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ECO 1002 Midterm 1: Production Possibilities and Gains from Trade

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ECO 1002 Midterm 1: Production Possibilities and Gains from Trade

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Questions and Answers

What is the price level index of the United States in terms of the Big Mac Index?

9.24

124

7.46

1.00 (correct)

What is the percentage difference in the cost of living between Switzerland and the United States?

74%

46%

24% (correct)

124%

What is the formula to adjust the nominal GDP of a country to its PPP-adjusted GDP?

Nominal dollars × (1 - Price level adjustment) (correct)

Nominal dollars × Price Level Index

Nominal dollars × (1 / Price level adjustment)

Nominal dollars ÷ Price Level Index

What is the implication of a price level index of 124 in Switzerland?

The cost of living in Switzerland is 24% higher than in the US. Signup and view all the answers

What is the adjustments required to maintain the same standard of living in Switzerland compared to the US?

Increase the salary by 62% Signup and view all the answers

What is the correct answer to the question of how much the uncle needs to earn in Switzerland to maintain the same standard of living?

$62,000 Signup and view all the answers

What is the purpose of the Big Mac Index?

To compare the cost of living in different countries Signup and view all the answers

What is the relationship between the price level index and the cost of living?

A higher price level index indicates a higher cost of living Signup and view all the answers

What is the implication of a price level adjustment of 0.24?

The cost of living in Switzerland is 24% higher than in the US Signup and view all the answers

What is the purpose of the PPP-adjusted GDP?

To compare the GDP of different countries in terms of their purchasing power Signup and view all the answers