Japanese GDP in 2010 wa 480 trillion yen while U.S. GDP was $14.5 trillion. The

Question

Japanese GDP in 2010 wa 480 trillion yen while U.S. GDP was $14.5 trillion. The exchange rate in 2010 was 87.8 yen per dollar. Japan had higher prices than the United States: the price level in Japan (coverted to dollars) divided by the price level in the United States was 1.243 in 2010. a) What is the ratio of Japanese GDP to U.S. GDP if we do not 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 Japan to real GDP in the U.S. in common prices?

Explanation / Answer

i suggest you read a little about purchasing power parity a concept whice normalises the varying values of currencies

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