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PEA 2026Question 25mcqModerate

Two countries HH and FF produce single goods with outputs YH,YFY_H, Y_F. Take HH's good as numeraire and pp as the relative price of FF's good. Consumers in country ii spend a fraction 1/41/4 of their expenditure on the foreign good. EiE_i denotes total expenditure of country ii measured in its own good. Given YH=120Y_H = 120, YF=100Y_F = 100, EH=80E_H = 80 and market clearing with YH+pYF=EH+pEFY_H + p Y_F = E_H + p E_F, find pp.