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Katena32 [7]
3 years ago
13

Name one factor that could increase the supply of saving and one that could increase the demand for saving. Discuss the effects

of each on saving, investment, and, the real interest rate.
Business
1 answer:
Readme [11.4K]3 years ago
7 0

Answer:

Factor that increases the supply of saving: High rate of return

Factor that increase the demand for saving: Confidence in return of business in the future, low rate of interest

Explanation:

Interest rates impacts the rate at which borroweres lend money which in turn determines the influx of savers (lenders). For example, if a business owner lacks the funds to raise capital for business (investment), the next route is usually to borrow money. Money is only borrowed when there is confidence in the business as most times, loans are repaid in the future. Also, if the interest rates are low, it's easier to pay back the loan but if the interest rates are high, this could affect the loan payback in due time (especially if the returns on the investment made or the profits made for the business is not enough to pay back the interest). This factor affects the demand for savings.

The demand for saving ultimately affects the supply of savings because with low demand of borrowing and a high supply of savings leads to a low interest rate, and a low interest rates doesn't appeal investors to save more money. This is simply the law of demand that states demand decreases when the rate of return is high.  While the law of supply states that supply increases when the rate of return is high.

The effects of these factors on investment: rate of return changes the flow of influx of investors as one would only want to invest when the compund interest would be high irrespective of the permissible risk involved.

The confidence in an investment  would also affect the rate at which one would demand for savings (loans) towards that investment.

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The journal entry to close the Fees Earned, $750, and Rent Revenue, $175, accounts during the year-end closing process would be:
maks197457 [2]

Answer:

c. Dec. 31Fees Earned750 Rent Revenue175 Income Summary925

Explanation:

The journal entry to record the closing of Fees earned and rent revenue is given below:

On Dec 31

Fees earned $750

Rent revenue $175

         To Income summary $925

(Being the revenues and fees earned is closed)

For recording this we debited the fees earned and rent revenue and credited the income summary so that the correct recording and posting could be done

Therefore the total amount of $925 is credited to income summary

5 0
4 years ago
Critical analysis Q16 Suppose that the Federal Reserve purchases a bond for $100,000 from Reggie Rich, who deposits the proceeds
kkurt [141]

Answer:

Explanation:

• Initially, As a result of the bond purchase, money supply will increase by $100000.

The reason for the increase in money supply by $100000 is because the federal reserve bought bond of $100000 from Riggie Rich. This is an expansionary policy which will lead to more money in supply.

• As a result of Rich's deposits, the bank will able to give $90000 more in additional loans.

The increase in the additional loans will be calculated by removing the reserve required ratio from the deposit.

= $100000 - (10% × $100000)

= $100000 - $10000

= $90000

• As a result of the purchase by the Federal reserve, the maximum increase in quantity of checkable deposits which could result throughtout the entire banking system will be $1000000.

The increase in checkable deposits will be the change in reserve multiplied by 1/RRR. This will be:

= $100000 x 1/10%

= $100000 × 1/0.1

= $100000 x 10

= $1000000

3 0
3 years ago
Lexington Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions ar
sleet_krkn [62]

Answer:

$2,115

Explanation:

Lexington Company's Year 2 net cash flow from financing activities = cash received from issuing stocks minus bank loan payments - distributed dividends

net cash flow from financing activities = $1,250 (from additional stock) - $1,825 (bank payments) - $1,540 (dividends paid) = $2,115

8 0
3 years ago
Carol manages the cafeteria at Mercy hospital. On an average month, Carol serves 18,000 meals. Her total monthly variable and fi
Snowcat [4.5K]

Answer:

a. Carol's transfer price is $6 per meal if she only recovers the variable costs.

b. $13,5 per meal

c. $27000 or a loss of $1.5 per meal.

d. The cost of the cafeteria should be charged to the user departments so that the actual profit or loss from each department can be valued

Explanation:

a. Variable costs = $108000 for 18000 meals.

Variable cost per meal = 108000 / 18000 = $6

Carol's transfer price is $6 per meal if she only recovers the variable costs.

b. If carol were to recover the full cost then the transfer price = Total cost / no. of meals

= (108000 + 135000) / 18000 = $13,5 per meal

c. If the transfer price is the market price i.e $12, the loss from the cafeteria = Revenue from meals - Total cost

= (18000 x 12) - (108000 + 135000)

= $27000 or a loss of $1.5 per meal.

d. The cost of the cafeteria should be charged to the user departments so that the actual profit or loss from each department can be valued.

This information is useful to the hospital management in knowing the actual costs of the meals consumed in the various departments and how the cost cutting measures can be implemented based on the cost of the different departments.

5 0
4 years ago
Christina is planning on getting married in the next year. She is a very successful business owner and is planning on buying som
Luden [163]

Answer:

Martina as her agent can give certain advice like if the property is priced right the size of the property, negotiating with the seller or conducting inspection of the property.

However, on legal matters such as how the title should be held or taken, Martina should excuse herself and refer Christina to her lawyer for advise as real estate agents are not licensed to provide legal advice meaning they cannot answer a legal question, even if they know the answer, without breaking the law.

Explanation:

4 0
3 years ago
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