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3 years ago

If the economy is at equilibrium above potential output:

Business

1 answer:

babunello [35]3 years ago

6 0

Answer:

B) There is an inflationary gap, and contractionary fiscal policy is appropriate.

Explanation:

One of the macroeconomic cases is inflationary gap. It means that the difference between the current level of real gross domestic product (GDP) and the predicted or forecasted GDP that would be experienced and achieved if an economy is at full employment. It could be claimed that when the demand for goods and services gets over the production in the factors such as: higher levels of overall employment, increased trade activities or increased government expenditure.

In order to overcome this gap, the contractionary fiscal policy must be considered. The mechanism of that policy is to increase the taxes decrease the government expenses due to inflationary pressures. This policy consequently will affect the level of consumption and private investment, respectively, these also will decrease the real GDP.

Other concept of macroeconomics is recessionary gap. In comparison to inflationary gap, this concept indicates the economy operating at lower level than its full equilibrium level, in turn, the level of real GDP is also less than full equilibrium level. We used to see this situation when the economy was intending to recess.

In order to overcome this gap, the expansionary fiscal policy will work well. Because of decreasing taxes and increasing government expenditures, the recessionary gap can be fought anymore. Since the taxes decreases, the business will revive and the confidence to the investment will increase, as a result the GDP will rise. Moreover, the growing government expenditures will stimulate the GDP to accrue.

To summarize, according to the question we need the gap in which the economy is above of potential, this means inflationary gap. Following this finding, the contractionary fiscal policy will be solution.

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Power Company issued a $ 1,000,000, 5 %, 10-year bond payable at at face value on January 1, 2016. Requirements

Anettt [7]

Answer and Explanation:

The journal entries are shown below:

1. Cash Dr $1,000,000

To Bond payable $1,000,000

(Being the issuance of the bond is recorded)

For recording this we debited the cash as it increased the assets and credited the bond payable as it also increased the liabilities

2. Interest Expense Dr ($1,000,000 × 5% × 1 ÷ 2) $25,000

To Cash $25,000

(Being the interest expense is recorded)

For recording this we debited the interest expense as it increased the expense and credited the cash as it decreased the asset

4 0

2 years ago

When the fed sells treasury bonds on the open market, it will tend to?

Ne4ueva [31]

Here is my answer. DECREASING THE MONEY SUPPLY AND RAISING THE INTEREST RATES is what happens when the Treasury Bonds are being sold by Fed on the open market. An open market is also the same with free market wherein there are only minimal restrictions. Hope this helps.

7 0

2 years ago

At the time of Carol's 10 year high school reunion she was making $30,000 and the CPI was 90. Now that is is time for her to att

Klio2033 [76]

No, Carol's real income fell during that 10-year period.

[(30,000 ÷ 90 × 100) is > (65,000 ÷ 200 × 100)].

<h3><u>How Does the Consumer Price Index (CPI) Work?</u></h3>

The change in prices that American consumers pay each month is tracked by the Consumer Price Index (CPI). The CPI is calculated by the Bureau of Labor Statistics (BLS) as a weighted average of prices for a selection of goods and services that are indicative of overall consumer spending in the United States.

A common indicator of inflation and deflation is the CPI. The CPI report employs a different survey methodology, price sample, and index weights than the producer price index (PPI), which gauges changes in the prices paid by American producers of products and services.

<u>What Purposes Does the CPI Serve?</u>

Policymakers and the financial markets carefully monitor the CPI Index as an indicator of inflation. The cost of living adjustments for federal benefit payments is computed using a linked CPI metric.

<u>How is the CPI determined?</u>

When calculating the CPI, the Bureau of Labor Statistics takes a monthly sample of 94,000 prices and weights each index according to its share of recent consumer spending to determine the total change in prices. In the computation, the substitution impact is also taken into account, which occurs when customers divert their spending away from goods whose prices are rising relative to other goods.

Learn more about CPI with the help of the given link:

brainly.com/question/26682248

#SPJ4

8 0

1 year ago

Germans have not been overly receptive to the use of credit cards such as visa or mastercard and installment debt to purchase pr

guapka [62]

<span>Because of a difference in values from American consumers, Germans have not been overly receptive to installment debt to purchase products and services and the use of credit cards such as visa or Mastercard. The German Schuld which means debt also means guilt.</span>

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3 years ago

The Federal Reserve (or Fed) often executes its policy by selling or buying U.S. government securities in the open market, which

dem82 [27]

Answer:

a) When interest rates on U.S. government securities increases, then the Federal Reserve sells those securities in the open market in order to decrease the money supply. This is contractionary monetary policy of the Federal Reserve. As interest rates are indirectly affected by open market operations, the Federal Reserve sells securities on the open market to reduce the amount of money in circulation to combat rising inflation in the economy.

(b) The federal funds rate, the interest rates charged on the loans to individuals and firms and the rates of bank deposits will increase. As a result, the demand for bank deposits will increase and the demand for other debt securities will decrease. This in turn will increase the yield offered on these instruments.

4 0

3 years ago