Homework Answers

The following transactions are extracted from MNP Ltd. for the year ended on June 30, 2020: (i) Plant assets sold at Tk. 5,300 which was purchased 6 years before for Tk. 20,000. The plant assets were depreciated on a straight-line basis assuming useful life of 10 years with no residual value. (ii) Issued 10,000 shares of Tk. 10 each at a price of Tk. 43 per share. (iii) Issued shares for a 70% interest in ABC Co. for Tk. 9,00,000. (iv) Patent amortization for the year was Tk. 20,000. (v) The company’s net loss for the year Tk. 50,000. Depreciation charged Tk. 22,000 and realized a gain of Tk. 9,000 on the sale of a land for Tk. 39,000. (vi) A 3-months Govt. Treasury Bill of Tk. 1,00, 000 was purchased. Requirement: State the treatment of the above transactions in the Cash Flow Statement of MNP for the year ended on June 30, 2020

a) The article identifies a number of factors behind the recent increase in the price of

aluminium. Mention these factors and indicate whether they are demand-side or supplyside

factors.

b) With the aid of a well-labeled diagram, illustrate the effects of the factors identified

in part (a) above on the equilibrium price and quantity of aluminium. Pay attention to

the statement in the article that “Supply constraints, however, have been more

important” when drawing your diagram.

1. What would the LM curve look like in a classical world? If this really were the LM curve that we thought best characterized the economy, would we lean toward the use of fiscal policy or monetary policy? (You may assume your goal is to affect output.) Explain in 250-300 words using the diagram

2. Show, using IS and LM curves, why money has no effect on output in the classical supply case. Explain in 500 words. Use diagram wherever necessary.

1. Discuss, using the IS-LM model, what happens to interest rates as prices change along a given AD schedule. Explain using the diagram.

2. What is crowding out, and when would you expect it to occur? In the face of substantial crowding out, which will be more successful—fiscal or monetary policy? Explain using the diagram.