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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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Suppose that in 2011, per-person GDP in Singapore was $53,591, and in Egypt, it was $5,547, as measured in 2005 purchasing power
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Answer:

a. There are significant differences in incomes between high- and low-income countries.

Explanation:

Data provided in the question

Per person GDP in Singapore = $53,591

Per person GDP in Egypt = $5,547

Based on the above information

As we can see that the level of income in Singapore is higher than Egypt also when there is an important difference in the high income and low income countries the same is shown accurately

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2 years ago
Lisa is wondering if her company is earning the income they expected to earn at the beginning of this year. She looks at to see
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Lisa is wondering if her company is earning the income they expected to earn at the beginning of this year. She looks at to see how the money looks, while remembering that this budget does not show cash outlays. This type of budget is called Expense Budget

<h3>What is Expense Budget?</h3>
  • The Expense Budget displays the revenue and capital expenditures of several ministries and departments and provides estimates for each under "Plan" and "Non-Plan."
  • It provides a thorough study of various expenditure kinds as well as a general explanation for why estimates vary. The Expense Budget also includes the Central Government's requests for grants.
  • Capital assets are crucial expenses for firms since they include cash outlays for production machinery and other equipment that generates revenue.
  • Due to the fact that production equipment is more expensive than standard office supplies or monthly expenses, financing is sometimes required to purchase capital assets.
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To know more about Expense Budget with the given link

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2 years ago
You purchased a bond at a price of $1,700. In 20 years when the bond matures, the bond will be worth $10,000. It is exactly 13 y
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Answer:

<u>Annual rate of return which will be earned from today is 5.89%</u>

Explanation:

FV = PV (1+r)^n

r is int Rate per anum abd n is balance period

10000 = 6700 ( 1 + r)^n

10000 = 6700 ( 1 + r)^7

( 1 + r)^7 = 10000 / 6700

= 1.4925

1+r = 1.4925^(1/7)

= 1.0589

r = 1.0589- 1

= 0.0589 i.e 5.89%

8 0
2 years ago
Sparks Fireworks manufactures and sells fireworks. Their raw materials used is $71,500. Their beginning raw materials inventory
algol13

Answer:

The correct answer would be, $70500

Explanation:

Raw Material Turnover means what amount of raw materials is used within a specific period of time. So the raw material turnover would be calculated by adding the beginning inventory with the amount of material used within the period, and then the remaining material will be deducted. So the whole calculations are shown as follows:

Beginning Raw Material Inventory: $5000

Raw Material Used:                $71500

Ending Raw Material Inventory:    $6000

Raw Material Inventory Turnover:

Beginning Inventory + Raw Material Used - Ending Raw Material

= 5000+71500-6000= $70500

7 0
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