Connecticut, Inc. uses the indirect method to prepare its statement of cash flows. Refer to the following portion of the compar
ative balance sheet: Connecticut, Inc. Comparative Balance Sheet December 31, 2019 and 2018 2019 2018 Increase / (Decrease) Cash Accounts Receivable () Merchandise Inventory Plant and Equipment Accumulated DepreciationPlant and Equipment () () () Total Assets Additional information provided by the company includes the following: 1. Equipment was purchased for with cash. 2. Equipment with a cost of and accumulated depreciation of was sold for . What was the amount of net cash provided by (used for) investing activities?
1 answer:
Answer:
Net cash used by investing activities -$16,000
Explanation:
The computation of the amount of net cash provided or used by investing activities is shown below:
Equipment purchase for cash -$66,000
Proceeds from the sale of equipment $50,000
Net cash used by investing activities -$16,000
The purchase is a cash outflow so it is in negative sign while the sale is cash inflow so it is to be shown in a positive sign
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Answer:
a. The government needs to increase spending by $0.45 billion and decrease taxes by $0.5 billion.
b. The real GDP will fall short of potential GDP by $3.6 billion.
c. The real GDP will fall short of potential GDP by $4 billion.
d. If government overestimates MPC change in spending or taxes will be too small.
Explanation:
The GDP gap is $4.5 billion.
a. The marginal propensity to consume is 0.90.
Government spending multiplier
=
=
= 10
The government needs to increase spending by
=
=
= $0.45 billion
Tax multiplier
=
=
= -9
The government needs to decrease taxes
=
=
= $0.5 billion
b. The marginal propensity to consume is 0.50.
Government spending multiplier
=
=
= 2
If the government increases spending by $0.45 billion,
The real GDP will increase by
=
=
= $0.9 billion
The real GDP will fall short of potential GDP by
= $4.5 billion - $0.9 billion
= $3.6 billion
c. Tax multiplier
=
=
= -1
If the government decreases taxes by $0.5 billion
The real GDP will increase by
=
= $0.5 billion
The real GDP will fall short of potential GDP by
= $4.5 billion - $0.5 billion
= $4 billion
d. If the government overestimates the value of the MPC, then its change in spending or taxes will be too small and real GDP will fall short of potential GDP.