If people decide to hold more currency relative to deposits, the money supply. Unemployment that results because the number of jobs available in some labor markets may be insufficient to give a job to everyone who wants one is called, Wages in excess of their equilibrium level help explain. Default Risk: The risk that the bond issuer will fail to make payments of interest or principal Higher the risk of default, the higher the risk premium will be Partially determined by a bond rating by a rating agency Liquidity: Investors value liquidity of investments, and as such would be willing to accept lower interest rates for more liquidity. The sum of the marginal benefit or demand curve should slope downward from left to right and intersect the marginal cost above eight hours of daily operation. How does this situation illustrate the effects of policy lags on monetary and fiscal policy? \text{Human resources (HR)} & \text{800} & \text{2,000} & \text{2,800}\\ Affect interest rates? Which of the following shifts the short-run aggregate supply curve right? (p. 160). Distinguish between the real risk free rate of interest, and the nominal (quoted) risk free rates of interest. $$ Initial public offerings (IPOs) tend to occur more frequently during bearish (weak) stock markets. Our professionals at.. Media industry has been witnessing a accelerating growth these days. As investors shift between markets and risk, risk premium affects interest rates because of the shift in supply/demand and shifts in funds. Explain what happens to each of these in the following scenarios. What happens when expected inflation increases or decreases? Congress was unable to agree on a program to help stimulate the economy until March 2002. All 200,000 car seats were inspected last year, and 5% were found to have problems with the stitching. a. lowers the discount rate. If a central bank acts as a Lender of Last Resort under a fixed exchange rate regime, why are reserves at risk. You would refer to a(n) _____ to find the quantity that a person would purchase at each price that could be offered in a market. Name at least three goods that could be bought as complements to hamburgers. Which of the following is correct? Long-term bonds are exposed to interest rate risk because as pricing of LT bonds decline as interest rates rise. There is evidence that the rate at which money changed hands rose during the German hyperinflation. \text{Information Technology (IT)} & \text{\$1,200} & \text{\$4,000} & \text{\$5,200}\\ The steps required to formulate fiscal policy are: The short-run aggregate supply curve is horizontal because wages and prices are assumed to be fixed. c. there is a trade surplus and Y > C + I + G. Other things the same, if a country has a trade deficit and saving rises. Interest is due at a fixed rate that is payable annually, semiannually, or quarterly over the life of the bond. b. decreased, so they decrease production. Other things the same, a decrease in the U.S. interest rate. B. What are national saving and investment for this country? What happens to market-clearing, or equilibrium, interest rates in a capital market when the supply of funds declines? Other things the same, if workers and firms expected inflation to be 2%, but it is only 1% then, A decrease in the expected price level shifts short-run aggregate supply to the. Which of the following should it do? a. If purchasing-power parity holds, then the value of the. \text{Department} & \text{IT Hours Used} & \text{Number of Employees}\\ Other things the same, as the maturity of a bond becomes longer, the bond will pay. Depends on MRP, expected inflation, default risk, liquidity. Explain. Our industry-specific experience, commitment to quality and in-depth knowledge in technology has empowered us to deliver superior services across multiple industries such as healthcare, ecommerce, media, retail, travel, food, logistics, real estate, finance and bank. How many of those in the sample would you expect to name chocolate? b. If investors believed that capital taxes would remain low, how would the governments action affect the level of investment? The consumer price index (CPI) is generally assumed by economists to: the group of 3 economists appointed by the president to provide fiscal policy is called the what. a. your nominal wage increase. d. Numerous students graduate from college and immediately begin new jobs. Ignoring brokerage fees, Nancy will. In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy? Wondering how to get your business idea off on the right foot in the competitive..Learn More, Are you looking for a digital partner for your agency? The coupons are, in effect, checks payable to the bearer. If the governments expenditures exceeded its receipts, it would likely. More risky than short-term bonds and so pay higher interest. No record of the owner's identity is kept by the corporation. d. both of them could be telling the truth if the labor force grew faster than employment. b. households want to lend more, so the interest rate falls, making the quantity of goods and services demanded rise. If the price paid is less than the carrying amount of the bonds at retirement the company records a gain on retirement of bonds. The GDP deflator is NOT a fixed-quantity price index, but the CPI is. 2. According to purchasing-power parity, if prices in the United States increase by a larger percentage than prices in Poland, then. \begin{matrix} 2. d. and the labor-force participation rate are both unaffected. Backed with rising consumer demands.. Bob is looking for work after school, but everywhere he fills out an application, the managers say they always have a lot more applications than open positions. Bonds issued at one time but payable over a period of years, Bonds that give the owner the right to convert the bonds into common stock under specified conditions, Bonds that allow the issuing corporation to require the holder to surrender the bonds for payment before their maturity date. Identify total cost of quality by category (appraisal, internal failure, and external failure). The nominal exchange rate. The problem can usually be detected and repaired during an internal inspection. A prospectus discloses information about a company's earnings, assets, and liabilities (T/F). 3. C. Capital will flow into Northlandia. d. purchases or by lowering the discount rate. A recent survey, 35 percent indicated chocolate was their favorite flavor of ice cream. The Fed could lessen the impact of this by buying Treasury bonds. $$ Inspection costs $5.00 per car seat, and repairs cost$1.00 per car seat. If a country has negative net capital outflows, then its net exports are. d. A recession in other countries reduces U.S. net exports so that U.S. aggregate demand shifts left. Explain. b. increases the interest rate and so investment spending decreases. In which of the following situations must national saving rise? Other things the same, if the price level is lower than expected, then some firms believe that the relative price of what they produce has. If your nominal wage rose by a greater percentage than the price level, then your real wage also increased. d. fell. A graph showing the relationship between bond yields and maturities. How does a strong dollar affect you? Tom has a law degree. If the natural rate of unemployment is 5.2 percent and the actual rate of unemployment is 5.7 percent, then by definition there is. What key assumptions underlies the pure expectation theory? How do maturity risk premiums affect the yield curve? How does a weak U.S. dollar affect you as a consumer? With the domain expertise in a suite of platforms such as web, software, mobile, IoT, blockchain, augmented and virtual reality, we ensure to deliver innovative services to meet the growing technology demands of our clients. a. (a) Describe the two issues that the Panic of 1907 forced the nation's banking system to address. President Bigego is running for re-election against Senator Pander. Bonds for which property is pledged to secure the claims of bondholders, Bonds secured by the pledge of securities, such as stocks or bonds of other companies. Briefly explain why bonds that have the same maturities often do not have the same interest rates. b. increases in the profitability of capital due perhaps to technological progress. Several firms have made him offers, but he thinks he might be able to find a firm where his talents could be put to better use. Other states do not. In your opinion, which statistic is the more meaningful gauge of how well the economy is doing? A country has $1.5 billion dollars of domestic investment and net exports of $2 billion. He knows that the state sales tax rate is 4.22 percent. Shipping costs are $8.00 per car seat, and repair costs are$1.00 per car seat. \text{Shoes} & \text{7,920} & \text{176}\\ Does the interest rate on a T-bond include a default risk premium? f. Advances in healthcare prolong the life of many retirees. If inflation rate is expected to remain constant at the current level in the future, would the yield curve slope up, slope down, or be horizontal. If these persons were counted as employed, then. Derek decides to forego a major appliance purchase and save the money. Both domestic investment and net capital outflow increase. Briefly explain what the term structure of interest rates is. d. M1 decreases by $2,100 and M2 stays the same. The following shows costs (in thousands) for each manufacturing facility and for each support department. Today, she sold her albums at a garage sale for$100. What accounts for the difference? What can the government do to increase the credibility of announced policy changes? The store originally decided on LIFO because of its tax advantages. However, soon after they made this decision, both the interest rate and the cost of building the store changed. Horngren's Cost Accounting: A Managerial Emphasis, Frank Hodge, Patricia A. Libby, Robert Libby, Fundamental Financial Accounting Concepts, Alvin A Arens, Mark A Beasley, Randal J Elder, Jocelyn sells short 1000 shares of JKLO stock at $31.25 per share and six months later purchases the shares at $29 each. Make Daspal your technology partner to bring innovative ideas into reality. The problem of time inconsistency applies to fiscal policy as well as to monetary policy. Which of the following is a cause of frictional unemployment? Other things the same, an increase in the price level makes the dollars people hold worth. Other things the same if reserve requirements are decreased, the reserve ratio. c. Numerous students graduate from college but cannot find work. Your boss gives you an increase in the number of dollars you earn per hour. c. real exchange rate is equal to one. Unregistered bonds that have coupons attached for each interest payment; also called bearer bonds. If saving is greater than domestic investment, then. Other things the same, the unemployment rate. When the Bank of Canada conducts open market purchases, It buys treasury securities, which increases the money supply. Copyrights 2021. This increase in pay makes. a. both the unemployment rate and labor-force participation rate would be higher. The numbers are not favorable. If Sportz no longer operated its own IT department, 30% of the fixed cost of the IT department could be eliminated. C. unit-inelastic demand. In general, as a person includes fewer stocks and more bonds in his portfolio, Abby buys health insurance because she knows that she has health risks that wouldn't be obvious to an insurance company. A loan agreement the store has with its bank, its prime source of financing, requires the store to maintain a certain profit margin and current ratio. Explain. In the special case of the 100-percent reserve banking the money multiplier is, A central bank can decrease the money supply by conducting open-market. Should Sportz outsource its IT services? c. both structural unemployment and the natural rate of unemployment. The only way the store can meet the required financial ratios agreed on with the bank is to change from LIFO to FIFO. Maturity Risk Premium always increases with maturity. Which of these is NOT one of the benefits that depository institutions (such as banks) offer society? Both frictional and structural unemployment. what term refers to those who link the buyers and sellers of stocks, earning a profit by collecting a commission on each transaction. Who makes the decisions in free market economy, True or False: The mix of variable costs and fixed costs that a business faces affects the way the business operates, profit motive, open opportunity, legal equity, private property rights, free contract, voluntary exchange. In doing so, April will. Original capitalized value of the asset minus any depreciation/amortization/depletion. How doe the Fed stimulate the economy? How does positive expectations of future markets effect the Loanable funds market? . If the price of ice cream cones rises, to maintain the real value of her money holdings she needs to hold more dollars. As a result of this transfer by itself. Suppose also that the price elasticity of demand for cigarettes is 1.2 and the price elasticity of supply is 0.7. The owners and their accountants decided that this was the profitable thing to do. April, who currently owns stock in four companies, has decided to expand her portfolio by purchasing stock in virtually every company that sells stock. d. rises. A. Does the Fed have complete control over U.S. interest rates? In which of the following cases is the present value of this payment the lowest? You conclude that. The store is at the end of its second year of operation and is struggling. A dollar buys as many goods in the U.S. as it does overseas. Many years ago, Peggy paid $500 to put together a record collection. The income statement for Electronic Wonders reports net sales of $91,758 million and cost of goods sold of$69,278 million. The long-run, but not the short-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables. What system ensures a proper balance between the amount of money banks can loan and funds available to cover consumer withdrawals. b. a good must sell at the same price at all locations. Interest rates on bonds of all maturities ten d to rise and fall together. Prices in both the U.S. and China rise, but prices in China increase by a smaller percentage. Daspal Technology Services. Compared to stocks, bonds offer the holder. Matilda just graduated from college. The number of goods you give up is a real value. A central bank increases the reserve requirement, but it wants to offset the effects on the money supply. The relationship among the interest rates on bonds that are otherwise similar but that have different maturities. Which of the following shifts aggregate demand to the left? The other 2.5% will be detected after car seats are sold and shipped. \text{Human resources} & \text{6,000} & \text{-}\\ How do risk and inflation impact interest rates in the economy? Starting a new venture? b. Creditors must be paid in full before stockholders can receive anything. What is a yield curve, and what information would you need to draw this curve? Consequently, people wanted to hold relatively more in currency and relatively less in. 1. What is its saving? d. neither frictional nor structural unemployment, Minimum wages create unemployment in markets where they create a. d. surplus of labor. Government policy can also influence allocation of capital and the level of interest rates. Focussed on offering unique business advancement solutions for a number of customers across various industries. In order to devote all her efforts to college, she didn't hold a job. Allow people with small amounts of money to diversify, Year-to-year fluctuations of unemployment around its natural state, Number of people employed plus the number of people unemployed, Which f the following would be counted as unemployed according to official statistics, A person is counted as unemployed by Statistic Canada is, Statistics Canada defines the unemployment rate as the percentage of, Adults have higher labour force participation rates and lower unemployment rates than do teenagers. Unemployment would decrease and prices increase if. Bonds issued to a party whose name is listed in the corporation's records. Sportz, Inc., manufactures athletic shoes and athletic clothing for both amateur and professional athletes. a. b. increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public. Molly holds $60. In the first year of operations, the store assigned inventory costs using LIFO. 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