International economics

Activity: Josko Joras (A), December 2012

Textbook Reading: Chapter 10 (Intro and Section 10.2 and 10.3; pp. 327-329 and pp. 342-357)

For an open economy

GDP = C + I + G + (X – M).

However it’s important to realise that imports don’t subtract from GDP.

Read more about the Big Mac index at The Economist. For more on how Argentina games it, see:

There are several nice utilisations of the Big Mac Index. For example, in a study that looked at the best cities in the world to study in, they used the Big Mac Index as a measure of living costs.  (And if you’re curious, the best city in the world to study in is…. London!)

Instructor Resource: 

  • Josko Joras (A) Solutions, December 2012
  • Josko Joras (B), December 2012
  • Josko Joras (B) Solutions, December 2012
Learning Objectives: Perform foreign exchange calculations. Understand Balance of Payments