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Concepts: Nominal exchange rate

Background: If Hakan opens his antique store with Memo, he will mostly do business with foreigners. Doing business with foreigners requires understanding how exchange rates work. In this clip, we can see the price of some Turkish sandwiches (Tost) on a price board. Some of them cost 7 Turkish Liras.

Question (Let's use data): Compute the price in US dollars of a sandwich costing 7 Turkish Liras, using the currency exchange rate[1].

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Concepts: Inflation, deflation, CPI, real price, exchange rate, purchasing power parity, Balassa-Samuelson effect.

Background: In Sacred Games, we follow Gaitonde’s path to organized crimes through the mid-1980s. We witness his life at the end of Indira Gandhi’s state of emergency that lasted from 1975 to 1977. In 1977, Ganesh worked at an upscale restaurant, where a meal cost 12 rupees.

Question 1: To better understand Ganesh’s socio-economic background, let’s review these two years of emergency using data. First, define the terms ‘inflation’ and ‘deflation,’ then find the inflation rates in India from 1974 to 1977. Did the economic situation improve during the state of emergency? To answer the question, you may use the values from the World Bank’s website[1].

Question 2 (Let’s Use Data): First, find the 1977 and this year’s values of the Indian consumer price index (CPI) to calculate the real price of the restaurant meal in 1977 (12 rupees). Second, use the current exchange rate to find the price equivalent in U.S. dollars. Compare this price with your favorite restaurant meal.