Explain in detail the Modigliani (life‐cycle) theory of consumption. Contrast it with the Keynesian theory of consumption.

Consider the following: Farmer Smith bought seed and fertilizer for $100. He grew wheat that he sold to the Wander Bread Company

Rom4ik [11]

As per the given case, the amount that is added to GDP is $350.

GDP refers to the measure of all final goods and services that have been bought by the final user produced in the country.

As per the given case, Farmer smith bought seed and fertilizer for $100. He grew wheat that he sold to the wander bread company. Consumers bought the bread from the grocery for $350. Therefore, it was added to the GDP.

So, $350 was added to the GDP.

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3 0

2 years ago

150-seat restaurant $8,000,000 is needed to construct the restaurant; no additional investment is needed in working capital.

goldenfox [79]

Answer:

The answer is $7400000

Explanation:

Solution

Recall that:

There is no information is given about per unit cost or sales price hence, a reverse calculation is to be made to find out the projected total revenue.

Now,

The reverse calculation to find sales is computed as follows:

Begin from the expected profit + Tax expenses + Interest Expenses + undistributed expenses + variable cost

Thus,

From the calculation of each term is as stated below:

1. The profit expected = 15% return on their investment. it is to be after tax return, total investment = $8000000,

So,

The Profit expected = $8000000 *15% = $1200000.

2. The tax xxpenses = 25% that is, it should be 25% on taxable profit which is decreased from it and then net profit after tax is available,

Thus,

we have net profit after tax we can compute the taxable profit as = $1200000 / 75% = $1600000. for example, tax amount on taxable profit = $160000 * 25% = $400000.

3. The Interest Expenses = 5% of borrowed fund from bank,

Now,

The borrowed fund from bank = $2000000 (8000000-6000000)

The expenses interest = $ 100000 ($2000000*5%)

4. Undistributed Expenses is stated as follows:

The Undistributed expenses are given in the question = $2000000.

5. Variable cost that is the labor cost and cost of food :

From the question it is given that it is 50% of the sales, which means the remaining 50% is the contribution.

Now

The contribution on reverse calculation is computed as:

Profit +taxes + Interest + fixed expenses

Contribution = 1200000 + 400000 + 100000 + 2000000 = $ 3700000,

Thus,

We say,let the sales be 10 , then variable cost be 50 and contribution is 50, that means variable cost = contribution in this case.

so, in proportional calculation , the variable cost = $3700000 .

Thus

The projected sales = expected profit + Tax expenses + Interest Expenses + undistributed expenses + variable cost

The total revenue projected =$1200000+ $ 400000 + $100000 + $ 2000000 +$ 3700000

Therefore, the total revenue projected = $ 7400000

3 0

3 years ago

A fixed asset with a cost of $30,000 and accumulated depreciation of $28,500 is sold for $3,500. What is the amount of the gain

Maksim231197 [3]

The amount of the gain or loss on disposal of the fixed asset is $2,000.

<h3>Gain or loss on disposal </h3>

First step

Book Value = Original Cost of Equipment - Accumulated Depreciation

Book Value = $30,000 -$28,500

Book value= $1,500

Second step

Gain=Sale Price -Book Value

Gain=$3,500-$1,500

Gain=$2,000

Inconclusion the amount of the gain or loss on disposal of the fixed asset is $2,000.

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8 0

2 years ago

A municipality has a tax rate of 12 mills. a piece of real property in the municipality is assessed at $225,000 and has a fair m

AleksAgata [21]

A municipality charges 12 mills in taxes. The assessed valuation of a piece of real estate in the municipality is $225,000, but its fair market value is $250,000. The property has an annual tax obligation of $2700.

<h3>What is meant by tax liability?</h3>

The sum of money owed to the Internal Revenue Service (IRS) at the conclusion of each tax year is referred to as "tax liability." By pursuing deductions and adjusting their filing approach, many Americans set the objective of lowering their tax obligation.

Tax liability is the total amount of tax that people and companies owe to the federal, state, and local governments in a specific time frame. Tax liabilities are short-term obligations for firms that are listed on a balance sheet and paid off within a year.

One mill = 0.001

12 mills = 0.012

Taxes are based on assessed valuation, not fair market value.

0.012 $*$ $225,000 = $2,700.

Another way to think about it is that 1 mill = $1 of tax for each $1,000 of assessed value.

A municipality charges 12 mills in taxes. The assessed valuation of a piece of real estate in the municipality is $225,000, but its fair market value is $250,000. The property has an annual tax obligation of $2700.

The complete question is:

A municipality has a tax rate of 12 mills. A piece of real property in the municipality is assessed at $225,000 and has a fair market value of $250,000. The annual tax liability on the property is:

A. $120

B. $300

C. $2,700

D. $3,000

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6 0

2 years ago

Explain why an economist would say, "There is no such thing as a free lunch."

muminat

Because everything has to be paid for by someone. Also, if someone is getting you something for free, it is likely that they will want something in return.

7 0

3 years ago

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