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Nana76 [90]
3 years ago
7

2. Let’s work out a simple example where a person smooths her consumption over time. Gwen is a real estate agent, and she knows

that she will have some good years and some bad years. She figures that half the time she’ll earn $90,000 per year, and half the time she’ll earn $20,000 per year. These numbers are after taxes and after saving for retirement. These numbers are all she has to worry about. a. If we ignore interest costs just to keep things simple, how much should Gwen consume in the average year? b. How many dollars will she save during the good years? c. How many dollars will she borrow during the bad years? (Note: "Borrowing," in this context, is basically the same as "pulling money out of savings.")
Business
1 answer:
Pepsi [2]3 years ago
8 0

Answer:

A) How much should Gwen consume in the average year?

Gwen should consume the average money she earns taking into account the good and bad years.

In the good years, she is earning $90,000, and in the bad years she is earning $20,000. We simply obtain the average:

$90,000 + $20,000 = $110,000/2 = $55,000

B) How many dollars will she save during the good years?

Personal saving equals disposable income minus consumption. As stated above, during the good years she will consume $55,000, while having a disposable income of $90,000. Her personal saving will then be:

$90,000 - $55,000 = $35,000

C) How many dollars will she borrow during the bad years?

During the bad years, Gwen is making $20,000, while consuming an average of $55,000 per year. Therefore, her total borrowing during the bad yeras is:

$55,000 - $20,000 = $35,000

In other words, for every bad year, she will exhaust a total good year's savings.

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kolezko [41]

Answer:

$189,000

Explanation:

The computation of total expense with regards to this payroll is shown below:-

Total expense = Salaries and wages earned by employees + Employer's portion of FICA taxes

= $180,000 + $9,000

= $189,000

Therefore for computing the total expenses with regards to this payroll we simply applied the above formula and we ignore all other values as they are not relevant.

5 0
3 years ago
What is aggregate demand? You can gain or 100 points on this Place the following items in order of the magnitude of the effect o
kodGreya [7K]

Answer:

Aggregate demand refers to the demand for the Gross Domestic Product in a country. In other words, it is the demand for the final goods and services produced in a country within a period.

Order of effect on Aggregate Demand.

1. Development of computer-based technologies from the 1940s to now.

This will have the greatest effect on Aggregate Demand (AD) because it will lead to an increase in the long term capacity of the economy to produce goods and services thereby increasing the demand for those same goods and services.

2. State governments in the 2010s cut their budgets for teachers, infrastructure, police, and other government expenditures.

This will contribute less to AD than the one above but the effect will still be significant because government spending is a significant component of AD so reducing it will reduce AD.

3. Prices of tech stocks increase in the late 1990s as a result of a speculative bubble.

Prices of tech stocks rising will lead to more people buying these stocks thereby increasing the investment portion of AD and having a significant effect on its increase.

4. People notice prices rising and an associated decrease in purchasing power.

If people notice a decrease in purchasing power, they will begin to buy less goods and services as they cannot afford as much. This will reduce Consumption in the AD curve but will not significantly impact AD as the ones above.

5. A trade war with China in the late 2010s leads to a decrease in trade.

A trade war with China will affect the Net exports side of the AD but there will be other countries to trade with and goods will still be purchased from and sold to China in some quantity so the AD will be least affected here.

5 0
2 years ago
Lee went to great lengths to make sure that Heard was considered an independent contractor and it didn't work. Since Lee made it
tekilochka [14]

The court found the employee status because he had and agreement indicating that he was an independent <em>contractor</em>.

<h3>What is an independent contractor?</h3>

It should be noted independent contractors are the contractors that don't work under an employer. They work independently.

In this case, the court found the employee status because he had and agreement indicating that he was an independent contractor.

Learn more about independent contractor on:

brainly.com/question/7429981

#SPJ1

8 0
2 years ago
Why would a large publically traded corporation likely prefer issuing bonds as a way to raise new money as opposed to issuing mo
Setler79 [48]

Answer:

B. more shares will dilute the existing value of the stock, causing its market price to fall

Explanation:

A bond can be defined as a debt or fixed investment security, in which a bondholder (creditor or investor) loans an amount of money to the bond issuer (government or corporations) for a specific period of time.

Generally, the bond issuer is expected to return the principal at maturity with an agreed upon interest to the bondholder, which is payable at fixed intervals.

The reason a large publicly traded corporation would likely prefer issuing bonds as a way to raise new money as opposed to issuing more shares is because more shares will dilute the existing value of the stock, causing its market price to fall and may negatively affect by reducing the value and proportional ownership of the investor's shares in the corporation.

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