Unformatted text preview: correlated with the local hourly wage (in dollars). – What about general prices? – Most goods have nontraded and traded components, so the economy-wide price level should follow the same patterns observed above. – Strong positive relationship between U.S. price level and GDP per person. – Deviations in PPP vary systematically. – Figure 22.2 (b): Price Levels in Rich and Poor Countries Panel (b) shows that richer countries (measured by higher GDP per person) tend to have higher overall price levels (measured in a common currency). – Source: Michael R. Pakko and Patricia S. Pollard, 2003, “Burgernomics: A Big Mac™ Guide to Purchasing Power Parity,” Review, Federal Reserve Bank of St. Louis, November, 9–28....
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- Spring '10
- Purchasing Power Parity, Big Macs, Starbucks tall lattes, local hourly wage