PPP Assignment (Due at End of Class)

For today's assignment, share a Google Doc with me (Mrdasilvasjha@gmail.com) labeled the following: "Measuring Development and PPP Assignment."


#1: Go to http://www.economist.com/content/big-mac-index and complete the following:

• A. In your own words, what is the theory behind purchasing power parity?
• B. What does the Big Mac Index measure?
• C. List two countries in which a Big Mac is more expensive than it is in the US
• D. Why is a Big Mac more expensive in these countries?
• E. List two countries in which a Big Mac is cheaper than it is in the US.
• F. Why is a Big Mac cheaper in these countries?

#2: Go to Where Are You on the Global Pay Scale?
Read the article and complete the following:

• A. What is the total value of world income?
• B. If income were to be divided completely evenly, how much income should each person in the world make?
• C. Why is it difficult to calculate the world's average wage?
• D. What is the world's average yearly salary?
• E. Why is the world's average yearly salary higher than your answer for question B?
• F. Why is PPP important to understanding the value of people's wages?

#3: Read ch. 28 from the textbook (link here). Then answer the following questions:

• a. What is the difference between absolute and relative poverty?
• b. What is the cycle of poverty?
• c. Why might a developing country have a much different value for its GNI/GNP than its GDP? (remember that GDP measures goods produced within borders while GNI/GNP tracks where the profits go)
• d. What are some different health and education measures that economists use? What information do they tell us?

#4: Extra Credit: Go here to see some interesting things about the world's population. Then, Go here to see trends in different development statistics.   What is the value of these tools to economists?