ps1key

# ps1key - Answer Key for PS1 Prof Shea Spring 2008 1 A...

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Answer Key for PS1 Prof. Shea Spring 2008 1. A rancher in Argentina sells \$5000 worth of beef to a beef processor located in the US -------------------Argentina: Export to US (Argentina's GDP rises by \$5000) -------------------US: Import from Argentina (\$5000 deducted from US GDP) The beef processor grinds the meat and sells half of the ground beef to a restaurant located in the US, for \$10,000; and the other half to a restaurant located in Mexico for \$8000. -------------------US: Export to Mexico (US GDP rises \$8000) -------------------Mexico: Import from US (\$8000 deducted from Mexico's GDP later) -------------------The sale to the US restaurant is intermediate (no impact on US GDP) The US restaurant makes hamburgers out of the ground beef and sells them for \$13,000, while the restaurant in Mexico makes tacos out of the ground beef and sells them for \$10,000. -------------------US: Consumption (US GDP rises by \$13,000) -------------------Mexico: Consumption (Mexico's GDP rises by \$10,000) Therefore, the rise of GDP for each country: Rise in US GDP = Rise in C + Rise in X – Rise in M = 13000+8000-5000 = \$16000 Rise in Argentina's GDP = Rise in X = \$5000 Rise in Mexico's GDP = Rise in C – Rise in M = 10,000-8000 = \$2000

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## This note was uploaded on 04/07/2008 for the course ECON 201 taught by Professor Shea during the Spring '08 term at Maryland.

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ps1key - Answer Key for PS1 Prof Shea Spring 2008 1 A...

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