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creativ13 [48]
3 years ago
8

Explain and discuss how each phase of the boom-and-bust cycle has characterized the history of capital flows from the advanced i

ndustrial countries to the developing world. Should national governments or international institutions regulate capital flows? How effective are capital controls? What is the role of the IMF in regulating cross-border capital flows
Business
1 answer:
Neporo4naja [7]3 years ago
3 0

Answer:

The boom and bust cycle is a process of economic expansion and contraction that occurs one after the other. During the boom the economy grows, jobs are plentiful and the market brings high returns to investors. In the subsequent bust the economy shrinks, people lose their jobs and investors lose money.

Explanation:

Characteristics of Boom: Increases in demand for capital/consumer goods. Businesses tend to increase their investment, employment opportunities abound, Consumer confidence is strong and consumers have a positive outlook.

The bust periods are referred to as recessions; if the recession is particularly severe, it is called a depression.

Since the mid-1940s, the United States has experienced several boom and bust cycles. Why do we have a boom and bust cycle instead of a long, steady economic growth period? The answer can be found in the way central banks handle the money supply.

During a boom, a central bank makes it easier to obtain credit by lending money at low interest rates. Individuals and businesses can then borrow money easily and cheaply and invest it in, say, technology stocks or houses. Many people earn high returns on their investments, and the economy grows.

Yes, national government and international institutions should regulate capital flows because when credit is too easy to obtain and interest rates are too low, people will overinvest. This excess investment is called “malinvestment.”

When this happens, There won’t be enough demand and the bust cycle will set in. Investments will decline in value. Investors lose money, consumers cut spending and companies cut jobs. Credit becomes more difficult to obtain as borrowers become unable to make their loan payments.

The IMF controls cross border flows by promoting exchange stability, to maintain orderly exchange arrangements among members, and to avoid competitive exchange depreciation.

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Suppose that initially a bank has excess reserves of $800 and the reserve ratio is 30%. Then Andy deposits $1,000 of cash into h
ratelena [41]

Answer:

excess reserves after lending  = $900

so correct option is C) $900

Explanation:

given data

reserves = $800

reserve ratio = 30%

deposits = $1,000

bank lends = $600

to find out

That bank can lend an additional

solution

first we get required reserves from new deposit that is express as

required reserves  = deposit × reserve ratio      ......................1

put here value

required reserves  = $1000 × 30%

required reserves  = $300

and

now excess reserves from new deposits will be  

excess reserves = deposits - required reserves     .......................2

put here value

excess reserves = $1000 - $300

excess reserves  = $700

and

total excess reserves  will be here

total excess reserves = old excess reserves + new excess reserves     ...........3

put here value

total excess reserves =  $800 + $700

total excess reserves = $1500

so that

excess reserves after lending is here express as

excess reserves after lending  = excess reserves - amount given to Molly   ..........................4

put here value

excess reserves after lending  = $1500 - $600

excess reserves after lending  = $900

so correct option is C) $900

3 0
3 years ago
Which type of investment offers both capital gains and interest income?
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3 years ago
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2 years ago
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A company uses the retail method to estimate inventories. The following information is for the first six months of the current y
Tanya [424]

Answer:

The correct answer is $240,000.

Explanation:

According to the scenario, given data are as follows:

Beginning inventory at cost = $70,000

Beginning inventory at retail = $100,000

Net purchases at cost = $270,000

Net purchases at retail = $360,000

Total sales = $320,000

According to the LIFO method.

Particulars                        Cost                       Retail              Cost/Retail Ratio

Beginning inventory             $70,000                $100,000                     70%

Net purchases                      $270,000              $360,000                     75%

Total Inventory                     $340,000             $460,000

Total sales                                                       $320,000

Ending inventory ( Estimated )

($360,000-$320,000)× 75%  $30,000

$70,000 × 70%                      $70,000

Ending inventory at cost         $100,000

Estimated cost of goods sold   $240,000.

Hence the correct answer is $240,000.

7 0
3 years ago
For a closed economy, gdp is $18 trillion, consumption is $13 trillion, taxes are $2 trillion and the government runs a deficit
Yakvenalex [24]

Answer:

$3 trillion and $2 trillion, respectively

Explanation:

Private savings in (Income - Taxes) -Consumption

National/Public Savings are (taxes - expenditures)

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2 years ago
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