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Solved: Find another set of equilibrium prices for the
Chapter 1, Problem 2E(choose chapter or problem)
Find another set of equilibrium prices for the economy in Example 1. Suppose the same economy used Japanese yen instead of dollars to measure the values of the various sectors’ outputs. Would this change the problem in any way? Discuss.
Questions & Answers
QUESTION:
Find another set of equilibrium prices for the economy in Example 1. Suppose the same economy used Japanese yen instead of dollars to measure the values of the various sectors’ outputs. Would this change the problem in any way? Discuss.
ANSWER:Step 1 of 2
The ratio between the prices of goods and the prices of services is given as,
\(\frac{{{P_G}}}{{{P_S}}} = \frac{7}{8}\) …… (1)
From this, for each value of \({P_S}\), the value of \({P_G}\) can be obtained in order to satisfy the requirements of the data.
Step 2 of 2
If the prices are in US dollars, the exchange rate betw