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Artist 52 [7]
3 years ago
8

Neoclassical Model of Investment" (1 point): In class, we discussed the idea of net investment, and how it could change in respo

nse to changes in economic conditions. Consider the following potential changes in the economy and discuss what the immediate impact of these changes will be for the rental price of capital, the cost of capital, and net investment.
(a) Anti-inflationary monetary policy raises the real interest rate (r ↑)
(b) An earthquake destroys part of the capital stock (K ↓)
(c) Immigration of foreign workers increases the size of the labor force (L ↑)
(d) Advances in computer technology make production more efficient (A ↑)
Business
1 answer:
statuscvo [17]3 years ago
6 0

Answer:

Take Note that the model has following relationship between investment and factors that affect it

Int = F(Ye, it, d, πe, tc, Kt-1)

Net investment is a function of

Expected output (Ye),

Rental or user cost of capital (such as nominal interest rate it),

Expected inflation (πe),

Corporate tax/ investment tax credit,

Existing stock of capital

For a given stock of capital,

A rise in expected output (Ye), increases investment

A rise in expected inflation (πe) increases investment

A rise in the investment tax credit increases investment.

A rise in nominal/real rate of interest decreases investment

A rise in corporate income tax decreases net investment

(a) Anti-inflationary monetary policy raises the real interest rate (r ↑). As mentioned, it will depress net investment as firms have to pay a higher rate of interest on the investment made. Such policy increases rental cost of capital and it will decrease the desired capital stock.

b) An earthquake destroys part of the capital stock (K ↓). This will reduce net investment, increases rental cost of capital and it will decrease the desired capital stock.

(c) Immigration of foreign workers increases the size of the labor force (L ↑). With more workers to share the capital stock, marginal producivity of capital rises and so net investment increases. This decreases rental cost of capital and it will increase the desired capital stock.

(d) Advances in computer technology make production more efficient (A ). This causes the net investment to increase as the marginal productivity of capital will increase. This decreases rental cost of capital and it will increase the desired capital stock.

Explanation:

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Mortgages, loans taken to purchase a property, involve regular payments at fixed intervals and are treated as reverse annuities.
Marianna [84]

Answer: b

Explanation:

500 000*12% = 60 000\12

5000

4 0
3 years ago
disadvantages of the structure include organizational complexity, increased administrative costs, slow decision making, and diff
Sophie [7]

A company's organizational structure is the hierarchy that defines its management and communications. The disadvantages of organizational structure include lopsided management lines, increased bureaucracy, slowed communications, and increased inflexibility.

<h3>What exactly is an organizational structure?</h3>

A system that defines how specific activities are directed in order to achieve an organization's goals is referred to as an organizational structure. Such activities include rules, roles, and responsibilities.

  • Many of the problems with using a simple organizational structure revolve around the workload of the owner or the person at the top. If the owner of a company is required to approve every decision, he may become overworked.
  • The three main organizational structures are hierarchical, sequential, and matrix.

Hence, the organizational structure of a company is the hierarchy that defines its management and communications. Organizational structure disadvantages include lopsided management lines, increased bureaucracy, slowed communications, and increased inflexibility.

To learn more about organizational structure refer to:

brainly.com/question/2636977

#SPJ4

8 0
1 year ago
Matt purchased a 20-year par value bond with an annual coupon rate of 8% compounded semiannually for a price of 1722.25. The cou
finlep [7]

Answer:

(b) 1440

Explanation:

As the coupon rate of 8% is greater than the yield to maturity (YTM) of 6% annually, the bond is selling at a premium. Hence, the bond will be called at the earliest i.e. 15 years.

Coupon = Call Price * Semi-annual coupon rate = X * [0.08 / 2] = X * 0.04

Yield to call = 6% annually = 3% semi-annually

Time = 15 years * 2 = 30

We know that,

Current Price of bond = Coupon * [1 - (1 + YTC)-call date] / YTC + Call Price / (1 + YTC)call date

  • 1,722.25 = [X * 0.04] * [1 - (1 + 0.03)-30] / 0.03 + [X / (1 + 0.03)30]

  • 1,722.25 = [X * 0.04] * 19.60 + [X * 0.41]

  • 1,722.25 = X * [(0.04 * 19.60) + 0.41]

  • 1,722.25 = X * 1.194

  • X = 1,722.25 / 1.194
  • X=$ 1,442.42 \approx $ 1,440

4 0
3 years ago
During a certain six-year period, the consumer price index (CPI) increased by 50%, but during the next sis-year period, it incre
liberstina [14]

Answer:

D. Deflation

Explanation:

"Consumer Price Index" <em>(CPI)</em> measures the changes in the weighted average of prices of a market basket (consisting of consumer goods and services). It tells the<u> cost of living for every consumer. </u>

"Inflation" refers to the sustained increase of prices of goods and services while "deflation" refers to the sustained decrease of prices of goods and services.

In the situation above, the CPI is considered lower than before, thus <u>deflation</u> must have occurred during the second six-year period. It shows a <u>negative inflation rate.</u>

So, this explains the answer.

7 0
3 years ago
Effect of Inventory Errors
pav-90 [236]

Answer:

Effect of Inventory Errors

1. Kate Interiors Company:

Ending Inventory of $378,500 counted as $366,900.

This shows that Ending inventory is undervalued by $11,600 ($378,500 - 366,900).

The cost of goods sold will be overstated by $11,600 and the net income understated by $11,600 in the income statement.

In the balance sheet, the assets are understated by $11,600 and Equity (Retained Earnings) understated by the same amount.

2. Waterjet Bath Company:

Ending Inventory of $719,880 counted as $728,660.

This shows that Ending inventory is overvalued by $8,780 ($728,660 - 719,880).

The cost of goods sold will be understated by $8,780 and the net income overstated by $8,780 in the income statement.

In the balance sheet, the assets are overstated by $8,780 and the Equity (Retained Earnings) overstated by $8,780.

Explanation:

An overstatement of Ending inventory results in understated cost of goods sold and overstated net income.  Conversely, an understatement of ending inventory results in overstated cost of goods sold and understated net income.

7 0
3 years ago
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