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mafiozo [28]
3 years ago
7

Suppose a country has a money demand function ( M/P )^d = kY , where k is a constant parameter. The money supply grows by 12 per

cent per year, and real income grows by 4 percent per year.
a. What is the average inflation rate?
b. How would inflation be different if real income growth were higher? Explain.
c. Suppose, instead of a constant money demand function, the velocity of money in this economy was growing steadily because of financial innovation. How would that affect the inflation rate? Explain.
Business
1 answer:
mote1985 [20]3 years ago
5 0

Answer:

Part A)

Inflation Rate = 12% - 4%

Inflation rate = 8%

Part B)

If the genuine income was higher, the expansion level would diminish subject to the buyer's spending limitations. As such, they will make a similar measure of cash yet their buying power per dollar will increase.  

Part C)

in the current scenario, increment in cash would cause the expansion rate to increment. On the off chance that we consider the past and occasions, for example, hyperinflation, take a gander at what the reason was. Governments were printing cash to pay obligations, which was diminishing the estimation of their money. Right now, would get paid and race to the store to go through their cash in light of the fact that their dollars today may just be worth 50 pennies tomorrow or at times, the following hour. Thus, our answer is if the speed of cash continues developing, expansion will continue developing also. These two factors are star repetitive with one another significance they move together.

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Avery Company has two divisions, Polk and Bishop. Polk produces an item that Bishop could use in its production. Bishop currentl
Aleksandr-060686 [28]

Answer and Explanation:

a. The computation of operating profit is shown below:-

Profit per unit = Purchase price from outside per unit + variable cost of production internally

= $15 - $7

= $8

Total increment in operating profit = Profit per unit × Total number of units

= $8 × 24,000

= $192,000

b. Minimum transfer price = Variable cost = $7 (because polk has overcapacity and there is no change in fixed cost and polk minimum has to recover its variable production cost)

c. Maximum transfer price = purchase cost from outside supplier = $15 (because if the internal transfer piece is more than $15 Bishop will lose so he prefers to buy from outside and the company as a whole will lose $192,000 in incremental operating profit

3 0
3 years ago
Doogan Corporation makes a product with the following standard costs: Standard Quantity or HoursStandard Price or Rate Direct ma
telo118 [61]

Answer:

Direct material quantity variance= $6,300 unfavorable

Explanation:

Giving the following information:

Direct materials 2 grams $7.00 per gram

The company produced 4,600 units in January using 10,100 grams of direct material.

<u>To calculate the direct material quantity variance, we need to use the following formula:</u>

Direct material quantity variance= (standard quantity - actual quantity)*standard price

Direct material quantity variance= (2*4,600 - 10,100)*7

Direct material quantity variance= $6,300 unfavorable

5 0
2 years ago
As indicated in the chapter, return on investment (ROI) is well entrenched in business practice. However, its use can have negat
Juliette [100K]

Answer:

ROI = net profit / total investment

1. What is the current return on investment (ROI) being realized by your division

  • ROI = $625,000 / $4,150,000 =  15.06%

2. What would happen to the near-term ROI of your division after adding the effect of the new investment?

  • ROI = ($625,000 + $50,000) / ($4,150,000 + $550,000) =  14.36%

If you carry out the new project the ROI of your division will decrease.

3. As manager of this division, given your incentive compensation plan, would you be motivated to make the new investment?

  • Even though the new project's return (9.1%) is considered acceptable by upper management, you will probably reject it since it will decrease your division's total ROI. When managers are assigned bonuses based on certain achievements, reducing your profitability ratio will probably result in no bonus.
6 0
3 years ago
An annuity that goes on indefinitely is called a perpetuity. The payments of a perpetuity constitute a/an series. The equation i
Alborosie

Answer:

Present value of the security = $1,888.89

Explanation:

The annual dividend of $170 represents a perpetual income stream. The present value of a perpetuity is calculated as follows:

PresentValue=\frac{Coupon}{r}

where r =interest rate per annum that would be compounded for each year

Therefore, present value of the security = \frac{170}{0.09} = $1,888.89

4 0
3 years ago
A firm has the following accounts and financial data for 2007:
Oksi-84 [34.3K]

Answer:

The correct answer is $302.40.

Explanation:

According to the scenario, the computation can be done as:

To calculate firms' earning first we less cost of goods and total operating expenses from sales revenue:

= $3,060 - $1,800 - 600

= $660

Now we deduct the interest expense, then

= $660 - $126

= $534

Now we deduct tax rate, then

= $534 × $213.60    ( $534× 40%)

= $320.40

Now we finally deduct the dividends to get the firm's earning to common shareholder's, then

= $320.40 - 18

= $302.40

Hence, the firm's earning to common shareholder's is $302.40.

5 0
3 years ago
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