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: 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? You may use the values from the World Bank’s website to answer the question: https://data.worldbank.org/indicator/FP.CPI.TOTL.ZG?locations=IN
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.
Concepts: Investment in human capital, Monetary and non-monetary costs, Risky investment, Nominal exchange rate.
Background: Polina is addicted to alcohol and just finished a rehabilitation program in a facility. Lyonya, her dad, is picking her up to bring her home.
Question 1: Define what an investment in human capital is. Provide two examples of human capital investment.
Question 2: Why do economists consider rehab an investment in human capital? Why some believe that rehab a risky investment?
Question 3: What costs are involved when somebody checks into a rehabilitation program?
Question 4 (Let’s use data): Lyonya has to pay 52,902 Russian Rubles to cover Polina’s damages in the rehab facility. Compute the US dollar cost Lyonya had to pay to cover Polina’s damages (https://www.xe.com/ ).
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.
