Acme US Revenue: $15000 Payment to Workers: $10500 Purchased Inputs: Engines $30

Question

Acme US
Revenue: $15000
Payment to Workers: $10500
Purchased Inputs:
Engines $3000
Elecricity $500

US HYRDOELECTRIC
Revenue: $500
Payment to Workers: ?
Purchased Inputs: $0

Acme Mexico
Revenue: $3000
Payments to Workers: $2200
Purchased Inputs: $0

Because Acme Worldwide wants to reduce its taxes, it has Acme U.S. increase the price it pays Acme Mexico for engines by $500, from $3,000 to $3,500.

This change means that GDP per car produced __________ in the United States and _________ in Mexico.




A. is $500 less, is also $500 less

B. is $500 more, is also $500 more

C. is $500 less, is $500 more

D. remains the same, also remains the same

E. is $500 more, is $500 less

Explanation / Answer

c) Mexico's exports go up by 500, U.S. imports (which subtract from GDP) go up by 500.

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