Answer:
$200 billion
Explanation:
Okun's law (or rule of thumb) states that for every 1% point drop in unemployment, the total output of the economy will increase by two percent.
In this case, since unemployment varies by 1% (= 5.5% - 4.5%), that would mean that the potential GDP differs in $200 billion (= $10 trillion x 2%) depending on which economist's unemployment estimation we use.
Final answer:
Using Okun's rule of thumb, the difference in potential GDP estimates in a $10 trillion economy due to differing target rates of unemployment of 4.5% and 5.5% would be approximately $200 billion.
Explanation:
Using Okun's rule of thumb, which indicates that for every 1% increase in the unemployment rate, a country's GDP will be an additional roughly 2% less than its potential GDP, we can estimate how two economists' differing views on the target rate of unemployment would affect their estimates of potential GDP.
If one economist believes the target rate of unemployment is 4.5% and another at 5.5%, there is a 1% difference in their views. In a $10 trillion economy, applying Okun's rule of thumb would mean a 2% difference in GDP attributed to the 1% difference in unemployment rates. Therefore, the economist who believes the target rate is 4.5% would estimate the potential GDP to be $200 billion higher than the economist who believes it is 5.5%.
In conclusion, the difference in the economists' estimates of the potential GDP in a $10 trillion economy, due to a 1% difference in the target rate of unemployment, would be approximately $200 billion.
Fiat money has :
A. a great intrinsic value that is independent of its use as money.
B. little to no intrinsic value and is authorized by the central bank or governmental body.
C. value, because it can be redeemed for gold by the central bank.
D. little to no intrinsic value but is backed by the quantity of gold held by the central bank.
Answer: Option (B)
Explanation:
Fiat money is referred to as the currency which tends to have no intrinsic value and thus has been further entrenched as money. This process is often carried out by the federal government. This particular type of money does not tend to have the use of value, and only has the value since the authority i.e. the government tends to maintains its value.
In competitive markets, which of the following is not correct? Group of answer choices No individual buyer can influence the market price. Some sellers can set prices. Firms produce identical products. Buyers are price takers.
In perfectly competitive markets, the following is not correct: Some sellers can set prices. Therefore, the correct option is B.
In a perfectly competitive market, there are many buyers and sellers, and none of them have the ability to individually influence the market price. The price is determined by the interaction of supply and demand forces in the market. Each buyer and seller takes the market price as given and adjusts their behavior accordingly. In competitive markets, the correct statement is that no individual buyer or seller can set prices.
Thus, the ideal selection is option B.
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The complete question might be:
In competitive markets, which of the following is not correct? Group of answer choices
A No individual buyer can influence the market price.
B Some sellers can set prices.
C Firms produce identical products.
D Buyers are price takers.
In competitive markets, the incorrect statement is that 'Some sellers can set prices', as it contradicts the nature of perfectly competitive markets where prices are determined by market forces, making both buyers and sellers price takers.
Explanation:In competitive markets, the statement that is not correct among the given choices is 'Some sellers can set prices'. This is because, in a perfectly competitive market, no individual buyer or seller has the power to influence the market price. The price is determined by the forces of supply and demand in the market, making both buyers and sellers price takers. Firms in such markets produce identical (or highly similar) products, and buyers have to accept the market price, thus cannot influence it either. Therefore, the assertion that some sellers can set prices contradicts the fundamental characteristics of a perfectly competitive market, where the market itself sets the prices.
With the advent of flexible manufacturing technologies and mass customization, establishing manufacturing facilities in each major market in which the firm is active is becoming less attractive.A. True.B. False
Answer:
A. True
Explanation:
As with the increasing modernization the technologies are increasing, which makes it easy to produce what a human desires.
As it is increasing day by day, and the technologies are easily accessible, by many people , there aren't much human interference involved in this. Not much of the efforts of humans are involved. Accordingly, the humans do not carry the old culture and art in such production or manufacturing the products.
Also the marketing in these days is comparatively quite easy, as with the access of internet by huge population.
These things make the efforts of people and manufacturers less attractive and visible.
A government collects $700 billion annually in tax revenue. Each year it allocates $70 billion to the justice system and $130 billion for its own administrative costs. What percentage of annual tax revenue is allocated to these two categories of government spending?
Answer:
% in Justice system: 10%
% in administrative costs: 18.57%
Explanation:
To know the percentage of annual tax revenue allocated to justice system and administrative costs you can use this formula:
%=(quantity/total)*100
"Quantity" in this case refers to the amount of money that government spends on each category. And "total" is the total amount of money that the government collects. Then,
% in Justice system:
($70billion/$700 billion)*100 = 10%
% in administrative costs:
($130 billion/$700 billion)*100= 18.57%
Love Languages is introducing an improved version of its tutoring targeted to students wanting more in-depth assistance using a CD format. The company has decided to continue to offer their original tutoring package and aim the new product at the original target market; therefore they are employing a ____ product strategy.
Answer: Modified product strategy
Explanation:
The modifying product strategy is one of the important strategy in the market as it basically refers to the value adding information and also modification in the existing products.
The modified product strategy also known as the product life cycle where the existing products are get modified according to the new product strategy. By adding various types of features and also improve the performance of the product then it known as the product modification.Therefore, the modified product strategy are used by the company for producing various types of new products and their aim is to produce the new product in the given original target in the market.
An annual report of Ford Motor Corporation states, "Net income a share is computed based upon the average number of shares of capital stock of all classes outstanding. Additional shares of common stock may be issued or delivered in the future on conversion of outstanding convertible debentures, exercise of outstanding employee stock options, and for payment of defined supplemental compensation. Had such additional shares been outstanding, net income a share would have been reduced by 10¢ in the current year and 3¢ in the previous year. As a result of capital stock transactions by the company during the current year (primarily the purchase of Class A Stock from Ford Foundation), net income a share was increased by 6¢."
What information is provided by this note?
Answer:
The main information given by this statement is that the net income per share has increased by 6¢ a share.
All the other stuff about the decision of not issuing new stock because it would lower net income per share is just a probability but is not really that important.
Whether they have to issue new stock to pay for future debts or supplemental compensation to employees is not that important because it didn't happen. In the future the company will have to decide how to pay for those expenses, hopefully they will have the cash to do so or they can issue new stock or new bonds. They don't even know how much they will have to pay since compensations are usually tied to other factors like performance, etc.
Anthony owns a landscaping business that has 4 employees. His company is able to earn revenue of $600 per day. He knows that if he hires another worker, he would have to pay that worker $50 per day and the company would earn revenue of $680 per day if the new worker is hired.
Answer:
What is the question?
Explanation:
I suppose that is if it is profitable to hire the new worker, according to microeconomics this decision must be based in something called marginal income and must be compare with the marginal cost because they can increase the income but not the profit depending of the cost of the new worker.
The percent of sales method provides a more detailed plan for future financing needs than the cash budget because both pro forma income statements and balance sheets are used in the analysis. True False
Answer:
The correct answer is False.
Explanation:
In online advertising, it is the amount of money an advertiser pays for each click that a given ad receives. In other words, the advertiser pays the publisher for each valid click that a visitor or user makes on the advertising provided by the advertiser.
It is based on the sales of the previous year and balance of the previous year and shows the additional financing that the company will need if its sales increase from one period to another.
The percentage of sales method is a method of financial forecasting that consists in expressing the needs of the company in terms of the percentage of annual sales invested in the balance sheet item in order to determine short-term financial needs.
Convert the accounts used in the balance sheet for the percentage of sales method to predict sales in a percentage of the sales for the current year. The accounts you need to convert include cash, accounts receivable, inventory, retained earnings and fixed assets on the active side of the balance sheet. To make this conversion, divide the total of each account by the total sales for the current year. This will result in each account showing a percentage based on this year's sales.
It is a factor that we multiply by 100, to be expressed as a percentage of the Asset with the Liabilities, and thus it gives us the amount of financing that the company needs, either from internally generated funds or from external sources.
Product placement has reached the world of live theater and opera. The difference between product placement and other forms of promotion is:
A. prominent personalities add a message about the product.
B.viewers are being marketed to subliminally without their consent.
C.products are focused showing different angles.
D. ethical concerns are not taken into account.
E.sponsors are recognized for their contribution.
Answer: Products are focused showing different angles.
Explanation:
Product placement is a form of advertisement in which a product is consciously placed in a televised show or video advert.
This done to draw the public attention to the specific product. The product can be the central attention point of the advert or may have repeated appearances in a show.
Product placement in live theater and opera differs from other forms of promotion because sponsors are recognized for their contribution.
Explanation:The difference between product placement and other forms of promotion in live theater and opera is that sponsors are recognized for their contribution.
Unlike other forms of promotion, product placement in live theater and opera involves sponsors being acknowledged publicly for their support. This recognition can be in the form of verbal acknowledgments, program mentions, or visual displays of sponsor logos.
For example, in some opera performances, a company's logo may be projected onto a screen during intermissions, or there may be announcements thanking sponsors before the show begins.
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German executives are not dedicated to the maximization of shareholder value to the degree that is the case for executives in the United Kingdom and the United States largely because:
a. of the focus on stewardship-management in German firms rather than the financial performance focus of U.S. firms.
b. large institutional investors control large blocks of stock.
c. private shareholders and large institutional investors rarely have large ownership positions in firms. d. the roles of CEO and chairperson of the board of directors are usually combined.
Answer:
(C) private shareholders and large institutional investors rarely have large ownership positions in firms
Explanation:
German executives differ greatly from UK and US ones since private shareholders have limited rights compared to those who held stakes in the United States and United Kingdom. Additionally, executives from the two countries are paid in equity (shares in the company) as part of their compensation, which causes them to have more interest in ensuring shareholders value (since they are one of them). This type of compensation does not happen in most German companies.
1. Which Response core capability involves ensuring the capacity for timely communications in support of security, situational awareness, and operations by any and all means available, among and between affected communities in the impact area and all response forces?
A. On-scene Security, Protection, and Law Enforcement.
B. Operational Communication.
C. Infrastructure Systems.
D. Logistics and Supply Chain Management
2. Whose duties include operation of the National Response Coordination Center, the effective support of all Emergency Support Functions, and, more generally, preparation for, protection against, response to, and recovery from all-hazards incidents?
A. Senior Federal Law Enforcement Official
B. DHS Director of Operations Coordination
C. Secretary of Homeland
D. FEMA Administrator
Answer:
1)On-scene Security, Protection, and Law Enforcement.
2)FEMA Administrator
explanation:1)The on-scene security,protection and Law Enforcement is an agency whose core duties are to maintain a safe and hazardous-free working environment via law enforcement and hastily effective communication by any means possible to ensure security and protection of people and communities located within affected areas in the jurisdiction of work-place and also for personnel involved or engaged in these life-threatening operations being carried out.
2)The FEMA Administrator duties are
thoroughly centred on emergency which include; the effective administration of the National Response Coordination Center,effective&total response to emergencies/events resulting from hazardous incidents.Also to ensure a total recovery process is possible arising from the events,thus providing support for all/emergencies as the case maybe.
Consider the market for natural gas. In this industry, low average costs are obtained only through large-scale production. In other words, the initial cost of setting up all the necessary pipes and hoses makes it risky and most likely unprofitable for a competitor to enter the market.
A monopolist, unlike a competitive firm, has some market power. It can raise its price, within limits, without the quantity demanded falling to zero. The main source of a monopolist's market power is barriers to entry - that is, obstacles that make it difficult for competitors to enter the market. Which of the following best describes the source of the monopolist's market power in the preceding scenario?
a. Economies of scale
b. Innovation
c. Hard to duplicate resources
Answer:
A) Economies of scale
Explanation:
Producing natural gas is very expensive and requires a large investment. The costs and risks of the processes involved in the upstream and downstream of natural gas discourage competition. Besides requiring a large initial investment, a drilling company can never be 100% sure that they will be able to find and extract natural gas or petroleum. So besides having to spend a lot of money, you are assuming a great risk.
Even if a competitor finds natural gas, in order for the downstream process to be profitable, they must be able to extract a large volume to achieve economies of scale.
Flint Inc. has decided to purchase equipment from Central Michigan Industries on January 2, 2017, to expand its production capacity to meet customers’ demand for its product. Flint issues a(n) $912,000, 5-year, zero-interest-bearing note to Central Michigan for the new equipment when the prevailing market rate of interest for obligations of this nature is 11%. The company will pay off the note in five $182,400 installments due at the end of each year over the life of the note.
1.Prepare the journal entry at the date of purchase.
2.Prepare the journal entry at the end of the first year to record the payment and interest, assuming that the company employs the effective-interest method.
3. Prepare the journal entry at the end of the second year to record the payment and interest.
4. Assuming that the equipment had a 10-year life and no salvage value, prepare the journal entry necessary to record depreciation in the first year. (Straight-line depreciation is employed.)
Answer:
Please see the answers below:
Explanation:
1.
Debit: Equipment $912,000
Credit: Notes Payable $912,000
To record purchase of equipment at zero interest bearing note Central Michigan.
2.
Debit: Notes Payable $182,400
Debit: Interest Payable $20,064
Credit: Cash $202,464
To record Cash Payment of 1st year Installment and Interest.
3.
Debit: Notes Payable $182,400
Debit: Interest Payable $20,064
Credit: Cash $202,464
To record Cash Payment of 2nd year Installment and Interest.
4.
Debit: Depreciation Expense $91,200
Credit: Accumulated Depreciation $91,200
To record Depreciation Expense on Equipment over the life of 10 years with no salvage value. (Straight Line Depreciation is employed).
Final answer:
The detailed answer provides journal entries for equipment purchase, payments, interest expenses, and depreciation. It explains each transaction clearly.
Explanation:
1. Journal entry at the date of purchase:
Debit Equipment $912,000
Credit Notes Payable $912,000
2. Journal entry at the end of the first year:
Debit Interest Expense $100,320
Debit Notes Payable $82,080
Credit Cash $182,400
3. Journal entry at the end of the second year:
Debit Interest Expense $89,000
Debit Notes Payable $93,400
Credit Cash $182,400
4. Journal entry for depreciation in the first year:
Debit Depreciation Expense $1,750
Credit Accumulated Depreciation $1,750
Concerning the allocation of the publication budget among various journals, Select one: a. the cost-per-thousand calculation should be based on circulation to the total audience. b. the cost-per-thousand calculation should be based on circulation to the target audience. c. the comparison of alternative journals can readily be made by examining their actual page rates (cost-per-page). d. the comparison of alternative journals can readily be made by examining total circulation.
Answer:
adgggrg
Explanation:
Kelley Company reports $1,500,000 of net income and declares $210,000 of cash dividends on its preferred stock for the year 2013. At year-end, the company had 340,000 weighted-average shares of common stock.
a. What amount of net income is available to common stockholders for 2013?
b. What is the company's basic EPS for 2013? Round your answer to the nearest whole cent.
Answer:
a. $1,290,000
b. $3.80
Explanation:
a. The computation of the net income is shown below:
= Net income - preference dividend
= $1,500,000 - $210,000
= $1,290,000
b. The earning per share is shown below:
= (Net income) ÷ (weighted-average shares of common stock)
= ($1,290,000) ÷ (340,000 shares)
= $3.80
Simply we apply the net income formula after considering the preference dividend and then earning per share is computed
In the Solow growth model with population growth and labor-augmenting technological change, the break-even level of investment must cover:______
1. depreciating capital, capital for new workers, and capital for new effective workers.
2. depreciating capital and capital for new workers.
3. depreciating capital and capital for new effective workers.
4. depreciating capital.
Answer:
1. depreciating capital, capital for new workers, and capital for new effective workers.
Explanation:
break-even investment is the level of investment necessary to keep the capital-labor ratio constant.
Disney is implementing a new type of pricing. When demand increases and more customers visitthe parks, the price will increase. When demand dips during the slow season, prices will decrease. This is a way to help balance out supply and demand. What is another name for the type of pricing that Disney is using?
a. cost-based pricing.
b. competition-based pricing.
c. dynamic pricing.
d. cost-plus pricing.
e. markup pricing.
Answer: (C) Dynamic pricing
Explanation:
The dynamic pricing is basically refers to the time based pricing and demand pricing in which the prices are fixed for the various type of products and services by the organization.
The dynamic pricing is also known as the discriminating pricing as it allow the maximize the profits for the each customers.
The dynamic pricing uses the proper data for the implementation and then produce the large amount of useful data by using the pricing strategies.
Therefore, option (C) is correct.
Final answer:
Disney is using dynamic pricing, which adjusts prices based on current market demand to balance supply and demand.
Explanation:
The type of pricing that Disney is using, where the price increases with higher demand and decreases when demand dips, is known as dynamic pricing. This strategy is used to balance out supply and demand by adjusting prices based on the current market conditions.
It is a contrast to strategies like cost-based pricing, competition-based pricing, cost-plus pricing, or markup pricing, which do not fluctuate as frequently with demand changes.
Dynamic pricing is a common practice in various industries, including airlines, hotels, and entertainment, where prices are adjusted in real-time or periodically to maximize revenue and efficiency.
A(n) ________ is an organizational change that involves rethinking the nature of the business and the nature of the organization itself.A) systems analysisB) paradigm shiftC) automation programD) rationalization programE) business process redesign program
Answer:
Your answer is D
Explanation:
Alpha Colony and Beta Colony both manufacture textiles and technology. Alpha Colony always produces higher quality textiles and technology with fewer raw materials and in less time than Beta Colony. Which statement would explain the reason why Alpha Colony has an advantage over Beta Colony?
A. Alpha Colony has a comparative advantage because it chooses not to export its manufactured goods to other colonies.B. Alpha Colony has a comparative advantage because it chooses to ignore the opportunity cost of using more raw materials.C. Alpha Colony has an absolute advantage because it has an established manufacturing infrastructure and trained workers.D. Alpha Colony has an absolute advantage because it has more farms and mines to produce raw materials needed for its products.
Answer:
C. Alpha Colony has an absolute advantage because it has an established manufacturing infrastructure and trained workers
Explanation:
Absolute advantage is when a country produces more efficiently than its trading partners.
Comparative advantage is when a country has a lower opportunity cost in production when compared with its trading partners.
Alpha Colony always produces higher quality textiles and technology with fewer raw materials and in less time than Beta Colony. Therefore, alpha colony has an absolute advantage because it produces more efficiently than beta colony.
Established manufacturing infrastructure and trained worker explain the absolute advantage because these factors ensures efficient use of materials and lessens production time.
I hope my answer helps you.
All the best
Suppose the economy is in short-run equilibrium above potential GDP, the unemployment rate is very low, and wages and prices are rising. Using the static AD-AS model, the correct Fed policy to move the economy from the short- run equilibrium back to long-run equilibrium would be
an open market purchase of Treasury securities (bonds).
a decrease in reserve requirements.
an open market sale of Treasury securities (bonds).
a increase in taxes.
Answer:
an open market sale of Treasury securities (bonds).
Explanation:
An open market sale will decrease the money supply so aggregate demand decreases and shifts to the left.
In addition to providing home mortgages, large commercial banks have specialized in providing short-term funds to mortgage banking companies in order to enable them to originate mortgage loans and hold the loans until the mortgage banking company can sell them in the secondary market. This type of financing is commonly referred to as:
a. loan underwriting.
b. warehousing.
c. mortgage pipeline.
d. loan servicing.
Answer:
The correct answer is b. warehousing.
Explanation:
The Warehouse concept within the scope of structured finance is, according to its own name, the storage of a set of assets with the purpose of securitizing them later. The Warehouse has been a technique widely used in the years prior to the start of the so-called 'subprime crisis'. The Warehouse allows the originator of the assets a 'bridge' financing between the granting of loans (or other type of assets) to the debtors and the wholesale financing in the capital markets.
In a simplified way, the usual process of a Warehouse is as follows: first, the lender grants a financing line to a vehicle (Special Purpose Vehicle) specially designed for this purpose, and this in turn, grants the funds to the final lender and originator of the assets. Subsequently, as the originator grants new assets (for example, loans), they are transferred to the vehicle. It is the so-called ramp-up phase of the Warehouse. Finally, once the volume of assets reaches a certain size, the Warehouse line is refinanced. Normally, refinancing is done through securitization bond issues.
Suppose Barry is maximizing his utility from consuming used paperback novels and audio books. The price of a used novel = $4 and the price of an audio book = $8. If the marginal utility of the last novel was 32 units of utility (utils) what was the marginal utility of the last audio book purchased? A. 2 utils B. 12 utils C. 16 utils
Answer:
None of the answers is correct, it should be 64 utils
Explanation:
If Barry's utility from consuming a used novel is 32 utils and the book costs $4, he was able to get 8 utils per dollar (= 32 / $4).
If an audio book costs $8, then Barry should obtain $8 x 8 utils per dollar = 64 utils.
When an organization operates several businesses to spread the risk, such as a landscaping company that offers not only landscaping services but also lawn care, snow removal, and other services, that business is utilizing a ____ strategy.
Answer:
nevative correlation strategy
Suppose, for simplicity, that a bank uses a single interest rate for loans and deposits, there is no inflation, and all unspent money is deposited in the bank. The interest rate measures which of the following?
a. the cost of using a dollar today rather than a year from now
b. the benefit of delaying the use of a dollar from today until a year from now
c. the price of borrowing money calculated as a percentage of the amount borrowed
Answer:
All the options are correct.
Explanation:
It is assumed that a bank uses a single interest rate for both loans and deposits. There is no existing inflation in the economy. Money which is not spent is deposited in the bank.
On the basis of these assumptions, we can say that the interest rate is the cost of borrowing money which is calculated as a percentage of the principal or the amount borrowed.
For a depositor, it is the return on depositing money or benefit of depositing money instead of using it immediately.
It can also be referred to as the opportunity cost of not depositing the money in the bank but spending it instead.
According to the annual Summer Vacation Survey conducted by Myvesta, a nonprofit consumer education organization, the average summer vacation costs $2252. If $1790 of this amount is charged on a credit card, what percent of the vacation cost is charged? Round to the nearest tenth of a percent.
Answer: 79.50%
Explanation: Total Average vacation cost = $2,252
Amount charges on Credit card = $1,790
Amount not charged to Credit card = $462
Percentage of amount charged = 1,790/2252*100
= 79.48 apprx =79.50%
Hannah needs a savings tool to help her manage her everyday purchases. The savings tool needs to be very liquid and accessible. Which of the following savings tools should Hannah choose?
A. Certificate of depositB. checking accountC. Money market deposit accountD. Any of the above savings tools would help Hannah
Answer:
B. checking account
Explanation:
Based on the requirements that Hannah has set forth for herself, it seems that the best option would be a checking account. This is a type of bank account that is very liquid, meaning she can easily access her money whenever needed and can keep track of how much she is spending and saving all through mobile apps or online accounts.
Management estimates the company's allowance for doubtful accounts as $200,000, and the auditors develop an estimate that suggests that the amount should be between $230,000 and $250,000. The factual misstatement in this situation is:a. $0.b. $30,000.c. $50,000.d. $40,000.
Answer:
Opton a $0
Explanation:
Factual misstatements There is no doubt of a mistake. There is an instance necessary to dsiclosure the correct information which is missing.
This is not the case as the company has a doubful accounts and disclosure in his statements.
Therefore, this is not a factual misstatement. The company has used an inferior or different method than the auditor.
According to the Purchasing Power Parity, if one country's price level rises relative to another's by a certain percentage, then the other country's currency appreciates by the same percentage. maintains its value. depreciates by the same percentage. lose its value.
Answer:
The correct answer is: appreciates by the same percentage.
Explanation:
According to the purchasing power parity theory, the value of the currency of the two countries is compared on the basis of a basket of goods. If the basket of goods costs the same in both the countries then the currencies are said to be in equilibrium or at par.
If the price level increase in a country, it means that the basket of goods became expensive in that country by the same percentage as an increase in the price level.
So the value of the currency of the other country will appreciate the same percentage as the price rise.
A recent report on GDP growth rates showed that the GDP of Dorada, a developed economy, has declined by 1.5 percent this year. Emily George and her friend Tabitha Jude, both students of economics, are discussing the possible reasons for the decline in the growth rate. Emily feels that the government deficit has reached an unsustainable level, as a result of which interest rates now are extremely high. This has reduced government expenditure in recent times, leading to a decline in GDP. Tabitha however disagrees. According to her, the fall in GDP must imply a fall in consumer spending as household consumption accounts for the largest share in Dorada's GDP Which of the following, if true, will weaken Tabitha's argument?
A. The government of Dorada recently introduced a new medical care program for lower-income individuals
B. The government increased income tax rates by 0.75 percent this year for each income tax bracket. and senior citizens.
C. The interest rates on bank deposits have increased by 1 percent.
D. Although sales tax rates remained unchanged, the government's revenue from sales taxes increased considerably this year
E. The government of Dorada has recently raised the price ceiling on house rents.
Answer:
D. Although sales tax rates remained unchanged, the government's revenue from sales taxes increased considerably this year
Explanation:
If revenues froms sale tax have increased, then, consumption has increased too. A sales tax is a form of consumption tax, hence, consumption and revenues from this tax are correlated, and are directly proportional. This would weaken Tabitha's argument if true.
An investor owns a 6% bond issued by ABC Corporation that is callable at 102 ($1,020) next May 1. All of the following statements are true regarding the call EXCEPT
A) up until May 1, the investor has call protection
B) it is likely that once the bond is called, the investor will also be exposed to reinvestment risk
C) when bonds are called, they are usually called at a premium to par
D) the bond is probably being called by the issuer because interest rates went up
Answer:D) the bond is probably being called by the issuer because interest rates went up
This statement is not true because when interest rates go up the issuer is at an advantage as he had previously borrowed money at a interest rate which is lower than the present interest rate, as interest rates have risen. Also when interest rates rise and the issuer calls the bond he will have to pay higher interest to re borrow money and this is foolish thus the issuer will not call the bond when interest rates rise. The issuer will call the bond when interest rates fall, as the issuer can re issue the bonds and borrow money at lower interest rates.
Explanation: