Possible solutions to minimize the issue of grapevine within organizations include promoting transparent communication channels, encouraging open dialogue, providing regular updates and information, fostering a positive work culture based on trust and collaboration, and addressing employee concerns promptly.
Trade unions can have an impact on Bill's decision by providing legal protection to employees and negotiating on their behalf for better working conditions, job security, and fair treatment. If Kim's termination is perceived as retaliation for her union activities, it could lead to legal repercussions and damage the company's reputation.\
Bill should consult HR and legal experts to ensure compliance with labor laws and handle the situation appropriately, considering the potential impact on employee morale and organizational relationships.
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Check your skill! Current 1-year spot rate is 6%,2-year spot rate is 7%, and 3-year spot rate is 6%. The 1-year forward rate for a loan two years from now is closest to: A. 6%. B. 5%. C. 4%.
A. 6%.. The 1-year forward rate for a loan two years from now is closest to 7%.
The forward rate can be calculated by taking the ratio of the future spot rate to the current spot rate, both raised to the power of the respective time periods. In this case, we are looking for the forward rate for a loan two years from now, which means we need to compare the 3-year spot rate (6%) to the 1-year spot rate (6%). By using the formula (1 + 3-year spot rate) / (1 + 1-year spot rate) - 1, we find that (1 + 0.06) / (1 + 0.06) - 1 equals 7%. Therefore, the closest estimate for the 1-year forward rate is 7%.
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Fred's Pizza business provides you the following Accounting GAAP francial information for this year's business income tax refu Income Statement.
1 Revenue $100,000
2. Meals and Entertainment $10,000
3. Supply Expenses $2,000
4 Depreciation Expenses $5,000
Assets
Furniture (Class 8,20%), UCC was $10,000, Purchase this year was $10,000 and disposed of furniture for proceeds of $10.000 and had an original cost of $5.000.
Building (Class 1,4%) UCC was $100,000
The TOTAL maximum CCA for this year is?
The TOTAL maximum CCA for this year is $4,000 + $1,500 = $5,500. Therefore, the correct option is D.
The solution to the problem is as follows:
Given Accounting GAAP financial information for Fred's Pizza business for this year's business income tax return
Income Statement.1 Revenue = $100,0002.
Meals and Entertainment = $10,0003. Supply Expenses = $2,0004.
Depreciation Expenses = $5,000
To calculate CCA, we need the UCC, and the half-year rule has to be applied to new purchases during the year.
UCC of Building (Class 1, 4%) = $100,000
UCC of Furniture (Class 8, 20%) = $10,000
Disposal Proceeds of Furniture = $10,000
Original Cost of Furniture = $5,000
Purchase of Furniture during the year = $10,000
New UCC for Furniture is: 10,000 - 5,000 + 10,000 / 2 = 7,500
New Total UCC:100,000 + 7,500 = 107,500
Maximum CCA calculation for Building is:
UCC * Rate = Maximum CCA
100,000 * 0.04 = 4,000
Maximum CCA calculation for Furniture is:
UCC * Rate = Maximum CCA7,500 * 0.20
= 1,500
The TOTAL maximum CCA for this year is $4,000 + $1,500 = $5,500.
Therefore, the correct option is D.
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Which of the following statements are incorrect?
A private company cannot offer its securities to the public.
Only a private company can pass written resolutions.
Public and private companies must have at least two directors.
A private limited company does not need to hold an annual general meeting.
A private limited company may only be limited by shares.
Give one correct answer.
I., II. and IV. only
I. and II. only
III. and V. only
II., III. and V. only
The correct option is a. I,II and IV only. The incorrect statement are - A private company cannot offer its securities to the public, Only a private company can pass written resolutions & A private limited company does not need to hold an annual general meeting.
I. A private company cannot offer its securities to the public.
This statement is incorrect. A private company can offer its securities to a specific group of people, such as its employees or existing shareholders, through a process called a private placement. However, it cannot offer its securities to the general public through a public offering.
II. Only a private company can pass written resolutions.
This statement is incorrect. Both public and private companies can pass written resolutions, which are decisions made by the board of directors or shareholders without holding a meeting. Written resolutions must be signed by all the directors or shareholders who are entitled to vote on the matter.
IV. A private limited company does not need to hold an annual general meeting.
This statement is incorrect. A private limited company is required to hold an annual general meeting (AGM) under most company laws and regulations. The purpose of the AGM is to allow shareholders to receive and approve the company's financial statements, elect directors, and appoint auditors.
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abc corporation had $3,000,000 in cost of goods sold and $370,000 in inventory. abc's inventory turnover is _____
ABC Corporation's inventory turnover ratio if they had $3,000,000 in cost of goods sold and $370,000 in inventory is 8,11.
The inventory turnover ratio is a financial metric that assesses how frequently a business can sell its inventory throughout a given period. This ratio is used to determine how effective a company is at managing its inventory. It's computed by dividing the cost of goods sold by the average inventory for the period.
Formula for Inventory Turnover Ratio:
Inventory turnover ratio = Cost of goods sold / Average inventory
Cost of goods sold = $3,000,000
Inventory = $370,000
We will calculate the Inventory turnover ratio using the formula,
Inventory turnover ratio = Cost of goods sold / Average inventory
Inventory turnover ratio = $3,000,000 / $370,000
= 8.11
Thus, ABC Corporation's inventory turnover ratio is 8.11.
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15%-What accounting needs to be done in each of the following cases: A) Attorneys advise us that a loss of of $5,000,000 is possible B) Attorneys advise us the reasonable estimable loss of $3,000,000 is probable C) The probable loss is a range from $2,000,000 to $7,000,000 with $3,000,000 being most likely. D) The probable loss is a range from $2,000,000 to $7,000,000. No one point in the range is more likely E) You are advised by your attorneys that you will probably win the lawsuit you filed and the dollar gain will be $6,000,000
In each of the given cases, specific accounting needs arise due to potential losses or gains resulting from legal matters. The cases involve varying degrees of certainty regarding the outcome, ranging from possible losses to probable losses and potential gains. The appropriate accounting treatment for each scenario will depend on the likelihood and measurability of the potential loss or gain.
A) When attorneys advise that a loss of $5,000,000 is possible, the accounting treatment would generally involve disclosure in the financial statements. This would provide relevant information to users of the financial statements about the potential loss, its nature, and any potential impact on the entity's financial position and performance.
B) When attorneys advise that a reasonable estimable loss of $3,000,000 is probable, the accounting treatment would typically require recognition of a provision. A provision represents a liability that is expected to be incurred and can be reliably estimated. It would be recorded in the financial statements, resulting in a decrease in the entity's net income and an increase in its liabilities.
C) In the case where the probable loss is a range from $2,000,000 to $7,000,000, with $3,000,000 being the most likely amount, the accounting treatment would depend on the level of certainty. If the most likely amount within the range can be reasonably estimated, a provision would be recognized for $3,000,000. However, if a single amount cannot be determined within the range, disclosure in the financial statements would be necessary.
D) When the probable loss is a range from $2,000,000 to $7,000,000 without a single amount being more likely, disclosure would be required in the financial statements. The range of the potential loss should be clearly communicated, along with any relevant qualitative information that assists users in understanding the potential impact.
E) If attorneys advise that a lawsuit is likely to be won, resulting in a dollar gain of $6,000,000, the accounting treatment would depend on the realization of the gain. Generally, gains are recognized in the financial statements when they are realized or realizable, which means the gain is virtually certain. If the gain meets these criteria, it would be recognized, leading to an increase in the entity's net income.
In summary, the accounting needs for each scenario involve disclosure and/or recognition, depending on the likelihood and measurability of the potential loss or gain. Disclosure ensures that users of the financial statements are appropriately informed, while recognition reflects the impact of the potential loss or gain on the entity's financial position and performance.
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XYZ Inc. has expected earnings over the next year of $3/share (E1 = 3). The company is expected to maintain an earnings retention rate of 20%, i.e., 80% of earnings are expected to be paid out as dividends every year. The company has a beta of 4, the risk-free rate is 6%, and the market risk premium is also 6%.
If the growth rate in earnings is expected to be 6% in perpetuity
What is the value of the stock?
What is the expected price a year from now?
What is the expected holding period return over the next year? How much of this
return is due to capital gains (price appreciation) and how much is attributable to
dividend yield?
What ROE justifies this growth rate?
What is the present value of growth opportunities for this stock?
Answer:
The present value of growth opportunities for this stock is $6.67.
Given:
Expected earnings over the next year of XYZ Inc., E1= $3/share
Earnings retention rate= 20% or 0.2,
dividends payout ratio= 80% or 0.8Beta of XYZ Inc., β= 4
Risk-free rate= 6%, Rf= 0.06
Market risk premium= 6%,
Rm-Rf= 0.06
Growth rate in earnings is expected to be 6% in perpetuity, g= 6%.
To find:
Value of the stock Expected price a year from now Expected holding period return over the next year, and how much of this return is due to capital gains and how much is attributable to dividend yield ROE justifies this growth rateThe present value of growth opportunities for this stock.
Solution:
Using the Gordon growth model, the value of the stock is obtained as follows:
Gordon growth model, Po= D1 / (ke - g)
where Po= value of the stock
D1= expected dividend a year from now
ke= required rate of return on equity
ke= Rf + β(Rm-Rf) = 0.06 + 4(0.06)
= 0.06 + 0.24 = 0.30ke- g
= 0.30-0.06= 0.24P0
= D1 / (ke - g)
= 3(1-0.8) / 0.24
= $5.00
Therefore, the value of the stock is $5.00.
Expected price a year from now,
D2= D1(1+g)
= 3(1+0.06)
= $3.18
Expected holding period return over the next year,
Holding period return= dividend yield + capital gains
Dividend yield= D1/P0
= 3(1-0.8)/5
= 0.6/5= 0.12
= 12%
Capital gains= (P1 - P0)/P0
= (D2/P1 - P0)/P0
Dividing both sides by P0,
(P1/P0)-1= D2/P0
Expected price next year
P1= P0(1+g)/(1+ke)
= 5(1+0.06)/(1+0.30)
= 4.06
Therefore, the expected holding period return is
= dividend yield + capital gains
= 0.12 + (4.06-5.00)/5.00
= -0.04 or -4%
The negative value of the expected holding period return indicates that the stock is not expected to perform well in the next year.
The expected return is primarily due to the dividend yield, which is positive, and the capital gains yield is negative.
ROE justifies this growth rate,
ROE= (1- Dividend payout ratio) × (Return on equity)
Return on equity (ROE) = (Net income) / (Equity)
Plugging in the given values,
ROE= (1- 0.8) × ROEROE= 0.2 × ROE
Given growth rate,
g= ROE × Retention ratio
ROE= g / Retention ratio
ROE= 0.06/0.2ROE
= 0.3 or 30%
The required ROE to justify the expected growth rate is 30%.
The present value of growth opportunities,
Present value of growth opportunities= P0 - E1 / (ke - g) × BV0
where
BV0 is the book value at the beginning of the year.
BV0 is not given in the problem;
Hence it is assumed that BV0 is equal to P0, which is $5.00.
Present value of growth opportunities= 5.00 - 3 / (0.30-0.06) × 5.00
= $6.67
Therefore, the present value of growth opportunities for this stock is $6.67.
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most economists support protectionism against international trade in cases where domestic businesses are negatively impacted
Most economists do not support protectionism against international trade in cases where domestic businesses are negatively impacted.
Protectionist policies, such as tariffs and trade barriers, can harm overall economic efficiency, increase consumer prices, and lead to retaliatory measures from trading partners. The majority of economists advocate for free trade as it allows for the specialization of resources, fosters competition, and expands market opportunities. While some domestic industries may face short-term challenges due to international competition, protectionist measures can have long-term negative consequences. Tariffs and trade barriers increase the cost of imported goods, leading to higher prices for consumers and reduced choices. Moreover, retaliatory measures by trading partners can further harm domestic industries by limiting market access. Instead, economists often recommend addressing negative impacts through targeted policies like worker retraining, investment in innovation, and adjustment assistance programs to ensure long-term competitiveness.
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4. Suppose the firm is-operating in a perfectly competitive market and the market price is $10. a. What is the profit maximizing output for the firm? Explain why you chose that output level. Annver: b. What profit is the firm making at these price and output? Answer:
In a perfectly competitive market, the profit-maximizing output for a firm is determined where marginal cost (MC) equals the market price (P).
Since the market price is given as $10, the firm will produce the quantity where MC is equal to $10. At this output level, the firm will maximize its profit. b. Without additional information about the firm's cost structure, we cannot determine the specific profit the firm is making at the given price and output. Profit can be calculated by subtracting total cost (TC) from total revenue (TR).Profit = TR - TC To calculate the profit, we would need to know the firm's cost function or have information about the relationship between quantity produced and cost. Without this information, we cannot provide a specific answer regarding the firm's profit.
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"Digital innovation boosts competition and undermines bundled
product pricing." Do you agree with this statement? Why or why
not?
The statement "Digital innovation boosts competition and undermines bundled product pricing" holds merit and can be supported by several factors.
Here are some reasons why this statement can be considered valid:
Increased Market Transparency, Digital innovation has facilitated easier access to information for consumers. With online platforms, price comparison websites, and customer reviews, buyers can now make more informed decisions. This enhanced transparency creates a more competitive environment, as customers are better equipped to evaluate bundled product offerings and compare them to individual products or alternatives from other providers.
Customization and Personalization, Digital technologies enable companies to offer greater product customization and personalized services. By tailoring products and services to individual customer needs, companies can provide more focused offerings, potentially breaking down bundled packages and allowing customers to choose only what they need. This flexibility challenges the traditional one-size-fits-all approach of bundled pricing and increases competition by giving consumers more options.
Disintermediation and Direct-to-Consumer Models, Digital innovation has enabled direct-to-consumer (D2C) models, eliminating the need for intermediaries. By bypassing middlemen, companies can reduce costs and offer products and services at lower prices. This shift can disrupt traditional bundled pricing strategies, as companies can sell individual components or services separately without the need to bundle them together, thus intensifying competition.
Rise of Digital Marketplaces, Online marketplaces provide a platform for sellers to reach a wide range of customers, fostering increased competition. These platforms often emphasize individual product listings rather than bundled packages, enabling consumers to compare prices and features more easily. Digital marketplaces create an environment where standalone products can compete directly with bundled offerings, potentially putting pressure on bundled pricing strategies.
Technological Substitution, Digital innovation has also introduced technological substitutes for traditionally bundled products. For example, streaming services have disrupted cable TV bundles by offering individual content subscriptions. These technological substitutes often provide greater convenience, flexibility, and cost-effectiveness, challenging the appeal and value of bundled offerings.
It is important to note that while digital innovation can disrupt bundled pricing, it does not guarantee its complete demise. Bundled pricing can still hold advantages in certain contexts, such as offering convenience or cost savings for customers who prefer a comprehensive solution. Additionally, digital innovation can also enable companies to create new and innovative bundled offerings that adapt to changing consumer demands.
In conclusion, while digital innovation can indeed boost competition and undermine bundled product pricing by increasing market transparency, enabling customization, facilitating direct-to-consumer models, promoting digital marketplaces, and providing technological substitutes, the impact may vary depending on the industry, market dynamics, and consumer preferences.
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QUESTION ONE (20 Marks)
Explain the nature of financial risk in the public sector and identify, evaluate and recommend appropriate financial risk mitigation strategies, including those relating to public borrowing and financial market risks.
QUESTION TWO (20 Marks)
Describe the budgetary framework, budget cycle and budget processes, including the nature of performance measures, target setting, budget monitoring, budget feedback and control
QUESTION THREE (20 Marks)
Evaluate the PFM system using the Public Expenditure and Financial Accountability (PEFA) framework
QUESTION FOUR (20 Marks)
Describe the nature of public sector capital projects including the approval process, performance measures, and target setting, paying particular attention to public/private partnerships
QUESTION FIVE (20 Marks)
A summary of the general fund transactions for the city of Wautoma for the year ended December 31, 2020 is as follows:
a. A budget was approved, showing estimated revenues of $900,000, appropriations of $875,000, transfers-in of $27,000 from other funds, and required transfers of $20,000 to other funds.
b. The reserve for encumbrance at the end of 2019 was $15,000. Amounts encumbered in the prior period are included in appropriations for 2020.
c. Property taxes for $650,000 were levied. In past years, 1% of the property taxes levied proved uncollectible.
d. Encumbrances for $250,000 had not been liquidated by the end of 2019. invoices for all these items received in 2020 and totaled $24,000.
e. Collections from property taxes totaled $644,000 of which $20,000 represented collections on delinquent taxes. Delinquent taxes of $8,000 remain uncollected, on which a $3,000 allowance is carried. Remaining taxes receivable – current and taxes receivable – delinquent were converted into taxes receivable – delinquent and tax liens receivable, respectively.
f. Purchase orders totaling $700,000 were issue. Subsequently, invoices were received amounting to $685,000 for items estimated to cost $680,000. included were supplies for $10,000.
g. An ending inventory of supplies amounted to $2,000 for which the fund balance should be reserved.
h. A tract of land was purchased for $250,000. Payment was made from the general fund, in whose appropriations the item had been included. The amount had not been encumbered. The purchase was made with the intent of reselling the land to a suitable developer.
i. Wautoma received $300,000 as its part of federal revenue sharing programs. Grants-in-aid of $60,000 due from the state governments are recorded. None of the grants is expenditure driven.
j. Required transfers of $20,000 are made to other funds.
k. A $50,000 payment is made on a mortgage payable. The payment includes $21,000 of interest and a principal payment of $29,000.
l. An offer was received from a land developer who will pay $380,000 for the land acquired by the city in item (h). the sale is approved. The developer remits $100,0000 with a note due in 90 days, bearing 8% interest. Any gain is to be considered revenue.
m. Transfers received from other funds amount to $23,000.
n. The developer in item (l) remits payments for the note plus interest.
REQUIRE
1. Prepare journal entries of record the general fund transactions
2. Prepare closing entries for the general fund
The nature of financial risk in the public sector involves the potential for adverse financial outcomes due to various factors such as economic volatility, budget deficits and reliance on external financing.
What are appropriate financial risk mitigation strategies?To mitigate financial risks in the public sector, several strategies can be implemented. One key approach is to establish robust risk management frameworks that identify, assess, and monitor financial risks. This involves regularly analyzing economic indicators, fiscal policies, and market conditions to anticipate potential risks and take necessary actions.
Also, diversifying funding sources and maintaining a balanced debt portfolio can reduce the vulnerability of public entities to fluctuations in interest rates and credit markets. Governments can also consider implementing prudent borrowing practices such as conducting thorough credit assessments and negotiating favorable terms and conditions with lenders.
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Which of the following statements about impeachment is true? Impeachment means to charge a government official with "treason, bribery, or other high crimes and misdemeanors." The president is the only official who may be impeached and removed by Congress. The Senate decides by a simple majority vote whether the accused ought to be impeached. O The House of Representatives decides whether to convict and remove the person from office.
The following statement about impeachment is true: Impeachment means to charge a government official with "treason, bribery, or other high crimes and misdemeanors." So, option a is correct.
Impeachment is a process outlined in the United States Constitution for removing certain government officials from office. It is a two-step process that involves the House of Representatives and the Senate.
The House of Representatives has the power to impeach a government official by bringing formal charges against them. The Constitution specifies that impeachment may be based on the grounds of "treason, bribery, or other high crimes and misdemeanors." Impeachment itself is equivalent to an indictment or formal accusation.
After the House of Representatives impeaches an official, the case is then passed to the Senate for trial. The Senate acts as the court for the impeachment trial, and it is the Senate that ultimately decides whether to convict or acquit the accused official.
In the Senate, a conviction and removal from office require a two-thirds majority vote. This means that at least two-thirds of the senators present must vote in favor of conviction for the official to be removed from office.
Therefore, the statement "The House of Representatives decides whether to convict and remove the person from office" is not accurate. It is the Senate that decides whether to convict and remove the impeached official from office, and it requires a two-thirds majority vote for conviction. So, option a is correct.
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Complete question:
Which of the following statements about impeachment is true? Impeachment means to charge a government official with "treason, bribery, or other high crimes and misdemeanors."
The president is the only official who may be impeached and removed by Congress.
The Senate decides by a simple majority vote whether the accused ought to be impeached. O
The House of Representatives decides whether to convict and remove the person from office.
The value of a 8 year lease that requires payments of $600 made at the beginning of every quarter is $16,500. What is the nominal interest rate compounded quarterly? % Round to two decimal places
The nominal interest rate compounded quarterly is 0.595% rounded to two decimal places.
Given that:
The value of an 8-year lease that requires payments of $600 made at the beginning of every quarter is $16,500.
Formula used: `
PV = PMT((1-(1+r)^-n)/r)`,
where
PV = present value
PMT = payment per period
r = rate per period
n = number of periods
Substituting the given values in the above formula, we get:
`16500 = 600((1-(1+r)^-32)/r)`
Simplifying the above equation, we get:
`1 - (1+r)^-32 = 16500 / (600r)`
Now, let us calculate the value of `(1+r)^-32`.
We have:`
(1+r)^-32 = 1 / (1+r)^32`
Substituting the above value in the earlier equation, we get:`
1 / (1+r)^32 = 16500 / (600r) + 1`
Multiplying both sides by `(1+r)^32`, we get:
`1 = (16500 / (600r) + 1)(1+r)^32`
Simplifying the above equation, we get:
`(1+r)^32 = 1.2875`
Now, taking the 32nd root of both sides, we get:
`1 + r = 1.00595`
Subtracting 1 from both sides, we get:
`r = 0.00595`
Answer: 0.595%.
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During the current year, Stan sells a tract of land for $800,000. The property was received as a gift from Maxine on March 10, 1995, when the property had a $310,000 FMV. The taxable gift was $300,000 because the annual exclusion was $10,000 in 1995. Maxine purchased the property on April 12, 1980, for $110,000. At the time of the gift, Maxine paid a gift tax of $12,000. In order to sell the property, Stan paid a sales commission of $16,000.
Read the requirements
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Question content area bottom
Part 1
Requirement a. What is
Stan's
realized gain on the sale?Select the formula, then calculate
Stan's
realized gain on the sale. (Do not round intermediary calculations. Only round the amounts you input in the cells to the nearest dollar.)
Minus:
Realized gain
Part 2
Requirement b. How would your answer to Part a change, if at all, if the FMV of the gift property was
$85,000
as of the date of the gift?
If the FMV of the gift property was $85,000 as of the date of the gift, Stan would have realized a gain on the sale of
Part(1) the realized sale on the gain is $666,000. Part(2) if the FMV of the gift property was $85,000 as of the date of the gift, Stan would have realized a gain on the sale of $674,000.
Part(1)
Given:
Sale price = $800,000
Price of property = $310,000
Price of tax = $300,000
Basis = $10,000
The gift tax is given as:
T = 12000×(310,000-110,000)/(310000-10000)
T = 12000×(200,000/300,000)
T = $ 8,000
The gift tax paid is:
P = (110,000+T)
P = (110,000+8000)
P = $118,000
Realized gain = Sale price - (P+Sales commission)
Realized gain = $800,000 - ($118,000+$16,000)
Realized gain = $666,000
Hence, the realized sale on the gain is $666,000.
Part(2)
Realized gain of basis ($110,000) is:
RG = Sale price- (Commission+Basis)
RG = $800,000 - ($110,000 - $16,000)
RG= $674,000
Hence, if the FMV of the gift property was $85,000 as of the date of the gift, Stan would have realized a gain on the sale of $674,000.
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Unrealized holding gains and losses on cash flow hedges are included in net income.
True
False
Unrealized holding gains and losses on cash flow hedges are included in net income.------ False.
Unrealized holding gains and losses on cash flow hedges are not included in net income. They are typically recorded in other comprehensive income (OCI) instead.
The purpose of cash flow hedges is to mitigate the impact of fluctuations in cash flows arising from certain future transactions or events, and any unrealized gains or losses on these hedges are recognized in OCI until the underlying hedged items affect net income.
What is cash flow hedge?
A cash flow hedge is a hedge strategy that seeks to limit the risk of an anticipated cash flow using financial instruments. The hedge is used to reduce the variability of the cash inflows and outflows over the term of the hedge, which reduces the uncertainty of the company's future cash flows.Cash flow hedges are accounting treatments for risks linked to an organisation's cash inflows and outflows. A cash flow hedge is a hedge of a future cash inflow or outflow that is highly possible to arise. To lower the risk of cash outflows and inflows, firms frequently use financial instruments such as forwards, options, and swaps.
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On 1 May 2019, Stewart acquired 70% of the equity interest in McDonald, a public limited company. The purchase consideration comprised cash of £94 million. The fair value of the identifiable net assets recognised by McDonald was £120 million excluding the patent below. The identifiable net assets of McDonald included a patent which had a fair value of £4 million. This had not been recognised in the financial statements of McDonald. The patent had a remaining useful term of four years to run at the acquisition date. The retained earnings of McDonald were £49 million and other components of equity were £3 million at the acquisition date. The remaining excess of the fair value of the net assets is due to an increase in the vlaue of land. The share capital of McDonald was £38 million at acquisition and there have been no shares issued since acquisition. The fair value of the non-controlling interest at acquisition was 46 million.
McDonald is located in a foreign country and also operates in the retail sector. The income of McDonald is demoninated in Kealeys. McDonald's sales price is determined by local supply and demand. McDonald pays 40% of its costs in dollars with the remainder being incurred locally and settled in Kealeys. McDonald's management has a considerable degree of autonomy in carrying out the operations of McDonald and is not reliant on the parent.
On 1 May 2019, Stewart acquired 70% of the equity interest in McDonald, a public limited company. The purchase consideration comprised cash of £94 million. The fair value of the identifiable net assets recognised by McDonald was £120 million excluding the patent below. The identifiable net assets of McDonald included a patent which had a fair value of £4 million. This had not been recognised in the financial statements of McDonald. The patent had a remaining useful term of four years to run at the acquisition date. The retained earnings of McDonald were £49 million and other components of equity were £3 million at the acquisition date. The remaining excess of the fair value of the net assets is due to an increase in the vlaue of land. The share capital of McDonald was £38 million at acquisition and there have been no shares issued since acquisition. The fair value of the non-controlling interest at acquisition was 46 million.
McDonald is located in a foreign country and also operates in the retail sector. The income of McDonald is demoninated in Kealeys. McDonald's sales price is determined by local supply and demand. McDonald pays 40% of its costs in dollars with the remainder being incurred locally and settled in Kealeys. McDonald's management has a considerable degree of autonomy in carrying out the operations of McDonald and is not reliant on the parent.
Based on the information provided, Stewart acquired 70% of the equity interest in McDonald on May 1, 2019, for a cash consideration of £94 million.
The identifiable net assets of McDonald, excluding the unrecognised patent, were valued at £120 million. The fair value of the patent was £4 million, which was not recognised in McDonald's financial statements. The patent had a remaining useful life of four years at the acquisition date.
The excess of the fair value of the net assets over the purchase consideration is mainly due to an increase in the value of land. McDonald's retained earnings were £49 million, and other components of equity were £3 million at the acquisition date. The share capital of McDonald was £38 million, and there were no additional shares issued since the acquisition.
It is also mentioned that McDonald operates in a foreign country, generates income in Kealeys, and pays 40% of its costs in dollars, with the remaining costs settled in Kealeys. McDonald's management has a high degree of autonomy and is not reliant on the parent company.
Overall, Stewart's acquisition of 70% equity interest in McDonald involved consideration of the identifiable net assets, the unrecognised patent, and the fair value of the non-controlling interest. The acquisition allows Stewart to gain control over McDonald's operations and contribute to its financial performance.
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The following information is available for Swifty's Hot Dogs;
Actual production 11.620 packages
Budgeted production 12.500 packages
Standard direct labor hours 1.5 direct labor hours per package
Actual direct labor hours 18.499
Standard variable overhead rate $3 per direct labor hour
Actual variable overhead costs $47.047
Calculate the variable overhead spending and efficiency variances. (Round answers to O decimal places, e.g. 125. If variance is zero, select "Not Applicable" and enter O for the amounts.)
The variable overhead spending and efficiency variances for Swifty's Hot Dogs can be calculated as follows:
The variable overhead spending variance is calculated by finding the difference between the actual variable overhead costs and the budgeted variable overhead costs. In this case, the actual variable overhead costs are $47,047 and the budgeted variable overhead costs can be calculated by multiplying the actual direct labor hours (18.499) by the standard variable overhead rate ($3 per direct labor hour). Therefore, the budgeted variable overhead costs are 18.499 * $3 = $55,497. The variable overhead spending variance is the difference between the actual and budgeted variable overhead costs: $47,047 - $55,497 = -$8,450.
The variable overhead efficiency variance is calculated by finding the difference between the standard hours allowed for the actual production and the actual hours worked, multiplied by the standard variable overhead rate. The standard hours allowed for the actual production can be calculated by multiplying the budgeted production (12,500 packages) by the standard direct labor hours per package (1.5 direct labor hours per package). Therefore, the standard hours allowed for the actual production are 12,500 * 1.5 = 18,750 direct labor hours. The variable overhead efficiency variance is the difference between the standard hours allowed and the actual hours worked: 18,750 - 18.499 = 251 hours. Multiplying this by the standard variable overhead rate ($3 per direct labor hour) gives the variable overhead efficiency variance: 251 * $3 = $753.
In summary, the variable overhead spending variance is -$8,450 and the variable overhead efficiency variance is $753.
The variable overhead spending variance is negative because the actual variable overhead costs are lower than the budgeted variable overhead costs. This indicates that the company has saved costs in the variable overhead category. On the other hand, the variable overhead efficiency variance is positive, indicating that the actual hours worked were slightly less than the standard hours allowed for the actual production. This suggests that the company's labor efficiency was slightly better than expected. Both variances provide insights into the company's performance in managing variable overhead costs and labor efficiency.
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Suppose production of a good creates a negative externality. What are two interventions the government can make in the market to help reduce the deadweight loss the negative externality creates? What is a potential downside of such interventions?
Two interventions the government can make in the market to help reduce the deadweight loss caused by a negative externality are imposing a Pigouvian tax and implementing regulations or standards.
A Pigouvian tax is a tax levied on the producers or consumers of a good that generates negative externalities. By imposing this tax, the government increases the cost of production or consumption, discouraging its use and reducing the quantity produced or consumed. This intervention internalizes the external cost and helps align private costs with social costs.
Implementing regulations or standards is another intervention the government can use to address negative externalities. By establishing rules and guidelines, the government can enforce the reduction of harmful emissions or promote the adoption of cleaner technologies. These regulations aim to limit the negative impact of production processes or consumption patterns.
However, a potential downside of these interventions is the potential distortion of market efficiency. Taxes and regulations can introduce additional costs for producers and consumers, which may lead to reduced economic activity, higher prices, or market inefficiencies. Additionally, the effectiveness of these interventions relies on accurate assessment and implementation, which can be challenging for the government. It is crucial to strike a balance between addressing negative externalities and maintaining a competitive and efficient market environment.
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Other than the examples given in the marketplace article, what’s an example of a monopsony? Explain how it fits into that category.
Should the government get involved In regulating monopsony actions? If yes, give an example of a rule/law that would help and explain how it would work. If no, why not? Explain your thinking as to why this is an acceptable state.
Monopsony is a market structure where there is only one buyer for a product. An example of a monopsony can be the employer in a company who hires employees.
A monopsony is a market situation in which there is only one buyer for a particular product or service. A monopsony is the opposite of a monopoly in which there is only one seller. However, unlike a monopoly, a monopsony is an imperfect market structure in which the buyer has market power and can influence the price of the product or service. A company that controls the majority of the market share in the labor market can be considered a monopsony. Other than the examples given in the marketplace article, an example of a monopsony can be the employer in a company who hires employees. A single employer who controls a significant percentage of the labor market can set lower wages for their employees than what would be the market wage, which can result in a lower labor supply due to the reduced incentive for workers to enter the labor market. Should the government get involved in regulating monopsony actions? Yes, the government should get involved in regulating monopsony actions. An example of a rule/law that would help is the Sherman Antitrust Act, which was passed in 1890. The act is intended to prevent the formation of cartels and monopolies that may reduce competition in the market and cause harm to consumers. It has been used to break up large companies that were deemed to have a monopoly or monopsony power over a particular market. The act helps in promoting fair competition in the market and preventing companies from engaging in anticompetitive behavior that harms consumers.
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Assume that there are two factors that price assets. Risk free rate is 3%. Factor 1 has an expected return of 7% and factor 2 has an expected return of 9%. Calculate the expected return for each asset with the following sensitivities using the Arbitrage Pricing Theory (APT):
(a) β1=1,β2=0.8;(5 marks )
(b) β1=1.2,β2=−0.50;(5marks)
(c) β1=0.8,β2=1.5. (5 marks)
(a) The expected return for the asset with β1=1 and β2=0.8 is 17.2%.
(b) The expected return for the asset with β1=1.2 and β2=-0.5 is 6.9%.
(c) The expected return for the asset with β1=0.8 and β2=1.5 is 22.1%.
Arbitrage Pricing Theory (APT) is an asset pricing model used to determine the expected returns of an asset based on its sensitivity to different risk factors.
(a) For asset with β1=1 and β2=0.8, the expected return can be calculated using the APT formula:
Expected Return = Risk-Free Rate + (β1 * Expected Return of Factor 1) + (β2 * Expected Return of Factor 2)
Expected Return = 3% + (1 * 7%) + (0.8 * 9%)
Expected Return = 3% + 7% + 7.2%
Expected Return = 17.2%
(b) For asset with β1=1.2 and β2=-0.5, the expected return can be calculated using the APT formula:
Expected Return = Risk-Free Rate + (β1 * Expected Return of Factor 1) + (β2 * Expected Return of Factor 2)
Expected Return = 3% + (1.2 * 7%) + (-0.5 * 9%)
Expected Return = 3% + 8.4% - 4.5%
Expected Return = 6.9%
(c) For asset with β1=0.8 and β2=1.5, the expected return can be calculated using the APT formula:
Expected Return = Risk-Free Rate + (β1 * Expected Return of Factor 1) + (β2 * Expected Return of Factor 2)
Expected Return = 3% + (0.8 * 7%) + (1.5 * 9%)
Expected Return = 3% + 5.6% + 13.5%
Expected Return = 22.1%
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Based on the capital asset pricing model (CAPM), decompose the total risk of a security into systematic / non-systematic components.
The Capital Asset Pricing Model (CAPM) decomposes the total risk of security into systematic and non-systematic components.
According to the CAPM, the total risk of a security can be expressed as the sum of its systematic risk and non-systematic risk. The formula is as follows:
Total Risk = Systematic Risk + Non-Systematic Risk
Systematic risk is measured by the security's beta coefficient (β), which represents the sensitivity of the security's returns to market movements. The higher the beta, the greater the systematic risk. Non-systematic risk, on the other hand, is specific to individual security and is not related to market movements.
By decomposing the total risk into systematic and non-systematic components, investors can assess the sources of risk associated with a particular security. This information is valuable for portfolio diversification and risk management strategies, as investors can aim to reduce non-systematic risk through diversification while still being exposed to the systematic risk inherent in the market.
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For each of the following situations, identify the inventory method that you would use or, given the use of a particular method, state the strategy that you would follow to accomplish your goal:
Inventory costs are increasing. Your company uses weighted-average cost and is having an unexpectedly good year. It is near year-end, and you need to keep net income from increasing too much in order to save on income tax.
Suppliers of your inventory are threatening a labour strike, and it may be difficult for your company to obtain inventory. This situation could increase your income taxes.
Inventory costs are decreasing, and your company’s board of directors wants to minimize income taxes.
Inventory costs are increasing, and the company prefers to report high income. e. Inventory costs have been stable for several years, and you expect costs to remain stable for the indefinite future. (Give the reason for your choice of method.)
Here are the inventory methods that you would use for each of the following situations:Inventory costs are increasing. Your company uses weighted-average cost and is having an unexpectedly good year. It is near year-end, and you need to keep net income from increasing too much in order to save on income tax.
The inventory method to be used in this situation is LIFO (Last-in, First-out). This method allows you to match the high cost of goods sold (COGS) with the current rising inventory prices. Suppliers of your inventory are threatening a labor strike, and it may be difficult for your company to obtain inventory. This situation could increase your income taxes.Answer: The inventory method to be used in this situation is FIFO (First-in, First-out). This method allows you to use up your oldest and cheapest inventory first, so you are not forced to sell more expensive, newer inventory when the supply is limited. This can help you maintain lower net income taxes. Inventory costs are decreasing, and your company’s board of directors wants to minimize income taxes.
The inventory method to be used in this situation is LIFO (Last-in, First-out). This method allows you to match the high cost of goods sold (COGS) with the current decreasing inventory prices. This can help you minimize your net income and taxes. Inventory costs are increasing, and the company prefers to report high income.Answer: The inventory method to be used in this situation is FIFO (First-in, First-out). This method allows you to use up your oldest and cheapest inventory first, so you are not forced to sell more expensive, newer inventory when the supply is limited. This can help you report higher net income and taxes. Inventory costs have been stable for several years, and you expect costs to remain stable for the indefinite future.
The inventory method to be used in this situation is the average cost method. This method is used when the cost of inventory is relatively stable and is based on the average cost of inventory purchased during the year.
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What is your understanding the term exchange rate misalignment ?
what could happened to the country if exchange rate is misaligned
???
Exchange rate misalignment refers to a situation where the value of a country's currency, as determined by the foreign exchange market, deviates from its equilibrium level .
Capital flows and financial stability: Exchange rate misalignments can influence capital flows and financial stability. If a currency is perceived as overvalued, it may attract speculative capital inflows seeking to profit from potential currency appreciation. This can create financial market volatility and increase the risk of financial ability.
Macroeconomic adjustment: Exchange rate misalignment may require macroeconomic adjustments to restore equilibrium. For example, a country with an overvalued currency may need to implement policies to boost export competitiveness or reduce imports. Conversely, a country with an undervalued currency may need to address potential inflationary pressures or manage capital inflows.
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China's entry into the World Trade Organization (WTO) in 2001 created more competition between local and foreign firms, and also provided China greater access to the market for exports. This was particularly true in the market for rubber since, at the time, China was the world's second largest consumer of rubber (China is now the world's largest consumer of rubber). Shortly after joining the WTO, China eliminated its import quota on rubber. What impact do you think the import quota reduction likely had on the price of rubber and the quantity of rubber exchanged in China? The price of rubber in China The quantity of rubber exchanged in China What implications do you think the elimination of the quota on rubber had on China's social welfare? Social welfare in China
The reduction of import quotas on rubber in China following its entry into the WTO likely had a significant impact on the price and quantity of rubber exchanged in the country.
With the elimination of import quotas, China experienced increased competition between local and foreign firms in the rubber market. This competition would likely lead to a more competitive pricing environment, potentially driving down the price of rubber in China. Moreover, the increased access to the global market for rubber exports provided China with the opportunity to import larger quantities of rubber, meeting its growing demand as the world's second largest consumer of rubber at the time.
The elimination of import quotas on rubber in China had implications for the country's social welfare. Firstly, the potential decrease in the price of rubber would benefit domestic industries and consumers reliant on rubber as an input, such as tire manufacturers and other rubber-dependent sectors. Lower rubber prices could result in cost savings for these industries, potentially leading to increased production and competitiveness. Additionally, lower rubber prices could translate into more affordable goods and services for consumers, contributing to improved living standards and higher purchasing power.
However, it is important to note that the impact on social welfare would not be uniform across all stakeholders, as some domestic producers may face increased competition and potential challenges in adjusting to the changing market dynamics.
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The traditional promotion mix for a firm consists of the:
A) strategic mix of price, product, place and advertising.
B) advertising, personal selling, public relations, and sales promotion used to reach a target market.
C) marketing intermediaries employed by the firm to create a supply value chain.
D) various types of advertising media the firm selects to reach each specific target market.
The correct answer is B) advertising, personal selling, public relations, and sales promotion used to reach a target market. The traditional promotion mix for a firm typically includes these elements to effectively reach and communicate with the intended target market.
To accomplish a certain marketing objective, a promotional mix combines marketing strategies such as direct marketing, sales, public relations, and advertising. Usually, the promotional mix is just a small component of the overall marketing mix. You could decide to employ a couple of the strategies or that a mix of them all might work best for your campaign. A promotional mix is necessary for a successful marketing plan.
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The traditional promotion mix for a firm includes four elements: advertising, personal selling, public relations, and sales promotion. Each has a specific role in marketing a product or service to the target market.
Explanation:The traditional promotion mix for a firm typically consists of four elements: advertising, personal selling, public relations, and sales promotion. To elaborate, advertising can take many forms, including print, TV, radio, and online ads, all with the purpose of spreading awareness about a product or service. Personal selling involves direct contact between a sales representative and a potential customer, usually through activities such as sales calls or face-to-face meetings. Public relations involves using media and communications to maintain and manage a positive image and relationship with the public. Lastly, sales promotion includes activities such as discounts, special offers, and giveaways to incentivize sales temporarily.
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Under the Comprehensive Motor Vehicle Insurance Reparations Act, rehabilitation is: A. Included as a medical expense B. Included as a loss of earnings modifier 1. Included as an other expense D. Not covered
Under the Comprehensive Motor Vehicle Insurance Reparations Act, rehabilitation is included as a medical expense. The correct answer is option A.
Comprehensive Motor Vehicle Insurance Reparations ActThe Comprehensive Motor Vehicle Insurance Reparations Act, commonly known as the "no-fault law," was passed in 1974. It mandated that anyone who is injured or suffers property harm in a car accident, regardless of fault, is entitled to benefits.
According to this act, a person who is injured in a car accident must collect first-party benefits from his or her insurance provider, regardless of who is responsible for the accident. This provides coverage for medical care, loss of earnings, rehabilitation expenses, and other associated expenses related to the car accident. This act necessitates that insurance companies give a minimum of $50,000 per person in personal injury protection benefits. The rehabilitation services are included in the personal injury protection benefits of the Comprehensive Motor Vehicle Insurance Reparations Act.
As a result, the answer to the given question is A. Rehabilitation is included as a medical expense under the Comprehensive Motor Vehicle Insurance Reparations Act.
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Which of the following is true about B2C buyers?
Group of answer choices
Purchase can be in millions or billions of dollars.
Makes buying decisions for companies that serve a lot of consumers.
One buyer, and may include some influences or other users.
There are 500,000 B2C businesses and organizations in the U.S.
They are concentrated in areas based on cost, access, availability of resources to produce products or services.
The true statement about B2C buyers among the options provided is: One buyer, and may include some influences or other users.
B2C (Business-to-Consumer) buyers typically refer to individuals or households who purchase goods or services for personal use. Unlike B2B (Business-to-Business) buyers who make buying decisions on behalf of companies, B2C buyers are individual consumers. While there may be influences or other users involved in the decision-making process (such as family members or friends), ultimately, there is one primary buyer who makes the purchasing decision.
The other statements provided in the options are not accurate descriptions of B2C buyers. B2C purchases can vary in value, but they are not necessarily in the range of millions or billions of dollars. B2C buyers do not make buying decisions for companies that serve a lot of consumers; that would fall under B2B transactions. The number of B2C businesses and organizations in the U.S. being 500,000 is not a universally true statement. Lastly, B2C buyers are not concentrated in specific areas based on cost, access, or availability of resources to produce products or services; their location can be diverse and widespread.
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If a project has an initial outay of $45,000 and cash flows of $13,000 per year for the next 5 years, what is the IRR of the project? (Answer to the nearest tenth of a percent, e.g. 12.3).
If a project has an initial outlay of $45,000 and cash flows of $13,000 per year for the next 5 years then, the IRR of the project is 15.6%.
To calculate the Inner Rate of Return (IRR) of a venture, we got to discover the discount rate that produces the present value of money streams rise to the beginning cost. In this case, money streams are $13,000 per year for 5 a long time and the starting cost is $45,000.
Utilizing a budgetary computer program or a budgetary calculator is able to illuminate this condition to discover the IRR. The IRR for this extension is roughly 15.6% (adjusted to the closest tenth of a percent).
thus, the IRR of the extent is roughly 15.6%.
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Jason Stedman is the director of finance for Burton Manufacturing, a U.S.-based manufacturer of handheld computer systems for inventory management. Burton's system combines a low-cost active tag that is attached to inventory items (the tag emits an extremely low-grade radio frequency) with custom designed hardware and software that tracks the low-grade emissions for inventory control. Burton has completed the sale of an inventory management system to a British firm, Pegg Metropolitan (UK), for a total payment of £1,900,000.
The exchange rates shown as:
student submitted image, transcription available below
were available to Burton on the dates shown, corresponding to the events of this specific export sale. Assume each month is 30 days.
a. What will be the amount of foreign exchange gain (loss) upon settlement?
b. If Jason hedges the exposure with a forward contract, what will be the net foreign exchange gain (loss) on settlement?
c. If Jason hedges the exposure with a forward contract purchased on the date the contract is signed, what will be the net foreign exchange gain (loss) on settlement?
a). Therefore, the amount of foreign exchange gain upon settlement is $76,000. b). the settlement amount will remain the same as agreed upon in the forward contract. c). settlement will still be zero.
(a) To calculate the amount of foreign exchange gain or loss upon settlement, we need to determine the difference between the exchange rate at the time of the sale and the exchange rate at the time of settlement.
Given:
Sale Amount: £1,900,000
Exchange Rate at the Time of Sale: £1 = $1.51
Exchange Rate at the Time of Settlement: £1 = $1.47
Foreign Exchange Gain/Loss = (Settlement Amount - Sale Amount) in USD
First, let's convert the sale amount to USD:
Sale Amount in USD = £1,900,000 * $1.51
= $2,869,000
Now we can calculate the foreign exchange gain/loss:
Foreign Exchange Gain/Loss = ($2,869,000 - $2,793,000)
= $76,000
Therefore, the amount of foreign exchange gain upon settlement is $76,000.
(b) If Jason hedges the exposure with a forward contract, the net foreign exchange gain/loss on settlement will be zero. This is because a forward contract allows Burton Manufacturing to lock in a specific exchange rate at the time of signing the contract.
Regardless of any subsequent changes in the exchange rate, the settlement amount will remain the same as agreed upon in the forward contract.
(c) If Jason hedges the exposure with a forward contract purchased on the date the contract is signed, the net foreign exchange gain/loss on settlement will still be zero.
The forward contract locks in the exchange rate at the time of signing, which ensures that the settlement amount remains the same regardless of any subsequent changes in the exchange rate. Therefore, there will be no foreign exchange gain or loss upon settlement.
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Which of the following is not an action of a fiscal expansion?
an increase in interest rates to stimulate consumption.
an increase in government spending on public infrastructure.
an increase of unemployment benefits to eligible job seekers.
an increase in subsidy payment for small-sized businesses.
tax cuts for low income earners.
Fiscal expansion refers to the implementation of government policies aimed at increasing aggregate demand and stimulating economic growth. An increase in interest rates to stimulate consumption is not an action of fiscal expansion.
Fiscal expansion typically involves increasing government spending, reducing taxes, or providing economic incentives. However, an increase in interest rates is a monetary policy tool used by central banks to control inflation and manage the overall economy. It falls under the realm of monetary policy rather than fiscal policy.
The other options listed—increasing government spending on public infrastructure, increasing unemployment benefits, increasing subsidy payments for small-sized businesses, and tax cuts for low-income earners—are examples of actions associated with fiscal expansion. These measures aim to boost government spending, support individuals and businesses, and provide economic stimulus during periods of economic downturn or recession.
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Tick the correct alternative(s), (more than one may be correct), or write your answer in the space provided. C, I, G are consumption, investment and government expenditures. Unless otherwise stated, assume the behavioural assumptions discussed in the lectures For all questions involving an exogenous change, assume that the only exogenous change is the one specified in the question.
G will change if the government
(a) purchases more goods
(b) increases old age pensions
(c) sells off (the previously government owned) British Steel.
The correct alternative that will change government expenditures (G) is (b) increases old age pensions.
Government expenditures (G) represent the amount of money spent by the government on goods, services, and programs. In this case, the question asks which alternative(s) would lead to a change in government expenditures.
Option (a) mentions purchasing more goods. While government expenditures do include spending on goods and services, the question doesn't specify any exogenous change in the context of increased government purchases of goods, so it cannot be determined if this would result in a change in government expenditures.
Option (b) states increasing old age pensions. This is a specific government program that provides financial support to elderly individuals. If the government increases the amount allocated to old age pensions, it would result in a direct change in government expenditures. This increase in spending on old age pensions represents a portion of government expenditures.
Option (c) mentions selling off previously government-owned British Steel. Selling off assets, such as British Steel, is typically considered a revenue-generating activity rather than an expenditure. While it may impact the government's overall budget, it does not directly affect government expenditures.
Therefore, the correct alternative that will change government expenditures (G) is (b) increases old age pensions.
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