Economics Answers

Susie’s Radio Store has expected sales of $2,000,000 and plans to produce $2,500,000 worth of goods. To meet production, the business purchases $100,000 of new equipment. Actual sales for the year wind up being $1,800,000. For Susie’s Radio Store actual investment equals ______ and planned investment equals ______.

A. $600,000; $200,000

B. $800,000; $600,000

C. $500,000; $800,000

D. $650,000; $500,000

Suppose in winters demand of dry fruits increases. Further supply of dry fruit increases due to favorable environmental condition. Explain with the help of demand and supply curve, how price and quantity will respond

1.     Suppose market demand is given Q_d=a-bp as and market supply is given as, Q_s=c+dp and then find the following

o  Equilibrium price

o  Equilibrium quantity

o  Price elasticity of demand at equilibrium

o  Price elasticity of supply at equilibrium 

Banks in New Transylvania have a desired reserve ratio of 10 percent of deposits and no excess reserves. The currency drain ratio is 50 percent of deposits. Now suppose that the central bank increases the monetary base by $1,200 billion.

i. How much do the banks lend in the first round of the money creation process?

ii. How much of the initial amount loaned flows back to the banking system as new

deposits?

iii. How much of the initial amount loaned does not return to the banks but is held

as currency?

iv. Why does a second round of lending occur?

v. Calculate money multiple in this example?

vi. What is the final increase in the quantity of money?

When the economy was slowly recovering from recession, in 2011, the NDP called for government spending on infrastructure and green energy and said that corporate tax cuts did not give sufficient stimulus.

i. Was the NDP’s proposed infrastructure spending a fiscal stimulus? Would such spending be a discretionary or an automatic fiscal policy?

ii. Explain whether, and if so how, spending on infrastructure and green energy would create jobs. Use graphs to illustrate your answer.

iii. What would have a larger effect on aggregate demand: Corporate tax cuts or an equivalent scale increase in government expenditure on infrastructure and green energy projects?

Q.1.10 When the rand depreciates against the dollar:

(1) The balance on the current account of the balance of payments worsens;

(2) The South African Reserve Bank can influence the exchange rate by raising interest rates to attract foreign capital and thus strengthen the value of the rand;

(3) The South African Reserve Bank can buy dollars to strengthen the value of the rand;

(4) The South African Reserve Bank can take steps to limit the supply of dollars and in this way strengthen the value of the rand relative to the dollar.

Q.1.7 As a result of more Europeans visiting South Africa, we can expect, ceteris paribus:

(1) An appreciation of the rand relative to the euro;

(2) A depreciation of the rand relative to the euro;

(3) An appreciation of the euro relative to the rand;

(4) That it will cost South Africans more to visit Europe.

Briefly explain multicollinearity and its impact on the standard error of an OLS estimator

Herald, a barista, earned 260,000 in 2019. But in 2021, he was retrenched and decided to open his own coffee shop. After a year, he submitted the following data :

•   He spent 45,000 on equipment.
•   He leased a small space for P70,000 a year.
•   He paid P 100,000 in wages.
•   He sold worth P950,000 of coffee a year.
•   He used P150,000 from his saving account, which pays 3% interest a year. 
•   He borrowed P250,000 at 10% a year from the bank.
•   Normal profit is P350,000 a year.

Compute for the following :

•    Herald's explicit costs (10 points)
•    Herald's implicit cost (10 points)
•    Herald's economic profit ( 10 points)

Aero Inc.

Balance Sheet

December 31, 2019

Cash $20,000

Accounts Receivable 21,200

Investments 32,000

Plant Assets 81,000

Land 40,000

194,200

Accounts Payable $30,000

Bonds Payable 41,000

Common Stock 100,000

Retained Earnings 23,200

$194,200

During 2020, the following occurred.

1. Aero liquidated its available-for-sale debt investment portfolio at a loss of $5,000.

2. A tract of land was purchased for $38,000.

3. An additional $30,000 in common stock was issued at par.

4. Dividends totaling $10,000 were declared and paid to stockholders.

5. Net income for 2020 was $35,000, including $12,000 in depreciation expense.

6. Land was purchased through the issuance of $30,000 in additional bonds.

7. At December 31, 2020, Cash was $70,200, Accounts Receivable was $42,000, and Accounts Payable was $40,000.

a. Prepare a statement of cash flows for the year 2020 for Aero.

b. Prepare the unclassified balance sheet as it would appear at December 31, 2020.