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Setler [38]
3 years ago
15

Imagine that the government statisticians who calculate the inflation rate have been updating the basic basket of goods once eve

ry 10 years, but now they decide to update it every five years. How will this change affect the amount of substitution bias and quality/new goods bias?
Business
1 answer:
exis [7]3 years ago
6 0

<u>The substitution bias causes an inflation rate calculated using a fixed basket of goods over time to overstate the true rise in the cost of living because it does not take into account that people can substitute away from goods whose prices rise disproportionately.</u>

Explanation:

<u>When the price of a good rises, consumers tend to purchase less of it and to seek out substitutes instead</u>.

<u>On the other hand , if  the price of a good falls, people will tend to purchase more of it and not opt for its substitutes</u>

<u />

This concept implies that goods with generally rising prices should tend over time to become less important in the overall basket of goods used to calculate inflation, while goods with falling prices should tend to become more important for the calculation of inflation

The <u>quality/new goods bias</u> causes inflation calculated using a fixed basket of goods over time to overstate the true rise in cost of living <u>because improvements in the quality of existing goods and the invention of new goods are not taken into account. </u>

<u />

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On January 1, DogMart Company purchased a two-year liability insurance policy for $32400 cash. The purchase was recorded to Prep
aleksley [76]

Answer: $1,350

Explanation:

The insurance is for 2 years but has to be apportioned monthly on account of the Accrual basis in Accounting where expenses will only be recognized when they are incurred.

The expense to be recorded for the first month will therefore be:

= 32,400 / 24 months

= $1,350

4 0
3 years ago
Margie received her store order on 12 3 16 at 4:00 a.M. She just opened one of the fountain bibs today 12 7 16 at 12:00 p.M. The
Kruka [31]

Answer and Explanation:

The correct way for putting this on expiration paper is as follows

Expiration date: 1/17/2017

Exp time: 4:00 AM

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Preparation time: 4:00 AM

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Therefore we applied the given information to arrive at an answer

6 0
4 years ago
A trade surplus occurs when the value of imports is__________. A. less than the value of exports. B. government spending is less
Reika [66]

Answer: Option A

         

Explanation: In simple words, trade surplus refers to the economic condition under which a country's value of goods sold to other countries, that is, exports is greater than the value of goods it purchases from other countries ,that is, imports.

Trade surplus is seen as a positive indicator of economic growth as a country in surplus will behaving more money to invest in public core services and wont be spending their tax collections on interest and loans taken by international assignations such as IMF or world bank.

Hence from the above we can conclude that the correct option is A.

5 0
3 years ago
Santana Industries purchased a supply of electronic components from ABC Corporation on October 1, 2020. In payment for the $5 mi
pshichka [43]

Answer: they will report an interest expense of $150000 in December 2020

Explanation:

firstly we calculate how much interest will be accumulated for the whole year so we are given a $5 million Dollar purchase which is the amount that will accumulate interest over time, then we have been told the company ha issued a 1 year installment note therefore we have a time frame.

so now we will calculate the yearly interest of $5 million :

$5 000000x12% = $600000 so the company will accumulate this interest yearly then we divide this amount by 12 to get the monthly interest.

$600000/12 = $ 50000 per month interest thereafter we will multiply the monthly interest of $50000 by 3 months which is months from October to December.

therefore the interest expense to be reported on the December 2020 income statement is $50000 x 3= $150000

6 0
3 years ago
Potatoes and wheat output (tons per day)
Alchen [17]

Answer:

c. potatoes

Explanation:

The computation is shown below:

Opportunity cost of producing 1 tons of wheat is  

for US = 4 ÷ 3 = 1.33 tons of potatoes

for Ireland = 2 ÷ 1 = 2 tons of potatoes

As the opportunity cost is higher in united states of potatoes so here the united stated should be comparative advantage in generating potatoes  

3 0
3 years ago
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