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stiv31 [10]
3 years ago
12

For each of the following scenarios, determine whether the situation described can be attributed to the real-balances effect, th

e interest-rate effect, or the foreign-purchases effect.
a. As a result of an increase in the price level, the cost of borrowing increases, which causes people to buy fewer cars.

1. Real-balances effect
2. Foreign-purchases effect
3. Interest-rate effect

b. When the price level decreases, restaurants become busier as more people purchase restaurant meals.

1. Real-balances effect
2. Foreign-purchases effect
3. Interest-rate effect
Business
1 answer:
aksik [14]3 years ago
3 0

Answer:

A)Interest-rate effect

B)Real-balances effect

Explanation:

✓The interest rate effect can be regarded as change in borrowing as well as spending behaviors as a consequence or result of adjustment of interest rate. As a general rule, interest are been set by central bank of the nation, then consumer banks will then extend similar interest rates across their customers. For instance

As a result of an increase in the price level, the cost of borrowing increases, which causes people to buy fewer cars.

✓ In economics, real balance effect can be regarded as "Pigou effect" which can be regarded as stimulation of output as well as employment which is been caused as a result of increased consumption through a rise in real balances of wealth, especially during time of deflation. Instance of this is

When the price level decreases, restaurants become busier as more people purchase restaurant meals.

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Answer and Explanation:

1. For computation of the non-controlling interest as at 30 June 2019 is shown below:-

Adjusted profit = Profit tax after the year - Unrealized gain in stock - Gain on machinery

= $200,000 - $10,500 - $10,500

= $179,000

Non-controlling interest as at 30 June 2019 = Share capital + Retained earning + General reserve + Profit of the year June 2019

= ($800,000 × 20%) + ($200,000 × 20%) + ($400,000 × 20%) + ($179,000 × 20%)

= $160,000 + $40,000 + $80,000 + $35,800

= $315,800

2. The Journal entries are shown below:-

a. Profit for the year Dr, $21,000

         To Stock reserves $10,500

         To Equipment reserve $10,500

(Being reserves is recorded)

Working note:

For stock reserve

Sale price $120,000

Cost $60,000

Profit before tax $60,000

Tax at 30% $18,000

Profit after tax $42,000

Unsold stock 25%

Unrealized profit $10,500

For net gain on sale of machinery

Sale price $80,000

Cost $60,000

Profit before tax $20,000

Tax at 30% $6,000

Profit after tax $14,000

Unsold stock 75% (3 years from 4 years)

Unrealized profit $10,500

b. Profit for the year Dr, $179,000

         To Consolidated reserves and surplus $35,800

          To Non controlling interest $143,200

(Being profit of expert ltd. is recorded)

Working note

Share of non controlling stakeholders = 20% × $179,000

= $35,800

Share of Giant Ltd. = 80% × $179,000

= $143,200

We do not make any adjustment with respect to consultancy fees

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Answer:

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Homestead Crafts, a distributor of handmade gifts, operates out of owner Emma Finn’s house. At the end of the current period, Em
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