Answer:
The income effect
Explanation:
The income effect refers to an increase in the purchasing power of customers simply because the products or services that they want to buy are cheaper. Since the price of the products or services decreases, the customers are able to purchase a higher quantity of them.
Answer: c. rightward shift of a demand curve.
Explanation:
When there is movement along the demand curve, this is due to a change in the price of the good.
However, an increase in demand is noted by a rightward shift in the Demand curve. This is to signify that the demand has changed even though the price had remained the same. This shift is meant to signify that something else apart from price has caused an increase in demand such as an increase in income. After the shift, the price will have to change to reflect a new Equilibrium which will be the new intersection point with the Supply Curve.
I have attached a graph showing what happens when Quantity Demand increases.
Answer: less than the multiplier effect of a change in government spending.
Explanation:
The multiplier effect of government transfers refers to the measure by which the aggregate demand will increase by as a result of government transfers increasing.
This multiplier is less than the multiplier effect of a change in government spending. This is because government spending affects more people in the economy as it targets both companies and consumers. Government transfers on the other hand, target only welfare and unemployment payments amongst others so it cannot have the same effect as government spending.
Answer:
$71.03
Explanation:
To find the current share price we need to find the value of future dividends first and then discount it by the given rate of return
DATA
Growth rate = g = 20%
Time period = 3 years
Required return = 11%
Current dividend = Do = $1.45
Share price =?
Solution
Future dividend = Current dividend ( 1 + growth rate)
D1 = (1.45 x 1.20) = $1.74
D2 = (1.74 x 1.20) = $2.088
D3 = (2.088 x 1.20) = $2.5056
Value after year 3 = (D3 x Growth rate) / (Required return-Growth rate)
Value after year 3 = (2.5056*1.08) / (0.11-0.08)
Value after year 3 =$90.2
current share price = Future dividends x Present value of discounting factor
current share price = (1.74/1.11)+($2.088/1.11^2)+(2.5056/1.11^3)+($90.2/1.11^3)
current share price = 1.56 + 1.69 + 1.83 + 65.95
current share price =$71.03
