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iVinArrow [24]
3 years ago
14

4. True, False or Uncertain. For each of the following statements determine if the statement is TRUE, FALSE, or UNCERTAIN. You m

ust justify your answer either graphically or in words. No credit will be given without an explanation. a. "An increase in the nominal exchange rate (e) will cause the IS* curve to shift to the right." b. "If the value of the currency is reduced via a devaluation in a fixed exchange rate regime, then income will rise, but net exports will remain unchanged." c. "A raising of credit card transaction fees (which causes an increase in the demand for money) will lead to a recession according to the IS-LM model." d. "If Congress cuts government spending in order to reduce the budget deficit, the Federal Reserve can keep the economy from falling into a recession by conducting an open market sale
Business
1 answer:
Montano1993 [528]3 years ago
4 0

Question:

4. True, False or Uncertain. For each of the following statements determine if the statement is TRUE, FALSE, or UNCERTAIN. You must justify your answer either graphically or in words. No credit will be given without an explanation.

A. "An increase in the nominal exchange rate (e) will cause the IS* curve to shift to the right."

B. "If the value of the currency is reduced via a devaluation in a fixed exchange rate regime, then income will rise, but net exports will remain unchanged."

C. "A raising of credit card transaction fees (which causes an increase in the demand for money) will lead to a recession according to the IS-LM model."

D. "If Congress cuts government spending in order to reduce the budget deficit, the Federal Reserve can keep the economy from falling into a recession by conducting an open market sale

<u>Answer to A is True</u>

This explanation will require the following model which has the following components:

This model uses the following variables:

<em>Y</em> is real GDP

<em>G</em> is real government spending (an exogenous variable)

<em>T</em> is real taxes levied

<em>NX</em> is real net exports

<em>M</em> is the exogenous nominal money supply

<em>P</em> is the exogenous price level

<em>i</em> is the nominal interest rate

<em>L</em> is liquidity preference (real money demand)

<em>C</em> is real consumption

<em>I</em> is real physical investment, including intended inventory investment

Explanation:

Higher disposable income or a lower real interest rate (nominal interest rate minus expected inflation) leads to higher consumption spending.

Higher disposable income is created when there is an increase in salaries.

Lower interest rate happens when intentionally the Central Bank decides to resuscitate  the economy or prevent the economy from sliding into a recession. Either way, the IS curve which comprises Consumption and Investment spending shifts to the right.

The components of the IS* Curve are given below:

C=C(Y-T(Y),i-E(\pi ))\,

{\displaystyle I=I(i-E(\pi ),Y_{t-1})\,}

Where <em>E(π) equals the inflation rate expected.</em>

<u></u>

<u>Answer to B is </u><u><em>False</em></u>

The Mundell – Fleming model was used to demonstrate that an economy can not sustain a fixed exchange rate, free movement of capital and an independent monetary policy at the same time. Only two of the three can be maintained by an economy at the same time. This concept is also called the "<em>impossible trinity."</em>

<em />

<em>Devaluation</em> is a method used by monetary authorities to improve the balance of trade in the country by improving exports at moments when the trade deficit can become an economic issue.

<u>Answer to C is </u><em><u>False</u></em>

Increase in card transaction fees will does not decrease the demand for money or it decreases the demand for <u>credit</u>. It has no way of creating a recession since demand for money is not affected directly.

<u>Answer to D is </u><em><u>True</u></em>

When expenses surpass revenue and suggest a country's financial safety, a budget deficit occurs. This form of spending is usually characterised by heavy importation especially by the government. So on one hand, the government can <em>truly </em> can cut back on expenses to reduce the deficit.

On another hand, the government can conduction an open market sale to prevent the economy from falling into recession. An Open Market refers to the buying and selling of government bonds by the Federal reserve.

If a bank buys a government bond from the Federal Reserve, the bank acquires capital that it can lend out. The supply of money is expected to increase. Buying on an free market brings money into the economy.

This increase can be balanced by slamming high tax rates on importation or outrightly prohibiting them. That way, money is circulated internally and there is a push pressure on exports which gradually, along with a shift in the Investment and Consumption curves bring about a turn around in the economy.

Cheers!

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Answer: Apply the same depreciation methods and the same useful lives among similar groups of assets

Explanation:

US GAAP for long-lived assets significantly impedes rate-of-return that is, the annual income from an investment which is being expressed as a proportion of the original investment comparisons across companies unless the firms apply the same depreciation methods and also the same useful lives are applied among identical groups of assets.

6 0
2 years ago
The primary disadvantage of using ______ is that they may have a low response rate and thus a limited impact on sales.
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money refunds

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8 0
1 year ago
On June 1, 2016, Skylark Enterprises, a calendar year LLC reporting as a sole proprietorship, acquired a retail store building f
fiasKO [112]

Answer:

Skylark Enterprises

The cost recovery is $___41,024___, and the adjusted basis for the building is $__358,976___

Explanation:

a) Data and Calculations:

Cost of retail store acquired = $500,000

Property acquisition date = June 1, 2016

Property disposal date = June 21, 2020

Length of use of property before disposal = 4 years and 21 days

Cost allocated to Land = $100,000

Cost allocated to Building = $400,000

Annual Depreciation expense = $10,256 ($400,000/39)

Cost recovery after 4 years = $41,024 ($10,256 * 4)

Adjusted basis for the building = $358,976 ($400,000 - $41,024)

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4 0
3 years ago
Hahn Co. prepared financial statements on the cash basis of accounting. The cash basis was modified so that an accrual of income
jeyben [28]

Answer: the answer is A. Yes.

Explanation:

Under a strict cash basis of accounting, revenues and expenses are recorded only when cash is received or paid. Under a modified cash basis of accounting, certain accruals and/or deferrals are recorded for financial-statement purposes.  

The most common modifications are the capitalization and amortization of long-lived assets and the accrual for income taxes (recognition of income tax expense and related liability).

8 0
3 years ago
A company has the following unadjusted account balances at December 31, of the current year; Accounts Receivable of $185,700 and
stellarik [79]

Answer:

a. The amount of the Allowance for Doubtful Accounts that should appear on the December 31, Balance Sheet of the current year is:

= $8,965.

b. Adjusting Journal Entry:

Debit Bad Debts Expense $7,365

Credit Allowance for Doubtful Accounts $7,365

To record bad debts expense and bring the balance of the Allowance for Doubtful Accounts to a credit balance of $8,965.

Explanation:

a) Data and Calculations:

Accounts Receivable balance = $185,700

Allowance for Doubtful Accounts $1,600 (credit balance)

Aging Schedule:

Account Age                 Balance  Estimated Uncollectible   Amount

                                                                 Percentage

Current (not yet due) $96,000                  1.00%                    $960

1—30 days past due    64,000                  2.50%                    1,600

30—60 days past due  16,000                  11.00%                   1,760

61—90 days past due    6,500                  37.00%                 2,405

Over 90 days past due 3,200                  70.00%                 2,240

Total                         $185,700                                              $8,965

Bad Debts Expense:

Allowance for Uncollectible Accounts:

Beginning balance     ($1,600)

Ending balance           $8,965

Bad Debts expense = $7,365

5 0
2 years ago
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