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Suppose that a Starbuck’s venti latte currently sells for $4.50 in the U.S. and SF4.00
in Switzerland. Make up a value for the exchange rate between the dollar and the
Swiss franc (expressed as francs per dollar) that leaves the dollar undervalued on
a Starbuck’s purchasing power parity basis. Then use your numbers to show that, at
this exchange rate, it would be cheaper to purchase coffee in the U.S. than in
Switzerland. (10 pts)
in Switzerland. Make up a value for the exchange rate between the dollar and the
Swiss franc (expressed as francs per dollar) that leaves the dollar undervalued on
a Starbuck’s purchasing power parity basis. Then use your numbers to show that, at
this exchange rate, it would be cheaper to purchase coffee in the U.S. than in
Switzerland. (10 pts)
While deriving output multiplier for an econonomy, what is the condition under which the output multuplier can be negative
If the Central Bank keeps nominal interest rates close to zero, and uses Quantitive Easing, how may output fail to expand?
Consider a closed economy with no government. The production function is given by
Consider the following IS/LM model for a closed economy without government.
In each of the following cases, specify whether the change is an injection or leakage/withdrawal in
Jamaica’s circular flow of income? In each case also specify whether the change is an increase or
a decrease assuming ceteris paribus condition.
a. The government raises tax allowance - circular flow of income will decrease.
b. The government cuts spending on roads - circular flow of income will decrease.ase.
Jamaica’s circular flow of income? In each case also specify whether the change is an increase or
a decrease assuming ceteris paribus condition.
a. The government raises tax allowance - circular flow of income will decrease.
b. The government cuts spending on roads - circular flow of income will decrease.ase.
Did the tools that the Egyptian government uses to finance the deficit are efficient?
(a) Your company’s current ratio is 0.5x, while your competitor’s current ratio is 1.5x. Both
firms want to "window dress" the coming end-of-year financial statements. As part of
the window dressing strategy, each firm will double its current liabilities by adding
short-term debt and placing the funds obtained in the cash account. Describe the actual
results of these transactions?
(b) What would be the effect if a company increases its debt ratio, but leaves its operating
income (EBIT) and total assets unchanged?
(c) A fire has destroyed a large percentage of the financial records of the Sunlight Inc. You
have the task of piecing together information in order to release a financial report. You
have found the return on equity to be 18 percent. If sales were RM4 million, the debt
ratio was 0.40, and total liabilities were RM2 million, what was the return on assets
(ROA)?
firms want to "window dress" the coming end-of-year financial statements. As part of
the window dressing strategy, each firm will double its current liabilities by adding
short-term debt and placing the funds obtained in the cash account. Describe the actual
results of these transactions?
(b) What would be the effect if a company increases its debt ratio, but leaves its operating
income (EBIT) and total assets unchanged?
(c) A fire has destroyed a large percentage of the financial records of the Sunlight Inc. You
have the task of piecing together information in order to release a financial report. You
have found the return on equity to be 18 percent. If sales were RM4 million, the debt
ratio was 0.40, and total liabilities were RM2 million, what was the return on assets
(ROA)?
Lorena likes to play golf. The number of times per year that she plays
depends on both the price of playing a round of golf as well as Lorena’s
income and the cost of other types of entertainment- in particular, how
much it costs to go see a movie instead of playing golf. The two demand
schedules in the table below show how many rounds of golf per year
Lorena will demand at each price under two different scenarios. In
scenario D1, Lorena’s income is $50,000 per year and the movies cost $9
each. In scenario D2, Lorena’s income is $70,000 and the price of movies
rises to $11 each. Quantity demanded PRICE ($) D1 D2 50 15 10 35 25 15
a) Using the data under D1 and D2, calculate the cross elasticity of
Lorena’s demand for golf at all two prices. Are movies and golf
substitutes, complements or independent goods? b) Using the data under D1 and D2, calculate the income elasticity of Lorena’s demand for golf at all two prices. Is golf an inferior good?
depends on both the price of playing a round of golf as well as Lorena’s
income and the cost of other types of entertainment- in particular, how
much it costs to go see a movie instead of playing golf. The two demand
schedules in the table below show how many rounds of golf per year
Lorena will demand at each price under two different scenarios. In
scenario D1, Lorena’s income is $50,000 per year and the movies cost $9
each. In scenario D2, Lorena’s income is $70,000 and the price of movies
rises to $11 each. Quantity demanded PRICE ($) D1 D2 50 15 10 35 25 15
a) Using the data under D1 and D2, calculate the cross elasticity of
Lorena’s demand for golf at all two prices. Are movies and golf
substitutes, complements or independent goods? b) Using the data under D1 and D2, calculate the income elasticity of Lorena’s demand for golf at all two prices. Is golf an inferior good?
Which of the following statements are true or false? Justify your answer
with appropriate explanations
a) An increase in the price of ham decreases the consumption of cheese.
An increase in the price of ham increases the consumption of salami.
Hence ham and cheese are substitutes and ham and salami are
complements.
b) If price elasticity of demand (PED) is -1.7, it is feasible that a company
cuts the price by 5% in order to generate enough total revenue
with appropriate explanations
a) An increase in the price of ham decreases the consumption of cheese.
An increase in the price of ham increases the consumption of salami.
Hence ham and cheese are substitutes and ham and salami are
complements.
b) If price elasticity of demand (PED) is -1.7, it is feasible that a company
cuts the price by 5% in order to generate enough total revenue
