Econ402_Set1 - PS 1 National Accounting and Data(60 raw...

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PS 1 - National Accounting and Data (60 raw points) ECON 402, Prof. Bachmann Due: January 20 Explain all your answers. “Results only” means partial credit only. Staple and write legibly. No spiral stuff. The numbers in brackets are the subdivision of raw points for each question. I) National Accounting in Hobbiton (30 raw points) After the glorious return from their adventurous journeys to the big folk, the hobbits had to concern themselves again with more practical matters. While Frodo lived quietly in Bagend, sensing that he would have to leave the Shire ere long, Sam was elected mayor of Hobbiton and had to take on great new responsibilities. “You know”, Gandalf had whispered into his ears, when they parted, “you should really introduce national accounting into the Shire. I hear the dwarves have worked great wonders with it”. Sam trusted the ancient wisdom of the wizard and inquired with the dwarves about their system of national accounting, passed on only amongst their people since the creation of middle earth. At the end of the first year of the new Shire reckoning, which began with the return of the Hobbits, the following data had been gathered: 1) Farmer Sadoc Baggins, a remote cousin of Frodo’s, had produced 150 Shire dollars worth of potatoes, the sweeter crop that can only be grown in the sandy soils of Hobbiton. He had sold 50 Shire-$ of potatoes to the Green Dragon,
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