Indian GDP in 2014 was 119 trillion rupees, while U.S. GDP was $16.5 trillion. The exchange rate in 2014 was 61.0 rupees per dollar. India turns out to have lower prices than the United States (this is true more generally for poor countries): the price level in India (converted to dollars) divided by the price level in the UNited States was 0.280 in 2014.
a) What is the ratio of Indian GDP to U.S. GDP if we don't take into account the differences in relative prices and simply use the exchange rate to make the conversion?
b) What is the ratio of ral GDP in India to real GDP in the United States in common prices?
c) Why are these two numbers different?
Indian GDP in 2014 was 119 trillion rupees, while U.S. GDP was $16.5 trillion. The exchange rate in 2014 was 61.0 rupees per dollar. India turns out to have lower prices than the United States (this is true more generally for poor countries): the price level in India (converted to dollars) divided by the price level in the UNited States was 0.280 in 2014.
a) What is the ratio of Indian GDP to U.S. GDP if we don't take into account the differences in relative prices and simply use the exchange rate to make the conversion?
b) What is the ratio of ral GDP in India to real GDP in the United States in common prices?
c) Why are these two numbers different?
Related textbook solutions
Related questions
1. Consider an economy that produces oranges and boomerangs. The prices and quantities of these goods in two different years are reported in the table below. Fill in the missing entries
| 2016 | 2017 | % change of 2016-2017 | |
| quantity of oranges | 100 | 105 | ? |
| quantity of boomerangs | 20 | 22 | ? |
| price of oranges (dollars) | 1 | 1.10 | ? |
| price of bommerangs (dollars | 3 | 3.10 | ? |
| Nominal GDP | ? | ? | ? |
| Real GDP in 2016 prices | ? | ? | ? |
| Real GDP in 2017 prices | ? | ? | ? |
| Real GDP in chained prices | ? | ? | ? |
2. Consider the economy from the above problem 1.^ Calculate the inflation rate for the 2016â2017 period using the GDP
deflator based on the Laspeyres, Paasche, and chain-weighted indexes of GDP.
3. Indian GDP in 2010 was 78.9 trillion rupees, while U.S. GDP was $14.5 trillion. The exchange rate in 2010 was 45.7 rupees per dollar. India turns out to have lower prices than the United States (this is true more generally for poor countries): the price level in India (converted to dollars) divided by the price level in the United States was 0.368 in 2010.
(a) What is the ratio of Indian GDP to U.S. GDP if we donât take into account the differences in relative prices and simply use the exchange rate to make the conversion?
(b) What is the ratio of real GDP in India to real GDP in the United States in common prices?
(c) Why are these two numbers different?
