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VashaNatasha [74]
3 years ago
5

Consider a small country that is closed to trade, so its net exports are equal to zero. The following equations describe the eco

nomy of this country in billions of dollars, where C is consumption, D is disposable income, I is investment, and G is government purchases: C=40+0.9∗DIG=80I=201. Assume that this economy initially has a fixed tax and that net taxes (taxes minus transfer payments are $100 billion. Disposable income is then (Y−100), where Y is the real GDP. Aggregate output demanded is $500 billion (True/False).2. Suppose the government decides to increase spending by $10 billion without raising taxes. Because the expenditure multiplier is 10 (True/False), this will increase the economy's aggregate output demanded by $100 billion (True/False).3. Now, suppose that the government switches to an income tax, which is the type of variable tax, of 20%. Because consumers retain only 80% of each additional dollar of income, disposable income is now 0.80∗Y. In this case, the economy's aggregate output demanded is $500 billion (True/False).4. Given an income tax of 20%, the expenditure multiplier is approximately 3.6 (True/False). Therefore, if the government decides to increase spending by $10 billion without raising tax rates, this would increase the economy's aggregate output demanded by approximately $36 billion (True/False).5. A $10 billion increase in government purchases will have a larger effect on output under a fixed tax of $100 billion (True/False).
Business
1 answer:
inna [77]3 years ago
4 0

Answer:

1. Aggregate output demanded is $500 billion. True.

Aggregate Demand (Y) = C + G + I

Y = 40+0.9∗DI + 80 + 20

Y = 40 + 0.9 ∗ (Y−100) + 80 + 20

Y = 50 + 0.9Y

0.1Y = 50

Y = $500 billion

2. Suppose the government decides to increase spending by $10 billion without raising taxes. Because the expenditure multiplier is 10. True.

Expenditure Multiplier = 1 / ( 1 - Marginal Propensity to Consume)

Marginal Propensity to Consume = 0.9 as per the Consumption function.

= 1/ ( 1 - 0.9)

= 10

2. b. this will increase the economy's aggregate output demanded by $100 billion. True.

Change in Aggregate output = Increase in government expenditure * expenditure multiplier

= 10 billion * 10

= $100 billion

3. ... In this case, the economy's aggregate output demanded is $500 billion . True.

Aggregate Demand (Y) = C + G + I

Y = 40+0.9∗DI + 80 + 20

Y = 40 + 0.9 ∗ (0.80∗Y) + 80 + 20

Y = 140 + 0.72Y

0.28Y = 140

Y = $500 billion

4. Given an income tax of 20%, the expenditure multiplier is approximately 3.6. True.

As a result of the new tax, the MPC will become;

= 0.9 * ( 0.80 * Y)

= 0.72Y.

Expenditure Multiplier = 1 / ( 1 - Marginal Propensity to Consume)

= 1/ ( 1 - 0.72)

= 3.57

= 3.6

4. b. Therefore, if the government decides to increase spending by $10 billion without raising tax rates, this would increase the economy's aggregate output demanded by approximately $36 billion. True.

Change in Aggregate output = Increase in government expenditure * expenditure multiplier

= 10 billion * 3.6

= $36 billion

5. A $10 billion increase in government purchases will have a larger effect on output under a fixed tax of $100 billion. True.

When the tax was fixed, an increase in Government purchases of $10 billion resulted in an increase in Aggregate output of $100 billion. When the Government switched to income taxes however, a $10 billion increase in Government spending led to a significantly lesser increase in Aggregate output of $36 billion.

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Len [333]

Answer:

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Explanation:

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Cost incurred by the company in building the power station = $10,000,000 + (150,000 x $35)

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3 0
3 years ago
Bloom Corporation purchased $1,000,000 of Taylor Company 5% bonds at par with the intent and ability to hold the bonds until the
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Answer:

1)

Since Bloom plans to sell the bonds, it must record the entire loss as credit loss (loss on sale of bonds)

Dr Other than temporary impairment loss 400,000

    Cr Discount on bond investment - Taylor bonds 400,000

Credits losses must be recognized as a loss in earnings in the income statement.

2)

Journal entry to record credit loss:

Dr Other than temporary impairment loss 250,000

    Cr Discount on bond investment - Taylor bonds 250,000

Journal entry to record non-credit loss:

Dr Other than temporary impairment loss 150,000

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Non-credit losses must be recognized as part of other comprehensive income/loss and must be disclosed separately than credit losses. They must be reported in the balance sheet (they lower retained earnings directly), not the income statement.

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2 years ago
Sweet Dreams Chocolatiers Ltd. began operations on January 1, 2020. During its first year, the following transactions occurred:
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Answer:

Explanation:

Journal entry is a record of transaction in their respective accounts using the debit and credit system. Debit entry represents an increase and credit a decrease.

S / NO             Particulars       Debit          Credit  

 1                      Cash                200,000

                       Share stock                               200,000

2                       Inventory             483,000

                   Account payable                             483,000

3.                 Account receivable   675,000

                              Sales                                       675,000

                      Cost of goods             405,000

                         Inventory                                       405,000

4                            Cash                        562,000

                     Account receivable                              562,000

5                    Account payable               431,000

                            Cash                                                  431,000

6                       Motor Vehicle                 39,000

                               Cash                                                  39,000

7                            Rent                        25200

                     Prepaid rent                       2100

                           Cash                                                         27300

8                    Operating Expenses      20,000

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                       Operating exp payable                                  2,000

9                            Depreciation                 2,000

                             Motor Vehicle                                              2,000

10                  Dividends payable                   8500

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7 0
3 years ago
Steve wants to use Google Display Ads to reach new customers who are looking to purchase products similar to his. Which audience
jok3333 [9.3K]

Answer: In-Market audiences

Explanation:

In-market audiences are internet users who through their browsing history and tendencies have spurred Google to term them as users with <em>high commercial intent</em>.

Because of the analysis done by Google, they know what the users are looking for and so one can target specific ads at them. Steve can therefore use Google Display Ads to target those customers who are looking to buy similar products to his through In-market audiences.

6 0
3 years ago
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nika2105 [10]

Answer:

(C) $94.00

Explanation:

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= Remaining units × cost price + remaining units × cost price

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= $60 + $34

= $94

The 4 units come from May 1 and May 10 i.e 9 units - 5 units = 4 units

And on May 20, the 6 units were sold out of which 4 units were sold at price of $15 and rest 2 units were sold at a price of $17

8 0
3 years ago
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