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tangare [24]
3 years ago
11

In the short run, the quantity of output that firms supply can deviate from the natural rate of output if the actual price level

in the economy deviates from the expected price level. Several theories explain how this might happen.For example, the sticky-price theory asserts that the output prices of some goods and services adjust slowly to changes in the price level. Suppose firms announce the prices for their products in advance, based on an expected price level of 100 for the coming year. Many of the firms sell their goods through catalogs and face high costs of reprinting if they change prices. The actual price level turns out to be 90. Faced with high menu costs, the firms that rely on catalog sales choose not to adjust their prices. Sales from catalogs will _______(Remain the same/fall/rise), and firms that rely on catalogs will respond by _______ (Increasing/Reducing) the quantity of output they supply. If enough firms face high costs of adjusting prices, the unexpected decrease in the price level causes the quantity of output supplied to ______ (Fall below/Rise above) the natural rate of output in the short run.Suppose the economy's short-run aggregate supply (AS) curve is given by the following equation:Quantity of output supplied = Natural Rate of output + a x (Price level (actual) - Price level (expected))The Greek letter a represents a number that determines how much output responds to unexpected changes in the price level. In this case, assume that a= $2 Billion. That is, when the actual price level exceeds the expected price level by 1, the quantity of output supplied will exceed the natural rate of output by $2 billion. Suppose the natural rate of output is $60 billion of real GDP and that people expect a price level of 100.The short-run quantity of output supplied by firms will rise above the natural rate of output when the actual price level ____ (rises above/falls below) the price level that people expected.

Business
1 answer:
Iteru [2.4K]3 years ago
6 0

Answer:

1. Rise

2. Reducing

3. Fall below

4. Rises above

Explanation:

1. Sales from catalogues will fall because people will demand less as a result of the catalogue price being higher than the actual price.

2. As the rules of Supply and Demand opine, the Catalogue companies will have to reduce supply in response to a decrease in demand.

3. The natural output quantity will be more than the output supplied.  have attached a graph and a table to show an example using the figures.

4. The short-run quantity of output supplied by firms will rise above the natural rate of output when the actual price level rises above the price level that people expected as shown by the graph.

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Explanation:

6 month free concession in first year drops rent to:

= 20 / 2

= $10

Effective rent = [Present value of Year 1 rent + Present value of Year 2 rent + Present value of Year 3 rent ] / [ 1 - (1 / (1 + rate)^ number of years) / rate]

= [(10 / (1 + 10%) ) + (21 / (1 + 10%)²) + (22 / (1 + 10%)³)] * [1 - (1 / (1 + 10%)³/ 10%)]

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8 0
3 years ago
The misperceptions theory of the short-run aggregate supply curve says that the quantity of output supplied will increase if the
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Insider Trading

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The concept of venue reflects the policy that: _____________
dsp73

Answer:

D. A lawsuit should be tried in the geographic neighborhood in which the incident leading to the lawsuit occurred.

Explanation:

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As part of its commitment to quality, the J. J. Borden manufacturing company is proposing to introduce just-in-time (JIT) produc
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Answer:

A. $74,100 $954,700

B. $880,600

Explanation:

A. Preparation to estimate the financial benefits associated with the adoption of JIT

Current situation After JIT

Sales 1,430,000 1,810,000

Less costs

Production level support 214,500 72,400

(15%*1,430,000=214,500)

(4%*1,810,000=72,400)

Variable manufacturing overhead 400,400 181,000

(28%*1,430,000=400,400)

(10%*1,810,000=181,000)

Direct material 429,000 362,000

(30%*1,430,000=429,000)

(20%*1,810,000=362,000)

Direct manufacturing labor 286,000 235,300

(20%*1,430,000=286,000)

(13%*1,810,000=235,300)

Inventory financing costs 26,000 4,600

(10%*260,000=26,000)

(10%*46,000=4,600)

Total costs 1,355,900 855,300

Operating profits $74,100 $954,700

(1,430,000-1,355,900)

(1,810,000-855,300)

Therefore the the financial benefits associated with the adoption of JIT will be $74,100 $954,700

B. Preparation for the estimated change in annual operating income attributable to the JIT implementation

Current situation After JIT Change

Sales 1,430,000-1,810,000=-380,000

Less costs

Production level support 214,500-72,400 =142,100

Variable manufacturing overhead 400,400 -181,000=219,400

Direct material 429,000-362,000=67,000

Direct manufacturing labor 286,000- 235,300= 50,700

Inventory financing costs 26,000-4,600 =21,400

Total costs 1,355,900-855,300=500,600

Operating profits 74,100-954,700=880,600

Therefore the estimated change in annual operating income attributable to the JIT implementation will be 880,600

8 0
3 years ago
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