Answer:
B) decrease taxes to increase consumer disposable income.
Explanation:
Recession can be defined as a period of economic meltdown, in which there's a general decline in all economic activities such as trade.
Fiscal policy in economics refers to the use of government expenditures (spending) and revenues (taxation) in order to influence macroeconomic conditions such as Aggregate Demand (AD), inflation, and employment within a country. Fiscal policy is in relation to the Keynesian macroeconomic theory by John Maynard Keynes.
A fiscal policy affects combined demand through changes in government policies, spending and taxation which eventually impacts employment and standard of living plus consumer spending and investment.
Furthermore, if during a severe recession, Congress passes legislation to cut taxes, this would be an example of an expansionary fiscal policy.
According to the Keynesian theory, government spending or expenditures should be increased and taxes should be lowered when faced with a recession, in order to create employment and boost the buying power of consumers
Hence, to combat a recession with discretionary fiscal policy, Congress and the president should decrease taxes to increase consumer disposable income.
Answer:
The correct answer is D.
Explanation:
Giving the following information:
i= 0.1025
NPV= -Io + ∑[Cf/(1+i)^n]
Cf= cash flow
Project 1:
Year 0 1 2 3 4 CFS:
−$950 $500 $800 $0 $0
Year 1= 500 - 950= -450
Year 2= 800 - 450= 350
Payback period= 1 year + (450/800)= 1.56 years
NPV=161.68
Project 2:
Year 0 1 2 3 4 5:
−$2,100 $400 $800 $800 $1,000
Year 1= 400 - 2,100= -1,700
Year 2= 800 - 1,700= -900
Year 3= 800 - 900= -100
Year 4= 1000 - 100= 900
Payback period= 3 years + (100/1000)= 3.1 years
NPV= 194.79
Value lost= 194.79 - 161.68= $33.11
Answer:
False
Explanation:
Year 1 Year 2 Year 3
Opportunity A $50,000 $50,000 $50,000
Opportunity B $150,000
The basic premise of finances is that the value of money changes over time. In other words, one dollar today is worth more than one dollar tomorrow.
Since the discount rate is positive, we can assume 1%, then the present value of the net cash flows for the two projects would be:
Opportunity A = $50,000/1.01 + $50,000/1.01² + $50,000/1.01³ = $49,505 + $49,015 + $48,530 = $147,050
Opportunity B = $150,000/1.01³ = $145,589
So the net present value (NPV) of opportunity A will be higher than the NPV of opportunity B, therefore, the investor should choose opportunity A.
Answer:
Company would make more money than other companies.
Explanation:
Because customers would buy more.