Teco601- Principles of Economics & PPP Theory - Nominal Exchange Rate Between Australia and Mexico - Economics Assignment Help

Assignment Task - 

Introductions

Question 1
Following table are the data for the U.S. economy (β=2) in four selected years. Using
Okun’s law, fill in the missing data in the table.

Question 2

An economy is described by the following equations Cd =3000+0.5(Y-T) Ip=1500, G=2500, NX=200, T=2000, Y*=12,000. The multiple in this economy is 2.

a) Find a numerical equation linking planned aggregate expenditure to output. Given PAE=Cd+Ip+G+NX. 
b) Find the value of short-run equilibrium output.
c) By how much would government purchases have to change in order to eliminate any output gap?

Question 4

a) Find the price level for 2006 and 2007. What is the rate of inflation between the two years?
b) What is the rate of inflation between 2006 and 2007 if the money supply in 2007 is1100 instead of 1050?
c) What is the rate of inflation between 2006 and 2007 if the money supply in 2007 is1100 and output in 2007 is 12600?

Question 4

Gold is $350 per ounce in Australia and 2800 pesos per ounce in Mexico.

a) What nominal exchange rate between Australian dollars and Mexican pesos is implied by the PPP theory? 

b) Mexico experiences inflation so that the price of gold rises to 4200 pesos per ounce. Gold remains $350 per ounce in Australia. According to the PPP theory, what
happens to the exchange rate? What general principle does this example illustrate? 

c)Gold is $350 per ounce in Australia and 4200 pesos per ounce in Mexico. Crude oil (excluding taxes and transportation costs) is $30 per barrel in Australia. According to the PPP theory, what should a barrel of crude oil cost in Mexico?

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