Answer:
(a) 0.7
(b) 3.33
(c) -$210
(d) -$147
(e) -$1 trillion
Explanation:
(a) Marginal propensity to consume (MPC) = 0.7
(b) Multiplier of this economy:
= 3.33
(c) Decrease government purchases by $300 billion,
Initial change in consumption = Change in government purchases × MPC
= $300 × 0.7
= -$210 billion
(d) This decreases income yet again, causing a second change in consumption equal to:
= Initial change in consumption × MPC
= -$210 × 0.7
= -$147 billion
(e) The total change in demand resulting from the initial change in government spending is:
= Change in government purchases × Multiplier
= $300 × 3.33
= -$1 trillion
Answer:
The options for this question are the following:
A. Quantity demanded will decrease, quantity supplied will increase, and a shortage will result.; B. Quantity demanded will increase, quantity supplied will decrease, and a surplus will result.; C. Quantity demanded will decrease, quantity supplied will increase, and a surplus will result; D. Quantity demanded will increase, quantity supplied will decrease, and a shortage will result.
The correct answer is C. Quantity demanded will decrease, quantity supplied will increase, and a surplus will result.
Explanation:
There is a strong correlation between pricing (at prices higher than the equilibrium price) and the creation of excess supply. Following the analysis of supply and demand, if we start from an initial equilibrium situation (where the quantity demanded and supplied are equal) and the authority decides to set a much higher price, the quantity demanded of the product will decrease and, on the other hand, the quantity supplied will increase, so producers will want to sell more than consumers want to buy. The previous problem will be solved if the authority decides to lower the price of the product, since this encourages consumers to buy more and bidders to produce less.
Answer:
<u>Revenues</u>
January = $0
February $4,100 * 50% = $2,050
March $4,100 * 30% = $1,230
April $4,100 * 20% = $820
<u>Expenses</u>
January = $0
February $2,000 * 50% = $1,000
March $2,000 * 30% = $600
April $2,000 * 20% = $400
<u>Operating Income
</u>
January = $0
February $2,050 - 1,000 = $1,050
March $1,230 - $600 = $630
April $820 - $400 = $420
Answer:
That would be a shortage.
Answer:
The company's weighted cost of capital is 12.6%
Explanation:
Weighted average cost of capital (wacc) is calculated using the following formula:
wacc = [ kd x (1-tax) x weight of debt] + [ke x weight of equity]
in which: kd is the cost of debt = 12.5%
ke is the cost of equity = 16%
Weight of debt = $120m / ($120m+$180m) = 40%
Weight of equity = $180m / ($120m+$180m) = 60%
--> wacc = [0.125 x ( 1-0.4) x 0.4] + [0.16 x 0.6]
= 12.6%
