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3 years ago

_______ occurs when the inflation rate is less than zero percent.

2 answers:

7 0

Answer: We always hear that inflation is bad for an economy, it is bad for people in general and imposes additional burden on the poor. Consequently we start believing that a negative rate of inflation, or deflation, is a good thing. It is not.

Explanation:

Here's why:

Deflation is a disincentive to producers. Production process usually takes time. Some times there can be huge time difference between the time of placing order for raw material and selling the final product. In a deflationary economy, the prices of goods and services will keep falling during this time. Thus it will be very difficult for producers to make profits and their sale price may not be enough to cover the cost of raw materials.

Deflation is disincentive to consumers. Think about it, if you have to buy a car, but you know that the car you want to buy will be available at a lower price some time in the future, would you still buy it? Thus in a deflationary economy, consumers tend to postpone their discretionary purchases (they have to buy essentials). This leads to pile up of inventory for producers creating further disincentive to producers.

The above two have a cyclical effect where the economy goes into a downward spiral. There is no production, hence no growth. Soon the economic machinery of the country could come to standstill.

This is the reason why central banks across the world target an inflation rate of around 2%. This is a manageable rate where the price increase are not high enough to hurt the consumers too much while the rate not being low enough to risk going into deflation.

It should be noted however that these consequences follow from a prolonged period of deflation. A month or two of deflation which quickly bounces back to inflation does not lead to such disastrous effects. Such deflation may be good to ease the pressure on the consumers. But central banks are wary, lest it get out of hand.

nikitadnepr [17]3 years ago

3 0

deflation occurs when inflation rate is less than zero percent

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A buyer purchased a new residence for $175,000. The buyer made a down payment of $15,000 and obtained a $160,000 mortgage loan.

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Answer:

Buydown, is the right answer.

Explanation:

This is a buydown mortgage arrangement because in the buydown financing technique the buyer tries to take lower interest rates in the initial year of the loan period. Moreover, some mortgage lenders provide buydown discounts or points as part of their promotion. Secondly, the builder pays the initial payment to the mortgage institution that results in the lower buyer’s payment.

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3 years ago

A company with $70,000 in current assets and $50,000 in current liabilities pays a $1,000 current liability. As a result of this

Rufina [12.5K]

Answer:

Option (b) is correct.

Explanation:

Given that,

Current assets = $70,000

Current liabilities = $50,000

Pays a current liability = $1,000

Current ratio(Prior) :

= Current assets ÷ Current liabilities

= $70,000 ÷ $50,000

= 1.40

Current ratio(After paying liability) :

= (Current assets - $1,000) ÷ (Current liabilities - $1,000)

= ($70,000 - $1,000) ÷ ($50,000 - $1,000)

= $69,000 ÷ $49,000

= 1.41

Therefore, there is an increase in current ratio.

Working capital(Prior):

= Current assets - Current liabilities

= $70,000 - $50,000

= $20,000

Working capital(After paying liability):

= (Current assets - $1,000) - (Current liabilities - $1,000)

= ($70,000 - $1,000) - ($50,000 - $1,000)

= $69,000 - $49,000

= $20,000

Therefore, there is no change in working capital.

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3 years ago

Economics helps managers because Group of answer choices it helps them focus on the most important issues. it lets them ignore d

murzikaleks [220]

Answer:

it helps them focus on the most important issues

Explanation:

Economics helps the managers with respect to direct, non-direct cost and their benefits

So as per the given situation it would help in focused on the most significant issues

Thus, the first option is correct

And the rest of the options are wrong

So the same is to be considered and relevant

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3 years ago

Sinking fund cash or cash assets are set aside for a purpose of

IgorC [24]

Sorry you need a little more detail for your question.

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3 years ago

Assume that a pure monopolist and a purely competitive firm have the same unit costs. In this case, determine what is true with

grandymaker [24]

Answer:

a. 1, 5 and 7

b. Resources will be allocated inefficiently

c. Differing sizes and capacities

d. Benefits due to economies of scale

e. Reduce prices and improve resource allocation.

Explanation:

The correct combination is 1, 5 and 7. The price of a pure monopoly firm is much higher than that of purely competitive firm because the later is a price taker while the former is a price fixer. Because of this, output of monopoly is lower while the profit margin is higher than that of competitive firm.

Assuming that a pure monopolist and a purely competitive firm have the same unit costs. In the case of a pure monopolist, resources will be allocated inefficiently because the monopolist does not produce at the point of minimum Average Total Cost and does not equate price and Marginal cost.

Even though both monopolists and competitive firms follow the MC = MR rule in maximizing profits, there are differences in the economic outcomes because pure competitors lack capacity and are smaller in size while the monopolist has the capacity to expand inorder to maximize profits.

The costs of a purely competitive firm and a monopoly may be different because the monopolist is capable of taking advantage of cost reduction arising from economics of scale. Pure competitors does not experience economies of scale due to their small sizes.

If a monopoly can experience economies of scale, it can reduce prices beyond that of the pure competitor thereby ensuring a more efficient resource allocation.

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3 years ago