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3 years ago

Investment can be increased both by reducing taxes on private saving and by reducing the government budget deficit.

Business

1 answer:

Romashka [77]3 years ago

7 0

Answer:

1. Increasing

2. A. The elasticity of private saving with respect to the after-tax real interest rate

B. The response of private saving to changes in the government budget deficit

C. The elasticity of investment with respect to the interest rate

Explanation:

1. It is difficult to implement both of these policies at the same time because reducing taxes on private spending has the effect of <u><em>Increasing</em></u> the government budget deficit.

A Government budget deficit is acquired when the government spends more than it earns. The Government earns money from taxes and if it spends more than it receives in taxes, that will lead to a deficit. If taxes on Private spending are reduced, this will lead to less tax revenue for the government thereby increasing the Deficit.

2. All of the listed options are useful in determining which policy would be a more effective way to raise investment.

The elasticity of private saving with respect to the after-tax real interest rate refers to how much private saving changes in reaction to a change in the tax rates. This can enable one decide how much investment will be expected if the Government reduces or increases taxes.

The response of private saving to changes in the government budget deficit is also a useful factor to look at because private savings reduce when government deficits reduce.

Also how much does investment change by due to interest rates. This will be important to note in terms of Private Investment to see if it will be beneficial to use it over reducing the government budget deficit given a certain interest rate.

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Sarah buys 500 shares of stock at $18 and sells the holding for a capital gain of $3,000. What was the share price at the time o

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Answer:

$24

Explanation:

500 * 18 = $9000 worth of stock initially.

She sells with a $3000 gain, which means the value of the stock is $12000

12000/500 = $24

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3 years ago

Speedy Delivery Company purchases a delivery van for $32,000. Speedy estimates that at the end of its four-year service life, th

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Answer:

(1) Straight-line.

Year 1 depreciation expense = $6,500

Year 2 depreciation expense = $6,500

(2) Double-declining-balance.

Year 1 depreciation expense = $16,000

Year 2 depreciation expense = $8,000

(3) Activity-based.

Year 1 depreciation expense = $7,000

Year 1 depreciation expense = $7,600

Explanation:

Note: This question is not complete. The complete question is therefore provided before answering the question as follows:

Speedy Delivery Company purchases a delivery van for $32,000. Speedy estimates that at the end of its four-year service life, the van will be worth $6,000. During the four-year period, the company expects to drive the van 130,000 miles. Actual miles driven each year were 35,000 miles in year 1 and 38,000 miles in year 2.

Required:

Calculate annual depreciation for the first two years of the van using each of the following methods.

(1) Straight-line.

(2) Double-declining-balance.

(3) Activity-based.

The explanation of the answers is now given as follows:

(1) Straight-line.

Depreciable amount = Cost of the delivery van – Salvage value = $32,000 - $6,000 = $26,000

Annual depreciation rate = 1 / Number of useful years = 1 / 4 = 0.25, or 25%

Year 1 depreciation expense = Depreciable amount * Annual depreciation rate = $26,000 * 25% = $6,500

Year 2 depreciation expense = Depreciable amount * Annual depreciation rate = $26,000 * 25% = $6,500

(2) Double-declining-balance.

Note: The salvage value is taken care of in the computation of the depreciation expense for the last useful year under the double-declining-balance method.

Therefore, we have:

Cost of the delivery van = $32,000

Annual depreciation rate = Straight line annual depreciation rate * 2 = 25% * 2 = 50%

Year 1 depreciation expense = Cost of the delivery van * Annual depreciation rate = $32,000 * 50% = $16,000

Book value at the end of year 1 = Cost of the delivery van - Year 1 depreciation expense = $36,000 - $16,000 = $16,000

Year 2 depreciation expense = Book value at the end of year 1 * Annual depreciation rate = $16,000 * 50% = $8,000

(3) Activity-based.

Depreciable amount = Cost of the delivery van – Salvage value = $32,000 - $6,000 = $26,000

Depreciation rate = Actual miles driven each year / Expected driven miles for four years ……….. (1)

Depreciation expense for each year = Depreciable amount * Depreciation rate …………… (2)

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Year 1 depreciation expense = $26,000 * (35,000 / 130,000) = $7,000

Year 1 depreciation expense = $26,000 * (38,000 / 130,000) = $7,600

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