Question

8.

Part I.

If Mexico has GDP of 15 trillion pesos, a population of 100 million people, and the exchange rate is 10p/$ ... then the $US per capita GDP of Mexico is

a. $1,500,000   

b. $1,500

c. $150,000

d. $15,000

Part II.

a. If Mexico has GDP of 15 trillion pesos, a population of 100 million people, and the exchange rate suddenly moves from 10p/$ to 15 p/$ ... then the $US per capita GDP of Mexico

b. decreases by $5000 as a result of the peso appreciation

c. increases by $5000 as a result of the peso depreciation

d. increases by $5000 as a result of the peso appreciation

e. decreases by $5000 as a result of the peso depreciation

Answer 1

8) Per capita GDP = GDP / population

= 15 x 1000 x 1000 million / 100 million

= 150000 pesos

= 150000/10

= 15000 dollars

Hence, select option D

Now exchange rate is 15 p for $1. Then GDP per capita will be 150000/15 = 10000 dollars

GDP per capita has reduced by 5000 dollars and this is because of exchange rate depreciation from 10 p to 15 p (peso depreciation)

Select option E