Mexican Average Daily Wages Grew From 129 Pesos

Mexican Average Daily Wages Grew From 129 Mexican Pesos Mxn In Fe

The assignment involves analyzing the growth of Mexican average daily wages over an 18-year period, calculating the average annual growth rate assuming compound growth, converting the 2018 wages to US dollars using a given exchange rate, and performing related financial calculations. The tasks include: (a) finding the compounded annual growth rate (CAGR) of wages from February 2000 to February 2018; (b) converting the 2018 wage in MXN to USD based on the current exchange rate; additionally, it involves calculating current account and financial account balances using provided data, determining the price of a UK wool sweater in NYC based on exchange rates, and computing specific currency exchange rates between Indian rupees, Japanese yen, and Malaysian ringgits.

Paper For Above instruction

Understanding economic growth and currency exchange calculations are fundamental aspects of macroeconomic analysis and international finance. The first task focuses on calculating the average annual growth rate of Mexican wages over an 18-year period, which provides insights into economic development and wage inflation in Mexico. The subsequent conversion of wages from MXN to USD roots the discussion in exchange rate application and currency valuation, reflecting Mexico’s integration into the global economy.

To calculate the compounded annual growth rate (CAGR) of Mexican wages from February 2000 to February 2018, we apply the formula:

\[ \text{CAGR} = \left( \frac{V_{f}}{V_{i}} \right)^{\frac{1}{n}} - 1 \]

where \(V_{f}\) is the final wage, \(V_{i}\) is the initial wage, and \(n\) is the number of years. Given that the initial wage in 2000 was 129 MXN and the wage in 2018 was 349 MXN over 18 years, the calculation is:

\[ \text{CAGR} = \left( \frac{349}{129} \right)^{\frac{1}{18}} - 1 \]

Performing the calculation, the ratio 349/129 approximates 2.705. Taking the 18th root of 2.705 yields approximately 1.053, signifying a 5.3% growth rate annually.

Next, converting the 2018 average wage into USD involves dividing the MXN amount by the exchange rate 1 USD = 18.2 MXN:

\[ \text{Wage in USD} = \frac{349 \text{ MXN}}{18.2} \approx 19.17 \text{ USD} \]

This provides a clear picture of the wage’s value in US dollars, illustrating the purchasing power and relative income compared to the United States.

Beyond wage analysis, the assignment requires evaluating the country’s international financial position through the current account and financial account balances. Given data on foreign assets, transfers, imports and exports, and income payments and receipts, the calculations involve standard macroeconomic formulas. The current account balance considers net exports and income flows, crucial for understanding a country’s trade and income balance. Typically, the current account is calculated as:

\[ \text{Current Account} = (\text{Exports of goods} + \text{Exports of services}) - (\text{Imports of goods} + \text{Imports of services}) + \text{Net income from abroad} + \text{Net transfers} \]

Similarly, the financial account reflects cross-border investment flows and is affected by changes in financial assets and liabilities.

For the current data, the current account balance calculation encapsulates the exports and imports of merchandise and services and includes net transfers and income payments. The sum of exports minus imports, combined with net income receipts and payments and foreign asset shifts, helps determine whether the country is a net borrower or lender internationally. The financial account total considers net acquisitions of financial assets abroad minus financial liabilities, reflecting overall international investment flows.

Furthermore, the task of applying the rule of one price—a foundational principle in international finance—relates to purchasing power parity, which posits that goods should sell for the same price in different markets when prices are expressed in a common currency. Using the given price of a wool sweater (£154) and the exchange rate between GBP and USD (1 USD = 0.71 GBP), the price in USD calculations follow:

\[ \text{Price in USD} = \frac{\text{Price in GBP}}{\text{Exchange rate (USD/GBP)}} = \frac{154}{0.71} \approx 217.61 \text{ USD} \]

This demonstrates how currency valuation affects international pricing and trade comparisons.

Finally, calculating the exchange rate between Malaysian ringgits and Indian rupees involves currency cross-rates and the given rates to Japanese yen:

\[ 1 \text{ INR} = 1.73 \text{ JPY} \]

\[ 1 \text{ MYR} = 25.69 \text{ JPY} \]

The exchange rate in MYR per INR is obtained by:

\[ \text{MYR per INR} = \frac{1 \text{ JPY per INR}}{1 \text{ JPY per MYR}} = \frac{1/1.73}{1/25.69} = \frac{25.69}{1.73} \approx 14.86 \text{ MYR} \]

This calculation integrates currency cross-rates, illustrating how relative currencies are compared indirectly via a third currency—in this case, Japanese yen.

References

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