Solution :
1. Incremental analysis when the demand for the decorated umbrella is 10,000 units.
[tex]\text{Particulars}[/tex] [tex]\text{Rosa umbrella}[/tex] [tex]\text{Decorated umbrella}[/tex] [tex]\text{Incremental}[/tex]
[tex]\text{Sales revenue}[/tex] $80000 $190000 $110000
[tex]\text{Less: Variable cost}[/tex] $ 45000 $120000 $75000
Contribution $35000 $70000 $35000
[tex]\text{Less: Additional}[/tex] --- $10000 $10000
development cost.
[tex]\text{Differential profit}[/tex] $35000 $60000 $25000
The company earns an additional profit of [tex]\$25,000[/tex] if it decorates and sells the Rosa umbrella.
2. The company, Mohave should add the decorations to the Rosa umbrella as this would increase the net revenues of the company by an amount of $25,000.
3.a. The demand for he decorated umbrella will fall to 8,000 units due to the higher price. If the company does not make any changes to the Rosa umbrella, it could sell 10,000 units.
The incremental profit or loss is :
Incremental analysis when the demand for the Rosa umbrella is 10,000 units and for the decorated umbrella is 8,000 units is given below:
[tex]\text{Particulars}[/tex] [tex]\text{Rosa umbrella}[/tex] [tex]\text{Decorated umbrella}[/tex] [tex]\text{Incremental}[/tex]
[tex]\text{Sales revenue}[/tex] $80,000 $152,000 $72,000
[tex]\text{Less: Variable cost}[/tex] $45,000 $96,000 $51,000
Contribution $35,000 $56,000 $21,000
[tex]\text{Less: Additional}[/tex] ---- $10,000 $10,000
development cost.
[tex]\text{Differential profit}[/tex] $35,000 $46,000 $11,000
The incremental profits are : $11,000.
3.b. The company should decorate and sell 8000 units of the decorated umbrellas as the increase in the net profit is $11,000.
If the cost of production of Hula Hoops increases, what happens to the supply curve?
Answer:
Left shift
Explanation:
In simple words, If manufacturing costs rise, the distributor's expenses for each output threshold will rise as well. The supply curve must shift inwards that is to the left) if everything else remained constant, indicating the higher cost of manufacturing. At each quantity level, the provider will supply less.
Murphy's, Inc., has 45,000 shares of stock outstanding with a par value of $1 per share. The market value is $10 per share. The balance sheet shows $70,500 in the capital in excess of par account, $45,000 in the common stock account, and $133,500 in the retained earnings account. The firm just announced a stock dividend of 12 percent. What will the balance in the capital in excess of par account be after the dividend?
Answer: $119100
Explanation:
The balance in the capital in excess of par account be after the dividend will be calculated thus:
Firstly, we'll calculate the change in capital in excess of par and this will be:
= Number of shares × dividend rate × (market value - par value)
= 45,000 × 12% × ($10 - $1)
= (45000 × 0.12) × $9
= 5400 × $9
= $48,600
Then, the balance in the capital in excess of par after the dividend will be:
= $70,500 + $48,600
= $119,100
Briefly state the reasons why a company would not wish to distribute all its profits to its shareholders.
Answer:
Explanation:
The profits of a company may be used to invest in equipment, land or some other capital as a one time purchase.
the company may anticipate that they will not make a profit in the following year so they need the current year profits to absorb that loss.
Penelope withdraws $4,115.23 at the end of a five-year investment yielding 4% interest, compounded annually. How much did Penelope originally deposit
Answer:
$3,382.42
Explanation:
The amount originally deposited by Penelope (PV) can be determined using a Financial calculator as follows :
FV = $4,115.23
PMT = $0
N = 5
I = 4 %
P/YR = 1
PV = ?
The PV is $3,382.42
thus,
Penelope originally deposited $3,382.42
Companies can use a spreadsheet to complete the statement of cash flows. Each item that follows is recorded in the transaction analysis columns of the spreadsheet.
Net income
Increases in current assets (other than Cash)
Decreases in current liabilities
Cash payment for the acquisition of plant assets
Cash receipt from the issuance of common stock
Depreciation expense
Identify each as being recorded by a Debit or Credit in the statement of cash flows section of the spreadsheet.
Answer and Explanation:
The categorization is as follows:
a. Debit, positive adjustment
b. Credit, negative adjustment
c. Credit, negative adjustment
d. Credit, negative adjustment
e. Debit, positive adjustment
f. Debit, positive adjustment
In this way the transactions should be categorized with respect to the statement of cash flows section
Hence, the same is to be relevant
Any effort by the Federal Trade Commission (FTC) to evaluate expected deceptive marketing practices would be seriously flawed because it would mean punishing business on the basis of what the FTC thinks might happen rather than on what actually does happen.
a. True
b. False
Answer:
True
Explanation:
This is true because the Federal Trade commission(FTC) analyze and investigate a seller or sellers who may be so cooperative as to make agreements that ensure large amounts of profit for them which is likely harmful and exploitative to consumers . FTC investigates business mergers which may be horizontal or vertical that are likely done for the purpose of increasing market share and fostering a sort of monopoly of the market. However, mergers and cooperation among businesses in the market do not always yield a monopoly and the FTC may be wrong(sometimes) to wave mergers that could increase the quality of goods or services in a market
The term city-state refers to:_________.
a. A walled urban center and its agricultural hinderlands
b. The political institution that ruled over all ancient kingdoms
c. The capital of a large empire run by a monarch
d. An association of mutually dependent cities
The board of directors declared cash dividends totaling $160,000 during the current year. The comparative balance sheet indicates dividends payable of $43,200 at the beginning of the year and $38,900 at the end of the year.
Required:
What was the amount of cash payments to stockholders during the year?
Answer: $164,300
Explanation:
Cash payments to stockholders shows the total amount that the shareholders of a company got during the year. It includes the money owed to them at the start of the year in addition to cash paid during the year.
= Beginning dividends payable + Dividends for the year - Ending dividends
= 43,200 + 160,000 - 38,900
= $164,300
Baxter Co. wants to issue new 20-year bonds for some much-needed expansion projects. The company currently has 5.6 percent coupon bonds on the market that sell for $1,094.30,page 160 make semiannual payments, and mature in 20 years. What coupon rate should the company set on its new bonds if it wants them to sell at par
Answer:
The coupon rate the company should set on its new bonds if it wants them to sell at par is 4.86%.
Explanation:
The coupon rate can be determined by calculating the yield to maturity (YTM) using the following RATE function in Excel:
YTM = RATE(nper,pmt,-pv,fv) * Number of semiannuals in a year = RATE(nper,pmt,-pv,fv)*2 .............(1)
Where;
YTM = yield to maturity = ?
nper = number of periods = number of years to maturity * number of semiannuals in a year = 20 * 2 = 40
pmt = semiannual coupon payment = face value * (annual coupon rate / number of semiannuals in a year) = 1000 * (5.6% / 2) = 28
pv = present value = current bond price = $1,094.30 = 1094.30
fv = face value of the bond = 1000
Substituting the values into equation (1), we have:
YTM = RATE(40,28,-1094.30,1000)*2
Inputting =RATE(40,28,-1094.30,1000)*2 into excel (Note: as done in the attached excel file), we have
YTM = 4.86%
Therefore, the coupon rate the company should set on its new bonds if it wants them to sell at par is 4.86%.
At the end of each quarter, Patti deposits $1,100 into an account that pays 12% interest compounded quarterly. How much will Patti have in the account in 4 years
Answer:
Future value = $22172.56
Explanation:
Below is the given values:
Deposit made at the end of each quarter = $1100
Interest rate = 12% or 12% / 4 = 3%
Number of year = 4years
Number of compounding period = 4 x 4 = 16
Future value = Annuity x [ (1 + r)^n - 1] / r
Future value = $1100 x [ (1 + 3%)^16 - 1] / 3%
Future value = $22172.56
Hartford, Inc. manufactures a single product. Shown are projected revenues and costs based on last year's income statement (8,000 units) and practical capacity (10,000 units). The costs are either variable, fixed, or mixed (part variable and part fixed.) You need to figure out what the cost type is based on the cost behavior.Last Year(8,000 units) Practical Capacity(10,000 units) Total Per Unit Total Per UnitRevenue $800,000 $100.00 $1,000,000 $100.00Costs: Direct Material $200,000 $25.00 $250,000 $25.00Direct Labor $160,000 $20.00 $200,000 $20.00Mfg. Overhead $180,000 $22.50 $200,000 $20.00Selling Expenses $40,000 $5.00 $50,000 $5.00Admin. Expenses $50,000 $6.25 $50,000 $5.00Total Costs $630,000 $78.75 $750,000 $75.00Pre-Tax Profit $170,000 $250,000 RequiredAssume that Hartford expects to sell the same number of units as last year in their normal distribution channels (8,000 units). They have received an offer from a one-time customer (not part of their normal customer mix) to buy 1,000 units (additional to their expected normal sales) at a price of $71. By how many dollars would pre-tax profit increase or decrease if Hartford accepts the special order? (9 points)
Answer:
Hartford, Inc.
If Hartford accepts the special order, the pre-tax profit would increase by
= $21,000.
Explanation:
a) Data and Calculations:
Production and sales capacity last year = 8,000 units
Practical capacity = 10,000 units
Last Year Practical Capacity
(8,000 units) (10,000 units)
Total Per Unit Total Per Unit
Revenue $800,000 $100.00 $1,000,000 $100.00
Costs:
Direct Material $200,000 $25.00 $250,000 $25.00
Direct Labor $160,000 $20.00 $200,000 $20.00
Mfg. Overhead $180,000 $22.50 $200,000 $20.00
Selling Expenses $40,000 $5.00 $50,000 $5.00
Admin. Expenses $50,000 $6.25 $50,000 $5.00
Total Costs $630,000 $78.75 $750,000 $75.00
Pre-Tax Profit $170,000 $250,000
Variable cost per unit $50.00 $50.00
Fixed cost $230,000 $250,000
Sales revenue from the one-time customer = $71,000
Variable cost per unit 50,000
Additional pre-tax profit (increase) $21,000
Select a commercial or Public Service Announcement (PSA) that uses an emotional appeal/Pathos.
Identify the organization along with the topic/issue presented in the PSA or commercial.
Using the information in this section, how would you characterize the way it persuades listeners with emotion?
Is it effective in persuading you as a listener? Why or why not?
Include a Reference page citing the source in APA format.
Write your response in a letter form.
Answer:
An announcement that applies an emotional appeal attempts to urge an emotional reaction from the general public so on suits the message contained within the announcement.
Select a commercial or public service announcement that uses an emotional appeal.
A public service announcement that shows the aftermath of environmental pollution
Using the information in this section, how would you characterize the way it persuades listeners with emotion?
When the general public feels guilty about not having the ability to try to do something about environmental degradation, there'll be a change from the utilization of inorganic to the use of organic materials. When companies that pollute the environment are charged or closed down, and when the people resort to planting more trees.
Is it effective in persuading you as a listener?
Yes.
Why or why not?
It is very effective in persuading because the listeners put themselves in the situation and feel the effect of not taking care of the environment.
Discuss your findings with your classmates.
When people feel guilty for not taking care of the environment, they're going to take social action aimed toward correcting things. The people imagine how the planet is going to be like 50 years from now and picture how their children and grandchildren will survive. they're therefore compelled to try to do something so on contribute to environmental protection and to support the ecology.
Senator A agrees to vote for Senator K's state project in exchange for Senator K voting for Senator A's state project. This is an example of Group of answer choices logrolling. the median voter model. the paradox of voting. the principal-agent problem.
Answer: logrolling
Explanation:
Logrolling simply refers to the exchange of favors specifically. It is the practice of exchanging assistance which is fine usually in politics when each other's proposed legislation is voted for.
Since Senator A agrees to vote for Senator K's state project in exchange for Senator K voting for Senator A's state project, this is logrolling.
Tango Company is planning to acquire Delta Company. The additional pre-tax income from the acquisition will be $300,000 in the first year, but it will increase by 2% in future years. Because of diversification, the beta of Tango will decrease from 1.2 to 0.8. Currently the return on the market is 9% and the riskless rate is 4%. What is the maximum price that Tango should pay for Delta
Complete question: Tax rate is 35%
Answer:
3250000
Explanation:
Tax income = 300000
Tax rate = 35%
Growth = 2%
Risk free rate = 4%
Expected market return= 9%
Beta = 0.8
We solve for the expected return on assets
= 4% + (9%-4%)x0.8
= 0.04+0.05*0.8
= 0.04 + 0.04
= 0.08
= 8% return on assets
The maximum price to pay
300000*(1-0.35)/(8%-2%)
= 300000 * 0.65/0.06
= 300000x10.8333333333
= 3,250,000
Suppose that a share of common stock is expected to pay a $3 dividend one year from now, and thereafter each annual dividend payment will increase by 4% over the prior payment. The effective annual interest rate is 12%. Find the modified duration of this share of stock.
Answer:
13
Explanation:
Modified duration of stock = (1 + Growth rate) / (Effective rate - Growth rate)
Modified duration of stock = (1 + 4%) / (12% - 4%)
Modified duration of stock = (1 + 0.04) / 0.08
Modified duration of stock = 1.04 / 0.08
Modified duration of stock = 13
So, the modified duration of this share of the stock is 13.
A company has these balances as of december 31
cash 20000 fixed assets 35000 accumulated depreciation 20000 accounts payable 5000
what are the total assets?
Answer:
Total asset = 55000
Explanation:
Below is the following calculations:
Cash amount = 20000
Fixed assets = 35000
Accumulated depreciation = 20000
Accounts payable = 5000
The total assets = Cash + fixed assets
Total asset = 20000 + 35000
Total asset = 55000
Not- Accumulated depreciation should be deducted from the gross assets.
What is the effective annual cost of skipping the discount and paying at the end of the net period for the following credit terms: 6/10, net 70
Answer:
APR = 38.829%
APY = 45.70%
Explanation:
Missing word "Calculate the APR and the APY."
Discount % = 6%
Total period = 70
Discount period = 10
i. APR = (Discount% / [100% - Discount%]) * (365 / [Total period - Discount period])
APR = [6% / 100%-6%] * [365 / 70 - 10]
APR = 6%/94% * 365/60
APR = 0.06382979 * 6.083333
APR = 0.38829787
APR = 38.83%
ii. APY = (1 + [Discount% / {100% - Discount%}])^(365/[Total period - Discount period]) - 1
APY = [1 + [6%/ / 100%-6%]^(365/70-10) - 1
APY = {1 + 0.06382979]^6.083333 - 1
APY = 1.06382979^6.083333 - 1
APY = 1.45704250704 - 1
APY = 0.45704250704
APY = 45.70%
Suppose a company wants to structure its assets and liabilities such that its equity is unaffected by interest rate risk. To accomplish that objective, which of the following must the company do?
a. The duration of its liabilities must be longer than the duration of its assets.
b. The duration of its liabilities must equal the duration of its assets.
c. The duration of its liabilities must be shorter than the duration of its assets.
Answer: b. The duration of its liabilities must equal the duration of its assets
Explanation:
Since the company wants to structure its assets and liabilities such that its equity is unaffected by interest rate risk, then the duration of its liabilities must equal the duration of its assets.
It should be noted that when the duration of its liabilities is shorter than the duration of its assets, the duration gap is positive and when there's a rise in interest rate, the worth of assets will be affected more.
When duration of its liabilities is longer than the duration of its assets, the duration gap is negative and when there's a rise in interest rate, the worth of liabilities will be affected more.
Finally, when the duration of its liabilities is equal the duration of its assets, its equity is unaffected by interest rate risk.
Accounts receivable arising from sales to customers amounted to $85,000 and $75,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $285,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is Group of answer choices $285,000. $295,000. $445,000. $275,000.
Answer:
$295,000
Explanation:
Cash flow from Operating Activities
Net Income $285,000
Adjustment for change in working capital :
Decrease in Accounts receivable $10,000
Net Cash Provided by Operating Activities $295,000
Differential cost is ______. Multiple select question. also known as incremental cost the same as opportunity cost the difference in cost between two alternatives never relevant to a product decision
Answer:
I. also known as incremental cost
II. the difference in cost between two alternatives
Explanation:
Costing is the measurement of the cost of production of goods and services by assessing the fixed costs and variable costs associated with each step of production.
Differential cost is also known as incremental cost and it is the difference in cost between two alternatives.
In Financial accounting, fixed cost can be defined as predetermined expenses in a business that remain constant for a specific period of time regardless of the quantity of production or level of outputs. Some examples of fixed costs in business are loan payments, employee salary, depreciation, rent, insurance, lease, utilities etc.
On the other hand, variable costs can be defined as expenses that are not constant and as such usually change directly and are proportional to various changes in business activities. Some examples of variable costs are taxes, direct labor, sales commissions, raw materials, operational expenses etc.
The differential cost is called the incremental cost, and it is the difference in the cost that lies between two alternatives.
The following information should be relevant:
It is the difference between the cost of 2 alternative decisions or the output level is varied.It is also known as the incremental cost.Therefore we can conclude that the differential cost is called the incremental cost, and it is the difference in the cost that lies between two alternatives.
Learn more about the cost here: brainly.com/question/15135554
As Kyle conducts his annual evaluations of his employees, he notices that Connie and Debbie have both been less productive since they were relocated in the same department. Kyle is in what stage of the managerial decision-making process?
Answer:
Identifying the problem or opportunity.
Explanation:
During this stage, Kyle is first trying to determine what aspects of the firm are troublesome or underperforming. The whole point of doing this is to identify the areas that need some actions or decisions made.
The next step would be to generate alternatives.
Mô hình cổ điển cho rằng đất đai là yếu tố quan trọng của tăng trưởng, đồng thời là yếu tố giới hạn của tăng trưởng
special - time order for 15,000 bird feeders at $ 3,50 per unit Bluebird currently produces and sells . This level represents 80 % of its capachy These bird feeders would be marketed under the wholesaler's name and would not Bluebird's through normal channels Production costs for these units are $ 4 25 per unit which includes $ 250 variable cost and 175 fed cost . If Bluebird accepts this additional business , the effect on net income will be :
Answer:
$15,000 Increase
Explanation:
Calculation to determine what the effect on net income will be :
Effect on net income = (15,000 x $3.50) – ($2.50x 15,000)
Effect on net income = $52,500-$37,500
Effect on net income = $15,000 Increase
Therefore If Bluebird accepts this additional business , the effect on net income will be :$15,000 Increase
g Suppose a commercial bank has checkable deposits of $80,000 and the legal reserve ratio is 20 percent. If the bank's required and excess reserves are equal, then its actual reserves
Answer:
$32,000
Explanation:
The computation is shown below;
Required reserves = checkable deposits × legal reserve ratio
= $80,000 × 20%
= $16,000
Now the actual reserves is
= $16,000 + $16,000
= $32,000
Also excess reserve is equivalent to the required reserves
Hence, the actual reserves is $32,000
Product A4B has been considered a drag on profits at XYZ Corporation for some time and management is considering discontinuing the product altogether. Data from the company's budget for the upcoming year appear below: Sales $730,000 Variable expenses $350,000 Fixed manufacturing expenses $234,000 Fixed selling and administrative expenses $161,000 In the company's accounting system, all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $144,000 of the fixed manufacturing expenses and $93,000 of the fixed selling and administrative expenses are avoidable if product A4B is discontinued. The financial advantage (disadvantage) for the company of eliminating this product for the upcoming year would be:
Answer:
the financial advantage (disadvantage) for the company of eliminating this product is -$143,000
Explanation:
The computation is shown below:
Loss in contribution margin -$380,000 ($350,000 - $730,000)
Avoidable fixed costs $237,000 ($144,000 + $93000)
Financial advantage (disadvantage) -$143,000
Hence, the financial advantage (disadvantage) for the company of eliminating this product is -$143,000
The following is a list of account titles and amounts (dollars in millions) from a recent annual report of Hasbro, Inc., a leading manufacturer of games, toys, and interactive entertainment software for children and families:
Buildings and improvements $ 234 Goodwill $ 593
Prepaid expenses and other current assets 392 Machinery, equipment, and software 504
Allowance for doubtful accounts 16 Accumulated depreciation 509
Other noncurrent assets 658 Inventories 340
Accumulated amortization (other intangibles) 798 Other intangibles 1,123
Cash and cash equivalents 893 Land and improvements 7
Accounts receivable 1,111
Required:
Prepare the asset section of the balance sheet for Hasbro, Inc., classifying the assets into Current Assets, Property, Plant, and Equipment (net), and Other Assets. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Amounts to be deducted should be indicated by a minus sign.)
Answer:
Hasbro, Inc.
Balance Sheet
Assets
Current Assets:
Cash and cash equivalents $893
Accounts receivable 1,111
Allowance for doubtful accounts (16) 1,095
Inventories 340
Prepaid expenses and
other current assets 392
Total current assets $2,720
Property, Plant, and Equipment (net):
Buildings and improvements $ 234
Land and improvements 7
Machinery, equipment, and software 504
Other noncurrent assets 658
Accumulated depreciation (509)
Property, Plant, and Equipment (net) $894
Other Assets:
Goodwill $ 593
Other intangibles 1,123
Accumulated amortization
(other intangibles) 798 325
Other assets $918
Total assets $4,532
Explanation:
a) Data and Calculations:
Current Assets:
Cash and cash equivalents $893
Accounts receivable 1,111
Allowance for doubtful accounts (16) 1,095
Inventories 340
Prepaid expenses and
other current assets 392
Total current assets $2,720
Property, Plant, and Equipment (net):
Buildings and improvements $ 234
Land and improvements 7
Machinery, equipment, and software 504
Other noncurrent assets 658
Accumulated depreciation (509)
Property, Plant, and Equipment (net) $894
Other Assets:
Goodwill $ 593
Other intangibles 1,123
Accumulated amortization
(other intangibles) 798 325
Other assets $918
The expenditure and income approaches to calculating GDP arrive at the same final number, but they calculate that number in different ways. To illustrate, consider the possible effects of the following transactions on GDP:
1. Daesun pays Awesome Foods Market $1,100 to cater his daughter's engagement party. He's attracted by Awesome Foods Market's guarantee that he'll be happy with the catering, or he'll get his money back.
2. Awesome Foods Market pays JoAnn's Catering $950 to cater the party.
3. JoAnn's Catering buys plasticware worth $200 from Kostko.
Required:
Compute contributions to GDP, using the expenditure approach.
Answer:
Only the amount spent by Manuel would be in included in the calculation of GDP
Explanation:
Gross domestic product is the total sum of final goods and services produced in an economy within a given period which is usually a year
GDP calculated using the expenditure approach = Consumption spending by households + Investment spending by businesses + Government spending + Net export
Net export = exports – imports
When exports exceed import there is a trade deficit and when import exceeds import, there is a trade surplus.
Consumption spending includes spending by households on goods and services. Consumption spending includes :
spending on durables - e.g. laptop
spending on nondurables - e.g. clothes, food
spending on services - e.g. payment of hospital bill
the purchase of a textbook by a student is an example of consumption spending on durable goods
Investment - It includes purchases of goods and services made by businesses in the production of goods and services
the airplane purchased by the airline would be used to provide services for airline customers. Also, the packing boxes bought by Amazon would be used in delivering goods to customers
Government spending - It includes government consumption expenditure and gross investment. The purchase of a new limousine for the president is an example of consumption expenditure
Items not included in the calculation off GDP includes:
1. services not rendered to oneself
2. Activities not reported to the government
3. illegal activities
4. sale or purchase of used products
5. sale or purchase of intermediate products
A corporation has the following account balances: Common stock, $1 par value, $60,000; Paid-in Capital in Excess of Par, $1,300,000. Based on this information, the :_________.
A. legal capital is $1,360,000.
B. number of shares issued are 60,000.
C. number of shares outstanding are 1,360,000.
D. average price per share issued is $22.50.
Answer:
B. number of shares issued are 60,000.
Explanation:
The computation is shown below:
Since the value of the common stock is $60,000 and the par value is $1
So, the number of common shares issued is
= $60,000 ÷ $1
= 60,000
Hence, the number of shares issued is 60,000
Therefore, the option b is correct
Before reconciling its bank statement, Lauren Cosmetics Corporation's general ledger had a month-end balance in the cash account of $8,250. The bank reconciliation for the month contained the following items:Deposits in transit $870Outstanding checks 645Interest earned 20NSF check returned to bank 220Bank service charge 70Given the above information, what up-to-date ending cash balance should Lauren report at month-end?A. $7,380.B. $8,530.C. $7,980.D. $7,700.
Answer:
a. $7,380
Explanation:
Ending cash balance = Cash balance + Interest earned - NSF check returned to bank - Bank service charge
Ending cash balance = $8,250 + $20 - $220 - $70
Ending cash balance = $7,980
So, $7,380 is the up-to-date ending cash balance should Lauren report at month-end.
Assume that a hypothetical economy with an MPC of 0.75 is experiencing severe recession. Instructions: In part a, round your answers to 2 decimal places. Enter positive numbers. In part b, enter your answers as whole numbers. a. By how much would government spending have to rise to shift the aggregate demand curve rightward by $25 billion? $ billion. How large a tax cut would be needed to achieve the same increase in aggregate demand? $ billion. b. Determine one possible combination of government spending increases and tax increases that would accomplish the same goal without changing the amount of outstanding debt (because it maintains a balanced budget, G = T).
Answer:
a-1. Amount of rise in government expenditure required = $6.25 billion
a-2. Tax multiplier = -3
b. The combination is as follows:
Increase in spending = $25 billion
increase in taxes = $25 billion
Explanation:
a-1. By how much would government spending have to rise to shift the aggregate demand curve rightward by $25 billion? $ billion.
Spending multiplier = 1 / (1 - MPC) = 1 / (1 - 0.75) = 4
Amount of rise in government expenditure required = Change in aggregate demand / Spending multiplier = $25 / 4 = $6.25 billion
a-2. How large a tax cut would be needed to achieve the same increase in aggregate demand? $ billion.
Tax multiplier = - MPC / (1 - MPC) = - 0.75 / (1 - 0.75) = -3
Amount of tax cut required = Change in aggregate demand / Tax multiplier = $25 / (-3) = $8.33 billion
b. Determine one possible combination of government spending increases and tax increases that would accomplish the same goal without changing the amount of outstanding debt (because it maintains a balanced budget, G = T).
The amount is the amount of the balanced budget, which has a multiplier of one. This indicates that spending and taxes need be increased by $25 billion each to boost GDP by $125 billion. Therefore, the combination is as follows:
Increase in spending = $25 billion
increase in taxes = $25 billion