Author Question: Refer to the scenario above. What is the size of the labor force in the economy? A) 6 million B) ... (Read 55 times)

segrsyd · **on:** Jun 30, 2018

Refer to the scenario above. What is the size of the labor force in the economy?

A) 6 million B) 3 million C) 4 million D) 5 million

Question 2

The income per capita of Ruberia in a certain year was 7,240 rubies and the income per capita of U.S. during the same year was 48,000. A bundle of goods that costs 100 rubies in Ruberia has a price of 1,250 in the U.S.

Which country has a higher income per capita using PPP?

joshbk44 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

C

Answer to Question 2

In order to compare the income per capita of the countries, we need to use the purchasing power parity factor to convert Ruberia's income per capita into U.S. dollars. The price of a bundle of goods that costs 100 rubies in Ruberia is 1,250 in U.S. Thus, 1 ruby buys the same amount of goods that 1,250/100 = 12.50 buys in the U.S. Therefore, 1 ruby is worth 12.50. The income per capita of Ruberia in U.S. dollars is 7,240 rubies 12.50 /ruby = 90,500. Thus, Ruberia has a higher income per capita.