Answer:
$8,500 and $1,500
Explanation:
The computation of the corrected amount for the cost of goods sold and the gross profit is shown below:
Since the ending inventory is overstated by $500 that means it is extra added so we deduct this amount from the ending inventory i.e
= $2,000 - $500
= $1,500
Now the cost of goods sold is
= Sales revenue - ending inventory
= $10,000 - $1,500
= $8,500
And, as we know that
Gross profit = Sales revenue - the cost of goods sold
= $10,000 - $8,500
= $1,500
Michael is the owner of a restaurant in downtown Buffalo and recently signed a long-term lease with the building's owner. Since Michael will be staying in his current location for the long-term, he decides to install new commercial ovens and dishwashers. These installations are examples of what...? Trade Fixtures Interim Fixtures Installations Real Property
Answer:
The answer is trade fixtures
Explanation:
Trade fixtures are a tenant's installments which become a part of the land during the leasing contract period but they are not belong to the landlord thereafter. The tenant reserves the right to remove the the installments at the end of the contract term.
Answer:
A. Trade Fixtures
Explanation:
Trade Fixtures are the pieces of property installed by a business tenant in a leased building to help him run his business. The pieces of equipment could be equipment or installations that are useful in the running of the business. The tenant or business owner should ensure that whatever equipment he installs in the property can be easily detached because failure to do so would make the fixture become the landlord's own.
Examples of trade fixtures could be counters installed in the building, or even show glasses constructed to showcase goods. He should ensure that these properties can be moved when he eventually leaves the building.
Tapestry Corporation will spend $1 million for special production equipment. Shipping and installation charges will amount to $175,000 and an initial increase in net working capital of $50,000 will be required. The equipment will replace an existing machine that has a salvage value of $85,000 and a book value of $100,000. Executives expect revenue to increase by $200,000 per year with no increase in operating expenses. If Tapestry has a corporate tax rate of 21%, what is the amount of the initial outlay for this project?
Answer:
($1,136,850)
Explanation:
The computation of the initial outlay is shown below:
Purchase price (-1,000,000 - $175,000) (1,175,000) (A)
machine proceeds
{$85,000 + ($100,000 - $85,000) × 0.21} $88,150 (B)
Net working capital ($50,000) (C)
Initial outlay ($1,136,850) (A - B + C)
Hence, the initial outlay is ($1,136,850)
We basically applied the above calculation to arrive at the answer
Ethan’s job as an accounting assistant was recently modified to include reconciling bank accounts and making deposits, two tasks previously done by the accounting manager. This increase in responsibility would best be described as job
Answer: enrichment
Explanation:
Job enrichment is when new dimensions are added to the job of an employee at an organization. Job enrichment can include adding extra work, creating autonomy, increasing skill variety, etc.
This is shown in the above analysis as Ethan has been giving more task that what he normally does.
Muy Bueno Bakery Company sells three different products. Currently they are not able to meet all of their customers' demand. Using the following information, determine the most profitable product. Cake Pie Cookies Contribution margin $18 $11 $3 Production hours 3 1 .30 a.Cake b.Cookies c.Pie d.Cookies and Pie are the same
Answer:
c. Pie
Explanation:
In order to determine which product is the most profitable, we must calculate the contribution margin per hour:
Cake Pie Cookies
contribution margin $18 $11 $3
production time 3 1 .30
contribution margin p/hour $6 $11 $10
Pie is the most profitable product, followed by cookies, and cakes are the less profitable products.
Bonnie's Ice Cream is expecting its ice cream sales to decline due to the increased interest in healthy eating. Thus, the company has announced that it will be reducing its annual dividend by 2 percent a year for the next five years. After that, it will maintain a constant dividend of $2 a share. Last year, the company paid $2.35 per share. What is this stock worth to you if you require a 9.5 percent rate of return
Answer:
the stock worth is $21.90
Explanation:
Given that;
A company announced that it will be reducing its annual dividend by 2 percent a year for the next five years.
and after that it will maintain a constant dividend of $2 a share.
Also last year, the company paid $2.35 per share.
The objective is to determine the stock worth if there is a requirement of 9.5 percent rate of return.
The price of the stock = $2/0.095
The price of the stock =21.0526
The stock worth is the present value of the price which can be expressed as:
[tex]P = (2.35 \times (1 - 0.02)) \begin {pmatrix} \dfrac{1 - (\dfrac{1 + (-0.02) }{1+0.095})^5 }{0.095-(-0.02)} \end {pmatrix}+ \dfrac{21.0526}{(1+0.095)^5}[/tex]
[tex]P = (2.35 \times (0.98)) \begin {pmatrix} \dfrac{1 - (\dfrac{0.98}{1.095})^5 }{0.115} \end {pmatrix}+ \dfrac{21.0526}{(1.095)^5}[/tex]
[tex]P = (2.303) \begin {pmatrix} \dfrac{1 - (0.894977)^5 }{0.115} \end {pmatrix}+ \dfrac{21.0526}{1.574}[/tex]
[tex]P = (2.303) \begin {pmatrix} \dfrac{1 -0.574195 }{0.115} \end {pmatrix}+ \dfrac{21.0526}{1.574}[/tex]
[tex]P = (2.303) \begin {pmatrix} \dfrac{0.425805 }{0.115} \end {pmatrix}+ \dfrac{21.0526}{1.574}[/tex]
[tex]P = (2.303) (3.702652174)+ \dfrac{21.0526}{1.574}[/tex]
[tex]P = 8.5272+ \dfrac{21.0526}{1.574}[/tex]
P = $21.90
Therefore , the stock worth is $21.90
To create a competitive advantage through superior efficiency, an organization must make products that are much more reliable than other available products in the market. reduce the number of inputs it requires to produce a given amount of outputs. use technology to make its product unique and different than other products in the market. conduct surveys to determine whether a product will be successful in the market. create products that will attract customers and charge a premium price for those products.
Answer:
Reduce the number of inputs it requires to produce a given amount of outputs
Explanation:
Efficiency simply means producing more with less resources. In other words an organization or a business that is able to produce high quality products or output and spend less in producing these products is highly efficient and more likely to have superior efficiency to other companies making same product. A business that has competitive advantage by superior efficiency is able to sell at cheaper prices than other businesses in the market since it spends less and can afford to fix lower prices for it's products
Fifty years ago, a high school diploma was the minimum requirement for entry to the paid labor force in the US. Today a college degree is virtually the bare minimum. This change reflects the process of
Answer: Credentialism
Explanation:
Credentialism is when credentials that are given by professional bodies, educational institutions etc are being relied upon and used as qualifications to know if someone can do a particular job or not.
Fifty years ago, a high school diploma was the minimum requirement for entry to the paid labor force in the US. Today a college degree is virtually the bare minimum. This change reflects the process of credentialism.
According to the video which abilities and skills do human resources managers need to have
Answer:
in depth knowledge of the companys product,
Explanation:
everything else isn't needed
The answers are C,D,E
Sensitivity to other people's needs
Speaking Skills
Writing Skills
An item was shipped from a supplier under FOB shipping point. The invoice in the amount of $2,000 included payment terms of 2/10, n/30. When the invoice was paid, a purchase discount in the amount of $40 was taken. Other details relating to the purchase of this item included the following: shipping charges of $300, storage fees of $50, and insurance premium of $100. The cost of this inventory item is
Answer:
Cost of inventory = $2,410
Explanation:
The payment terms 2/10, n/30 implies that if the Company pays within te next 10 days of purchase, it will receive a discount of 2% of the net invoice amount and that the latest date for the settlement of bill is within the next 30 days of purchase.
The cost of the inventory would be the sum of the next purchase cost , shipping charges, storage fees and insurance fee
Net purchase cost net of discount = 2,000 - 40= 1,960
Cost of inventory= 1,960 + 300 + 50 +100 =$2410
Cost of inventory = $2,410
Erin works for a dry-cleaning company that has a contract with the U.S. government. To save on cleaning fluid, her boss orders her to wash some clothes that are supposed to be dry-cleaned in a washing machine. When the courier hired to pick up the cleaned garments arrives, Erin tells him about her boss's actions. Erin tells no one else about what is going on and is later fired. Erin
Answer: Failed to informed the proper party
Explanation:
When negligence of the right deeds to be done in an organization is osetved by an individual working their, it is right report the situation that occurred to the right authority so that the right action would be taken which will not endanger the reporting individual or harm his employment in the organization. Erin's situation will be taken with kids glove due to she failed to report the situation to the appropriate party for investigations to be carried out.
Which choice below shows all accounts that appear on the balance sheet? Multiple Choice Owner's Capital, Prepaid Insurance, Unearned Revenue, and Accumulated Depreciation Owner's Withdrawals, Service Revenue, Supplies, and Unearned Revenue Cost of Goods Sold, Land, Accounts Payable, and Sales Discounts
Answer:
The answer is:
. Owner's Capital
2. Prepaid Insurance
3. Unearned Revenue
4. Accumulated Depreciation
5. Land
6. Accounts Payable
Explanation:
Balance sheet also known financial position of a business contains asset, liability and equity.
The following accounts(from the question) will be found in the balance sheet.
1. Owner's Capital( Found under Equity)
2. Prepaid Insurance( under asset)
3. Unearned Revenue(under liability)
4. Accumulated Depreciation(under asset)
5. Land(under asset)
6. Accounts Payable(under liability)
Tech giant, TimeHop was concerned about creating a workspace that was inviting and encouraged collaboration. Knowing that most of its employees would work odd hours, there was care taken to lighting choices and types of furniture. TimeHop was concerned with
Answer:
physical design
Explanation:
TimeHop was concerned about creating a workspace that was inviting and encouraged collaboration and here TimeHop was concerned with physical design because the reason for this is the the firm tailored their work space to the needs of employees thus being concerned with physical designso answer is physical designA manufacturer of hospital supplies has a uniform annual demand for 80,000 boxes of bandages. It costs $10 to store one box of bandages for one year and $160 to set up the plant for production. How many times a year should the company produce boxes of bandages in order to minimize the total storage and setup costs?
Answer:
50 times
Explanation:
For the computation of the number of times company should produce a year first we need to determine the EOQ which is shown below:-
[tex]EOQ = \sqrt{\frac{2\times Annual\ demand\times Ordering\ cost\ per\ order}{Holding\ cost} }[/tex]
[tex]= \sqrt{\frac{2\times 80,000\times \$160}{\$10} }[/tex]
= [tex]\sqrt{\frac{25,600,000}{10} }[/tex]
= 1,600
Now,
we will assume a number of times in a year is x, so that the company manufacture bangles
[tex]x = \frac{Annual\ demand}{EOQ}[/tex]
= [tex]\frac{80,000}{1,600}[/tex]
= 50 times
Therefore for computing the number of times the company should produce a year we simply applied the above formula.
A system of accounts that measures the transactions of goods, services, income, and financial assets between domestic households, businesses, and governments and residents of the rest of the world during a specific time period is the
Answer:
Balance of Payments
Explanation:
The balance of payment refers to the statement in which all the transactions i.e lies between the entities for one country and the remaining word for a given period of time like quarterly yearly, monthly, annually, etc
Here in the given situation, the system of accounts that determine the transactions related to the goods, services, etc for a specific period of time is known as the balance of payments and the same is to be considered
All duties required by the stairway and ladder rules must be performed _______ employees begin work that requires them to use stairways or ladders and their respective fall protection systems.
Answer:
Before.
Explanation:
In work related environments, stairways and ladder systems are generally considered to be the major source of fatalities, injuries or bodily harm being experienced by the workers who are working in construction sites.
According to the Occupational Safety and Health Administration (OSHA), all duties required by the stairway and ladder rules must be performed before employees begin work that requires them to use stairways or ladders and their respective fall protection systems.
This ultimately implies that, before any employee commences a work that requires the use of a stairway or ladder, all of the guidelines, rules and standard procedures should have been followed or done.
Kirk Custodial Service and Green Energy Company enter into an oral contract under which Kirk agrees to provide custodial service for Green's facilities for two years. This contract is enforceable by
Answer: D) none of the choices.
Explanation:
None of the choices listed can enforce the contract. Contracts are made as a legal requirement for parties to fulfil the duties that they promised they would in an agreement.
As such, the legality and obligations of the contract can be enforced by the Courts who preside over legal matters. Parties cannot do this as they lack the necessary legal authority.
Tariffs Group of answer choices may be imposed either to raise revenue (revenue tariffs) or to shield domestic producers from foreign competition (protective tariffs). are per-unit subsidies designed to promote exports. are excise taxes on goods exported abroad. are also called import quotas.
Answer:
imposed either to raise revenue (revenue tariffs) or to shield domestic producers from foreign competition (protective tariffs).
Explanation:
A tariff is a compulsory sum levied on the importation of goods. the purpose of tariffs is either to raise revenue (revenue tariffs) or to shield domestic producers from foreign competition (protective tariffs). by imposing tariffs, imported goods become more expensive. this discourages importation and encourages individuals to patronise locally produced goods.
what general political Trend coincided with the significant increase in private and corporate spending
What general political trend coincided with a significant increase in private and corporate spending in political campaigns at the turn of the 21st-century
Answer:
A withdrawal of people from the public sphere
Explanation:
At the beginning of 21-century or the new millennium, various research have shown that, coupled with the advent of the internet fair loss of interest in active politics by the general populace, a larger percentage of the general public has withdraw from the public space in terms of politics. This has led to substantial increase in private and corporate spending in political campaigns at the turn of the 21st-century.
Hence, the right answer is: A withdrawal of people from the public sphere
• risk free rate: 1.75%
• expected rate of return for the market: 9.5%
• Beta of VZ (you need to research this factor)
• VZ total debt, interest and shares issued can be found in VZ financial statements
• assume market value of all debt is 100% of face(par) value.
• tax rate is 20%
• VZ stock price: $55
• initial investment: 4,500,000
• year 1 cash flow: 1,100,000
• year 2 cash flow: 1,200,000
• year 3 cash flow: 1,350,000
• year 4 cash flow: 1,550,000
• year 5 cash flow: 1,750,000
BASED ON THIS INFORMATION CALCULATE THE FOLLOWING
1. cost of equity
2. after tax cost of debt
3. weighted average cost of capital (WACC)
4. net present value of the investment (NPV)
5. internal rate of return of the investment (IRR)
6. payback period of the investment
Answer:
lol fizzy shook purl p GTG j he
For February, sales revenue is $900,000, sales commissions are 5% of sales, the sales manager's salary is $96,000, advertising expenses are $80,000, shipping expenses total 2% of sales, and miscellaneous selling expenses are $2,100 plus 1/2 of 1% of sales. Total selling expenses for the month of February are
Answer:
$245,600
Explanation:
The computation of Total selling expenses is shown below:-
Particulars Calculation Amount
Sales Commissions ($900,000 × 5%) $45,000
Salary expenses $96,000
Advertising expenses $80,000
Shipping expenses ($900,000 × 2%) $18,000
Miscellaneous selling
expenses ($2,100 + 1 ÷ 2 × $6,600
($900,000 × 1%)
Total Sales expenses $245,600
We simply added all the items
Which type of organzational chart shows the Vice Presidents of Marketing,
Manufacturing, Finance, and Human Resources reporting directly to the
CEO of a company?
Horizontal
Vertical
Functional
Matrix
Answer:
The correct option is;
Vertical
Explanation:
The organizational structure of most business are either vertical or horizontal
The vertical organizational structure is an hierarchical organizational structure where power comes from the top of the organizational chart towards the lower layers of the chart. The chain of command is adhered to and clearly defined designation of authority and responsibility such that the top most executive layers of the chart make decisions which the lower layers collaborate to put into effect.
The funds dispensed at the ATM machine located near the checkout line at the Kroger's in Union Kentucky, follows a normal probability distribution with mean $4200 per day and a standard deviation of $720 a day. The machine is programmed to notify the nearby bank that if the amount dispensed is very low (less than $2500) or very high ($6,000).
a. What percent of the days will the bank be notified because the amount dispensed is very low?
b. What percent of the time will the bak be notified because the amount is very high?
c. What percent of the time will tbe bank not be notified regarding the amount of funds being dispensed?
Answer:
0.00914 ; 0.0062 ; 0.9847
Explanation:
Given the following :
Normal distribution :
Mean(m) = $4200
Standard deviation (sd) = 720
Amount VERY low = < 2500
Amount very high = > 6000
a. What percent of the days will the bank be notified because the amount dispensed is very low?
x < 2500
Finding the z-score :
Z = (x - mean) / standard deviation
Z = (2500 - 4200) / 720
Z = - 1700 / 720 = −2.361111
P(z < −2.361111)
Locating −2.361111 on the z- distribution table
-2.3 under 0.06 = 0.00914
P(z < −2.361111) = 0.00914
B) What percent of the time will the bank be notified because the amount is very high?
x > 6000
Finding the z-score :
Z = (x - mean) / standard deviation
Z = (6000 - 4200) / 720
Z = 1800 / 720 = 2.5
P(z > 2.5)
Locating 2.5 on the z- distribution table = 0.9938
P(z > 2.5) = 1 - 0.9938 = 0.0062
c. What percent of the time will the bank not be notified regarding the amount of funds being dispensed?
P(2500 < X < 6000)
P(2500 < X < 6000)
P(-2.36 < z < 0) + P(0 < z < 2.5)
= 0.4909 + 0.4938
= 0.9847
An asphalt company has a manufacturing plant located in an area that has just been rezoned for residential use. The company is allowed to continue operating the plant under the new zoning classification as a nonconforming use. However, if the plant is destroyed or torn down, the asphalt company MOST likely
Answer:
forbidden to rebuild the plant in that neighborhood under any circumstances
Explanation:
A nonconforming use allows for the use of a property that was allowed under the zoning regulations at the time that it was built, even though it is no longer permitted due to new regulations. In such a case like this one, if the plant is destroyed or torn down, the asphalt company most likely would be forbidden to rebuild the plant in that neighborhood under any circumstances because they would not be able to meet the new zoning requirements.
Home Day is a large supermarket. It recently launched its own brand of cereals called Fast Bites, equivalent to most national brands and also priced slightly lower. Therefore, Fast Bites is an example of a(n)
Fast Bite is an example of a generic brand/store brand.
What is the meaning of Brand?A "brand" is a commercial and marketing concept that helps customers identify a certain business, object, or individual. Brands are immaterial, thus you cannot touch or see them with your hands. As a result, these affect how people perceive various entities, their products, or specific individuals.
A brand is something that is publicly distinguished from comparable products, services, or concepts. This makes it straightforward to communicate and generally advertise. Branding is the process of creating and promoting a company's name, characteristics, and personality.
A brand is a trademark or other designation that sets one company or product apart from others on the market, such as Coca-Cola, Apple, or Ford. The ancient Norse term "brand," which means "to burn," is where the current word "brand" comes from. In the year 950 A.D., a "brand" was a burning chunk of wood. By the 1300s, it was mostly used to refer to a torch, which is just a burning wood piece that serves as a tool.
Learn more about the brand here:
https://brainly.com/question/22068280
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which of these will a filing clerk find most useful in carrying out his Duty
a. computer
b. perforator
Answer:
computer
Explanation:
I Think This will help you
Which of the following is true of an opportunity cost? A. It is the income foregone by not using a resource in an alternative way. B. It is an unavoidable cost that cannot be changed no matter what action is taken. C. The higher the opportunity costs, the lower is the relevant cost. D. It is recorded as an expense in the accounting records.
Answer:
A. It is the income foregone by not using a resource in an alternative way.
Explanation:
Opportunity cost is the income foregone by not using a resource in an alternative way.
Opportunity cost is refers to the value of what you have to give up in order to choose something else. It can also be called REAL COST.
It also refers to the value or benefits of something that must be given up in order to acquire another thing.
Two years ago, a customer purchased 1,000 shares of ABC stock at $45 per share. The stock has appreciated in value and is currently worth $60,000. The company announces that it is spinning off a subsidiary, DEF, to its shareholders. The value of the new company being spun off equals 5% of the old company. The customer will have:___________
Answer:
Explanation:
Spin off can be defined as the splitting of the shares of an existing company in order to form an independent new entities as part of larger business.
In calculating the spill off value of a business ,the aggregate cost of the business is used and not the aggregate cost.
Workings
Shares stock acquired = 1,000
initial share price = $45
Total share value = 45*1000=45,000
Percentage split off to DEF= 5%
Value split off = 5%*45,000 =2,250
Percentage retained in ABC = 95%*5,000
=42,750
Cardiac Science is a California-based company that makes defibrillators,heart monitors,and other medical equipment.It is preparing to market its products in Greece.The company's marketing manager is responsible for the promotional campaign in Greece,and she wants to avoid any problems that might arise because her field of experience does not coincide with that of her Greek target audience.Which of the following is the best example of a communications problem that might arise because her field of experience is different from that of her audience?
A) The name of the product,when translated into Greek,has an unintentional meaning.
B) Her target audience is strongly ethnocentric.
C) The trade journals in which the company wants to run its ads do not accept ads from foreign companies.
D) A Greek bureaucrat who is responsible for determining that the Cardiac Science products meet national standards has taken a personal dislike to her.
E) The ads are in trade journals that Greek hospital administrators don't read.
The correct answer is A) The name of the product, when translated into Greek, has an unintentional meaning.
Explanation:
In business, communication problems can emerge due to a difference in language that prevents the business from communicating appropriately its purpose, name, slogan, and from advertising its products. This mainly occurs if the translation does not reflect the original meaning or there are cultural features that create a barrier.
This situation occurs in "The name of the product when translated into Greek, has an unintentional meaning" because due to the lack of experience of the manager in Greece and the differences in language, she does not know how to communicate in Greek the name of the company, which creates a communicative barrier as Greek customers will not understanding the real meaning of the company.
Sam Consultancy has a large internal project to be initiated. To staff this project, Sam Consultancy is working with People Consultancy to provide three resources for six months. The resources will be part of the team managed by Sam Consultancy for six months. Which contract type should be used by Sam Consultancy?
Complete Question:
Sam Consultancy has a large internal project to be initiated. To staff this project, Sam Consultancy is working with People Consultancy to provide three resources for six months. The resources will be part of the team managed by Sam Consultancy for six months. Which contract type should be used by Sam Consultancy?
Group of answer choices
a. Purchase Order
b. Cost plus Fee
c. Fixed cost
d. Time and Material
Answer:
d. Time and Material
Explanation:
Time and material is a type of contract used mostly for construction or manufacturing services, in which the client pays the contractor's employees (workers) based on the amount of time spent and quantity of materials used for the execution of the project.
Generally, a Time and Material (T&M) is peculiar to projects that cannot be easily estimated by size or duration and when project requirements are likely to be changed.
Hence, a Time and Material (T&M) contract is considered to be more flexible and suitable for a long-term project than a fixed-cost contract.
Consider a small country that is closed to trade, so its net exports are equal to zero. The following equations describe the economy of this country in billions of dollars, where C is consumption, D is disposable income, I is investment, and G is government purchases: C=40+0.9∗DIG=80I=201. Assume that this economy initially has a fixed tax and that net taxes (taxes minus transfer payments are $100 billion. Disposable income is then (Y−100), where Y is the real GDP. Aggregate output demanded is $500 billion (True/False).2. Suppose the government decides to increase spending by $10 billion without raising taxes. Because the expenditure multiplier is 10 (True/False), this will increase the economy's aggregate output demanded by $100 billion (True/False).3. Now, suppose that the government switches to an income tax, which is the type of variable tax, of 20%. Because consumers retain only 80% of each additional dollar of income, disposable income is now 0.80∗Y. In this case, the economy's aggregate output demanded is $500 billion (True/False).4. Given an income tax of 20%, the expenditure multiplier is approximately 3.6 (True/False). Therefore, if the government decides to increase spending by $10 billion without raising tax rates, this would increase the economy's aggregate output demanded by approximately $36 billion (True/False).5. A $10 billion increase in government purchases will have a larger effect on output under a fixed tax of $100 billion (True/False).
Answer:
1. Aggregate output demanded is $500 billion. True.
Aggregate Demand (Y) = C + G + I
Y = 40+0.9∗DI + 80 + 20
Y = 40 + 0.9 ∗ (Y−100) + 80 + 20
Y = 50 + 0.9Y
0.1Y = 50
Y = $500 billion
2. Suppose the government decides to increase spending by $10 billion without raising taxes. Because the expenditure multiplier is 10. True.
Expenditure Multiplier = 1 / ( 1 - Marginal Propensity to Consume)
Marginal Propensity to Consume = 0.9 as per the Consumption function.
= 1/ ( 1 - 0.9)
= 10
2. b. this will increase the economy's aggregate output demanded by $100 billion. True.
Change in Aggregate output = Increase in government expenditure * expenditure multiplier
= 10 billion * 10
= $100 billion
3. ... In this case, the economy's aggregate output demanded is $500 billion . True.
Aggregate Demand (Y) = C + G + I
Y = 40+0.9∗DI + 80 + 20
Y = 40 + 0.9 ∗ (0.80∗Y) + 80 + 20
Y = 140 + 0.72Y
0.28Y = 140
Y = $500 billion
4. Given an income tax of 20%, the expenditure multiplier is approximately 3.6. True.
As a result of the new tax, the MPC will become;
= 0.9 * ( 0.80 * Y)
= 0.72Y.
Expenditure Multiplier = 1 / ( 1 - Marginal Propensity to Consume)
= 1/ ( 1 - 0.72)
= 3.57
= 3.6
4. b. Therefore, if the government decides to increase spending by $10 billion without raising tax rates, this would increase the economy's aggregate output demanded by approximately $36 billion. True.
Change in Aggregate output = Increase in government expenditure * expenditure multiplier
= 10 billion * 3.6
= $36 billion
5. A $10 billion increase in government purchases will have a larger effect on output under a fixed tax of $100 billion. True.
When the tax was fixed, an increase in Government purchases of $10 billion resulted in an increase in Aggregate output of $100 billion. When the Government switched to income taxes however, a $10 billion increase in Government spending led to a significantly lesser increase in Aggregate output of $36 billion.
