Suppose the rural wage is 1 per day. Urban modern sector ...

[notis]

Suppose the rural wage is 1 per day. Urban modern sector employment can be obtained with 5 probability and pays 2 per day.
 
  Will there be any rural-urban migration? Explain your reasoning, stating explicitly any simplifying assumptions, and show all work.

Question 2

The number of units of developing country currency required to purchase a basket of goods and services in a developing country that costs one dollar in the U.S. is given by
 
  a. GNI price deflator.
  b. Human Development Index ranking.
  c. purchasing power parity.
  d. the exchange rate.

[CourtneyCNorton]

Answer to Question 1

In this case the expected urban wage is equal to the rural wage. Only an individual who is risk loving will migrate.

Answer to Question 2

C