7. How large is the economy of Japan? Japanese GDP in 2007 was 517 trillion yen

Question

7. How large is the economy of Japan? Japanese GDP in 2007 was 517 trillion yen (U.S. GDP again was $13.7 trillion). The exchange rate un 2007 was 118 yen per dollar. Contrary to china and India, however, Japan had higher prices than the Unites states: the price level in Japan (converted to dollars) divided by the price level in Unites States was 1.074 in 2007. A) What is the ratio of Japanese GDP to U.S. GDP if we don't take into account the differences in relative prices and simply use the exchange rate to make the conversion? B) What is the ratio of GDP in Japan to real GDP in the Unites States in common prices? C) Why are these two number different?

Explanation / Answer

a) ratio of japan's GDP to United States 1 Yen = $ 0.01 So Japan's GDP in $ = 517 trillion *0.01 = $ 5.17 trillion Japan's GDP/ USA GDP = 5.17 trillion/ 13.7 trilllion =0.3773 b) Take the nominal GDP which is adjusted according to country PPI (producer Price index, CPI (consumer price index) which is Japan's GDP nominal / USA GDP nominal = 0.8 as per nominal GDP data c) This occur because every country has its own inflation rate , some country have huge inflation rate leading to higher GDP while other may have low GDP because of low inflation rate. So make proper comparison nominal GDP concept is used providing actual comparison in GDP

Related Questions

Navigate

• Browse (All)
• Browse 7
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.