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4 years ago

The aggregate demand curve is downward sloping because

Business

1 answer:

SSSSS [86.1K]4 years ago

3 0

Answer:

D. an increase in the price of a good causes a decrease in market demand for that good.

Explanation:

First, if prices decrease, then people will feel wealthier and consume more and the aggregate demand increases. (Pigou´s effect)

Second, if interest rates decrease available domestic investors will invest in foreign countries where return (interest rates]) on investments are higher. If domestic investors invest in foreign countries the supply of dollars will increases. This will decrease the real exchange rate and then exports will be affected in a positive way; exports will increase and thus the aggregate demand.

Third, when the price level is down, consumers demand less currency, which means that they will keep more money in their bank accounts. If banks have more money, then the interest rate for loans decrease. If interest rates decrease, the cost of investment decreases too. Then, if the price for investment decreases, the demand for it increases and the aggregate demand decreases too.

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If your nominal wage rises from $10 to $12 while the CPI rises from 150 to 180 will your real wage increase, decrease, or stay t

dimaraw [331]

Answer:

A. Stay the same

Explanation:

We need to compare the rate of price change and the rate of inflation.

Rate of price change = $12 - $10 x 100

$10

=2/10 x 100

=0.2 x 100

=20%

inflation rate= CPI year 2- CPI year 1 x 100 %

CPI year 1

=180 -150 x 100

150

=30/150 x 100

=0.2 x 100

=20%

The price change are the inflation rate are the same.The real wages will stay the same

4 0

3 years ago

Read 2 more answers

Johnny Cake Ltd. has 8 million shares of stock outstanding selling at $20 per share and an issue of $40 million in 8 percent ann

dangina [55]

Answer:

Year Cashflow [email protected]% PV [email protected]% PV

$ $ $

0 (905) 1 (905) 1 (905)

1-16 52.80 7.8237 413 10.8377 572

16 1,000 0.2176 218 0.4581 458

NPV (274) NPV 125

Kd = LR + NPV1/NPV1+NPV2 x (HR – LR)

Kd = 5 + 125/125 + 274 x (10 – 5)

Kd = 5 + 125/399 x 5

Kd = 6.57%

Ke = D1/Po + g

Ke = $3/$20 + 0.04

Ke = 0.19 = 19%

WACC = Ke(E/V) + Kd(D/V)

WACC = 19(160,000,000/196,200,000) + 6.57(36,200,000/196,200,000)

WACC = 15.49 + 1.21

WACC = 16.7%

Market value of the company $

Market value of equity (8,000,000 x $20) 160,000,000

Market value of bond ($40,000,000 x $905/$1,000) 36,200,000

Market value of the company 196,200,000

Explanation:

In this case, we will calculate cost of debt using interpolation formula. The cashflow for year 0 is the current market price while the cashflow for year 1 to 16 refers to after-tax coupon, which is calculated as R(1-T). R = 8% x $1,000 par value = $80. Then, R(1-T) = 80(1-0.34) = $52.80. The cashflow for year 16 is the par value. The cashflows are discounted in order to obtain the cost of debt.

Cost of equity is the ratio of expected dividend to current market price plus growth rate.

WACC is the aggregate of cost of each capital multiplied by the proportion of each stock in the market value of the company.

5 0

3 years ago

James has the choice of the following two Treasury Bills: A Government of Canada Treasury Bill for 98,000. The Canadian Treasury

kherson [118]

Answer:

E. The annual effective interest rate earned by the U.S. Treasury Bill is greater than rate for the U.S. Treasury Bill.

Explanation:

Treasury bills, or T-bills, are short term investments that are issued by the government. Unlike normal bonds which governments issued with interest payment, they do not have interest payments, but instead are sold at a discount. The Understanding how to calculate a T-bills yield and discount yield based on the maturity date is important to evaluate the investment.

5 0

3 years ago

You are offered a court settlement in the following terms: you will receive 7 equal payments of $7,275 each every year, with the

-Dominant- [34]

Answer:

$34,244.98

Explanation:

For computing the settlement worth in present value terms first we have to determine the future value which is shown below:

Value at year 4 = Annuity × [1 - 1 ÷ (1 + interest rate)^number of years] ÷ interest rate

= $7,275 × [1 - 1 ÷ (1 + 0.07)^7] ÷ 0.07

= $7,275 × [1 - 0.6227497419 ] ÷ 0.07

= $7,275 × 5.3892894016

= $39207.08

Now the present value is

As we know that

Future value = Present value × (1 + interest rate)^number of years

$39,207.08 = Present value × (1 + 0.07)^2

So, the present value is

= $39,207.08 ÷ 1.1449

= $34,244.98

We simply applied the above formula so that the present value comes i.e today's value

3 0

3 years ago

Natalie and Curtis have been experiencing great demand for their cookies and muffins. As a result, they are now thinking about b

lukranit [14]

Answer:

Cookie & Coffee Creations Inc.

a) Current Portion of Note Payable:

= $4,000

b) Long-term Portion of Note Payable:

= $6,000

Explanation:

Data and Calculations:

Date of Note Payable = November 1, 2017

Period = 3 years

Interest rate = 5%

Terms of payment:

Fixed principal payments = $2,000

Payment dates = May 1 and November 1

Each year's principal repayment = $4,000 ($2,000 x 2)

From November 1, 2017 to October 31, 2018 = $4,000

At October 31, 2018, Payment made = $2,000 on May 1

Remaining Note payable = $10,000 ($12,000 - $2,000)

Current Portion = $4,000 ($2,000 x 2)

Long-term Portion = $6,000

b) The current portion of $4,000 will be payable on November 1, 2018 and May 1, 2019. The current portion represents the short-term portion of the note payable, which is the portion that will be settled within a 12-months' period. Since Cookie & Coffee Creations Inc. had already paid $2,000 on May 1, 2018, the long-term portion will only remain $6,000 ($12,000 - $2,000 - $4,000), which is the difference between the total note payable, the portion paid on May 1, 2018, and the current portion of $4,000 that will be payable within one year.

5 0

3 years ago