantity | Local Price |
|---|---|---|---|
| A | Apples | 100 | $1 |
| A | Bananas | 50 | $2 |
| B | Apples | 120 | $2 |
| B | Bananas | 40 | $1 |
Based on this methodology, what is the calculated real output of Country B?
0
1
Tags
Economics
Economy
Introduction to Macroeconomics Course
Ch.3 Aggregate demand and the multiplier model - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
CORE Econ
Social Science
Empirical Science
Science
Application in Bloom's Taxonomy
Cognitive Psychology
Psychology
Related
Purchasing Power Parity (PPP)
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?
Comparing Real Economic Output
Comparing Real Economic Output with a Common Price Set
An economist wants to compare the real economic output of two countries, Country A and Country B, which each produce only apples and bananas. To eliminate the effect of different price levels, the economist decides to value the production of both countries using the prices from Country A.
Country Good Quantity Local Price A Apples 100 $1 A Bananas 50 $2 B Apples 120 $2 B Bananas 40 $1 Based on this methodology, what is the calculated real output of Country B?