Scenario: The price of a standard basket of goods in Country A is 10 pesos. The price of the same basket of goods in country B is 25 francs and $5 in the United States. Country A has an income per capita of 60,000 pesos, and country B has an income per capita of 100,000 francs. Assume full employment in both countries.
-Refer to the scenario above.Assume workers in Country A on average work 10 percent more than workers in Country B.What would happen to GDP per capita in Country B if workers in Country B were required to increase their work by 10 percent?
A) Country B's GDP per capita would be equal to GDP per capita in Country A.
B) The difference between GDP per capita in Countries A and B would increase.
C) The difference between GDP per capita in Countries A and B would decrease.
D) Country B's GDP per capita would remain constant.

Question

Quizplus · Accepted Answer

If workers in Country B work 10 percent more, their productivity and output will increase. This will lead to an increase in GDP, and since the population and income per capita of Country B are higher than that of Country A, the increase in GDP will result in a decrease in the difference between the two countries' GDP per capita. Therefore, the answer is C.

Scenario: the Price of a Standard Basket of Goods in Country