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oee [108]
3 years ago
12

Arkensland is a highly industrialized countr. Prices have been steadily increasing over the last few years and inflation reached

an all-time high of 8 % last year. Following this, the central bank came under pressure to reduce inflation to least 4 % in this year. With real GDP expected to grow at 2% this year, the finance minister suggested that the central bank should ensure that money supply growth in the current year is not more than 6%. However, inflation at the end of this year turned out to be higher than 4%, even though real GDP grew at 2% and money supply growth was restricted to 6%. Which of the following can most reasonably be inferred from the above information? A. The velocity of money increased this year. B. THere is a risk of hyperinflation in Arkensland. C. The growth of GDP in Arkensland has stagnated. D. The central bank of Arkensland must have sold bonds this year in order to reduce the money supply.
Business
1 answer:
ale4655 [162]3 years ago
4 0

Answer: (A) The velocity of money increased this year

Explanation:

First of all, the question says: "which of the following can be most reasonably inferred from THE ABOVE INFORMATION?"

"Above information" here refers to:

"Inflation rate turned out to exceed 4% in the current year, DESPITE Real GDP growth being at the estimated level of 2% AND money supply growth being at the restricted level of 6%"

So why did inflation growth rate still exceed money supply growth rate and real GDP growth rate?

Answer: the velocity of money increased in the current year. Velocity of money is the speed with which money is exchanged in the economy. The fact that the real value of this currency has dropped significantly (due to significant rise in inflation) made individuals lose interest in having a bulk of the currency. Hence, they quickly spend it once it gets to their hands (e.g. as disposable income) and this in turn causes inflation rate to rise.

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PackMan Corporation has semiannual bonds outstanding with nine years to maturity and the bonds are currently priced at $754.08.
Alja [10]

Answer:

b. 8.225%

Explanation:

The rate formula will be used to solve this question.

Please note that the NPER represents the time value.

Where;

Present value is $754.08

Let's assume that the face value is $1,000

PMT= 1,000 x 7.25% ÷2

=$36.25

NPER= 9 years x 2

= 18 years

The formulae is therefore

Rate(NPER,PMT,-,PV,FV)

The value of the present value is negative.

a. The pretax would therefore be 11.75%

b. After tax cost of debt would be ;

Pretax cost of debt x (1 - tax rate)

11.75% x (1 - 30%)

11.75% x (1 - 0.03)

=8.225%.

4 0
3 years ago
Geoff purchased a life annuity for $4,800 that will provide him $100 monthly payments for as long as he lives. Based on IRS tabl
Brilliant_brown [7]

Answer:

B. $80

Explanation:

The annuity exclusion ratio is ($4,800/($100*240))= 20% return of capital per payment. Hence, $80 of the $100 monthly payment is include in gross income

8 0
3 years ago
Hahn Co. prepared financial statements on the cash basis of accounting. The cash basis was modified so that an accrual of income
jeyben [28]

Answer: the answer is A. Yes.

Explanation:

Under a strict cash basis of accounting, revenues and expenses are recorded only when cash is received or paid. Under a modified cash basis of accounting, certain accruals and/or deferrals are recorded for financial-statement purposes.  

The most common modifications are the capitalization and amortization of long-lived assets and the accrual for income taxes (recognition of income tax expense and related liability).

8 0
3 years ago
Acme Home Builders, Inc., has build 24 houses so far this year at a total cost to the company of $4.80 million. If the company b
Dmitry_Shevchenko [17]

Answer:

25th house's Marginal cost is $250,000.

Explanation:

Given:

Total cost of 24 houses = $4,800,000

Total cost of 25 houses = $5,050,000

Marginal cost = ?

Computation of marginal cost:

Marginal cost = Change in total cost

Marginal cost = Total cost of 25 houses - Total cost of 24 houses

Marginal cost = $5,050,000 - $4,800,000

Marginal cost = $250,000

So, we say that 25th house's marginal cost will be $250,000 .

5 0
3 years ago
Paula Boothe, president of the Armange Corporation, has mandated a minimum 10% return on investment for any project undertaken b
Vlad1618 [11]

Answer:

Residual income= $36,000

Explanation:

Residual income is the income that is generated in excess of the minimum required rate of return, which in this case is 10%. Any income above 10% return is considered as residual income. In this case the investment is 1,800,000 and 10% of that is 180,000 (0.1*1,800,000). So any income made above $180,000 will be residual income. In order to find the residual income we subtract the minimum income required from the actual income.

In this case the minimum income required is 180,000 and the actual operating income is 216,000 so residual income=

216,000-180,000= $36,000

4 0
3 years ago
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