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3 years ago

Why has the use of fiscal policy declined since the recession of 2001?

Business

1 answer:

12345 [234]3 years ago

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FISCAL POLICY

1. The government collects taxes from its citizens which contributes to the revenue of the government. The government spends its revenue in the building of the country’s infrastructure.

2. The fiscal policy emphasizes the use of government’s revenue and its expenses to stabilize the economy of the country. The policy also aims at keeping inflation under the control of the government.

THE RECESSION 2001

1. The time frame in the years beginning from 2000 saw a decline in the economies of the developed countries. The recession first affected the European economy during 200-2001, followed by the United States during the months from March to November, 2001.

2. While other countries including United Kingdom, Canada and Australia were successful in avoiding the recession, Russia, which was already suffering economic backlog during the years in 1990 decade, had started to recover.

FISCAL POLICY IN THE UNITED STATES

1. The United States implemented the Fiscal policy as a tool to recover from the economic recession but the long-term monetary effectiveness were seen to suffer.

2. The recession during 200-2001 only threw light on the weaknesses of the Fiscal policy and its ineffectiveness in the long term.

3. Had the fiscal policy taken into account all the factors affecting economy and the importance of in-hand cash of an individual, the United States would have stabilized its economy efficiently through the implementation of fiscal policy.

DECLINE IN USE OF FISCAL POLICY

1. The above incident only indicates successful implementation of the fiscal policy in the short term thus, stabilizing the economy for only a short duration of time.

2. Owing to the above mentioned factors, the use of the Fiscal policy has seen a decline since the recession.

3. The policy was formulated ineffectively and implemented inefficiently only having short term benefits.

4. The policy was viewed as expansionary in spite of slowness of economic growth in the countries which implemented the fiscal policy as a reaction to recession in 2000 and 2001.

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Why are capital appreciation bonds (CABs) a controversial way for local governments to finance projects?

denis-greek [22]

Answer:

See explanation section

Explanation:

Municipal security from which an investor will receive a return on investment from an initial principal is called a capital appreciation bond. However, in this security, the return on investment will be reinvested further until the security matures at a specific rate. The primary purpose of the CABs is to permit the local authority to generate revenue. Due to the financing in the innovative project without increasing the tax is one of the controversial ways for local governments to finance projects. Another controversial way is to owe investors more than what they acquired.

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3 years ago

Farris Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

bekas [8.4K]

Answer:

$10, 950

Explanation:

What is the net operating income (loss) for the month under the variable costing?

Direct materials $ 20

Direct labour 62

Variable manufacturing overheads 8

Total variable costs 90

Sales ($120 x 8, 650) $ 1, 038, 000

Variable expenses:

Variable cost of goods sold ($90 x 8650) 778, 500

Variable selling admin costs ($12 x 8, 650) 103, 800

Contribution margin 155, 700

Fixed expenses:

Fixed manufacturing overheads 135, 750

Fixed selling and admin 9, 000

Net operating profit 10, 950

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3 years ago

In the country of Mashwen, the state owns key industries such as energy and transportation. The rest of the industries are priva

zzz [600]

Answer:

Mixed economy.

Explanation:

In the country of Mashwen, the state owns key industries such as energy and transportation. The rest of the industries are privately owned. Mashwen is a <u>Mixed</u> economy.

Mixed economy: It is a shared economy system, which has equal role of private enterprises and public enterprises. In the current global market, most of the economy are mixed economy. It allow private enterprises with equal opportunity to participate in the market, it create healthy competition among different player and buyer can have variety of product at low price.

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3 years ago

Your firm (an Australian firm) makes a sale to a Japanese customer. The sale price is 200 million Japanese Yen payable in exact

charle [14.2K]

Answer:

An Australian Firm Selling to a Japanese Customer

a) Direct Quote of the Exchange Rate between Australian Dollar and Japanese Yen:

A$ 1 = ¥90

Meaning 1 Australian Dollar = 90 Japanese Yen.

Therefore, the price of the goods would be A$ 2,222,222.22222 (¥200 million)/ ¥90

b)Theoretical Current Forward Exchange Rate, quoted in terms of JPY/AUD for delivery in three months:

= Spot Rate x (1 + Japanese Interest Rate) / (1 + Australian Interest Rate) x 360/90

= ¥90 x (1 +0.005) / (1 +0.03) x 360/90 = ¥90 x 1.005/1.03 x 360/90

= ¥351.26214 =A$1

c) The Australian firm can take advantage of any decreases in the exchange rate and also ensure that it receives at least Australian $2 million by entering into a Currency Forwards Contract.

d) If the spot exchange rate in 3 month's time is:

(i) AUD/JPY=150, the outcome of the hedging with a Currency Forwards Contract to get at least A$ 2 million would be the gain of:

Forward Exchange outcome in Australian Dollars = ¥200 million/ ¥150 =

A$ 1,333,333.33333

Hedging outcome minus Forward Exchange outcome

A$2 million - A$ 1,333,333.33333 = A$666,666.66667

(ii) AUD/JPY = 50, the outcome of the hedging with a Currency Forwards Contract to get at least A$ 2 million would be the loss of:

Forward Exchange outcome = in Australian Dollars = ¥200 million/ ¥50 =

A$4 million

Hedging outcome minus Forward Exchange outcome

A$2 million - $4 million = -A$2million

Explanation:

a) Currency forwards contracts and future contracts are used to hedge the currency risk. For example, a company expecting to receive ¥200 million in 90 days, can enter into a forward contract to deliver the ¥200 million and receive equivalent Australian dollars in 90 days at an exchange rate specified today.

b) If A$ 1 = ¥90

Therefore, the price of the goods would be A$ 2,222,222.22222 (¥200 million)/ ¥90 in Australian Dollars.

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3 years ago

Thrill Rides is considering adding a new roller coaster to its amusement park. The addition is expected to increase its overall

zepelin [54]

Answer:

C. ticket sales for the new coaster.

Explanation:

In the case when the sales is reduced for the boat rise so the new rise would decrease the sales of the boat ride.

in the case when the food cost would be increase so if the sales of the food rises so automatically the food cost would rise

In the case when there is an extra sales for existing coaster, the same is mentioned in the given case

Therefore the option c is correct

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3 years ago