Why are these two numbers so different

Reference no: EM131198856

How large is the economy of India? Indian GDP in 2010 was 78.9 trillion rupees, while U.S. GDP was $14.5 trillion. The exchange rate in 2010 was 45.7 rupees per dollar. India turns out to have lower prices than the United States (this is true more generally for poor countries): the price level in India (converted to dollars) divided by the price level in the United States was 0.368 in 2010.

a) What is the ratio of Indian GDP to U.S. GDP if we don't take into account the differences in relative prices and simply use the exchange rate to make the conversion?

b) What is the ratio of real GDP in India to real GDP in the United States in common prices?

c) Why are these two numbers so different?

Reference no: EM131198856

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