University of Missouri, St. Louis

Economics 1002-003: Principles of Macroeconomics.

Discussion Topic 11: Great Recession and Lost Decade

1. How has the US money supply growth since 2008 resulted in an effective ceiling on real interest

rates while allowing the US inflation rate to remain low?

2. What role might the Fed policy have had in creating an effective ceiling on real interest rates, in

terms of paying interest on excess reserves (starting in 2008 for the first time)?

3. Illustrate how an effective ceiling on real interest rates in the capital market causes less private

investment and savings in equilibrium.

4. Describe how the capital market could be “deregulated” such that the ceiling on real interest

rates is eliminated and real rates resume their unregulated equilibrium.

5. What can be the effect of a ceiling on real interest rates internationally, if other countries want

their currency to remain of the same value relative to the US (so they avoid currency

appreciation and a decrease in exports).

On April 1, Jiro Nozomi created a new travel agency, Adventure Travel. The following transactions occurred during the company’s first month.
  

  
The company's chart of accounts follows.

  
Use the following information:

1. Prepaid insurance of $133 has expired this month.
2. At the end of the month, $600 of office supplies are still available.
3. This month’s depreciation on the computer equipment is $500.
4. Employees earned $420 of unpaid and unrecorded salaries as of month-end.
5. The company earned $1,750 of commissions that are not yet billed at month-end.

  
Required:
1. & 2. Prepare journal entries to record the transactions for April and post them to the ledger accounts in Requirement 6b. The company records prepaid and unearned items in balance sheet accounts.
3. Using account balances from Requirement 6b, prepare an unadjusted trial balance as of April 30.
4. Journalize the adjusting entries for the month and prepare the adjusted trial balance.
5a. Prepare the income statement for the month of April 30.
5b. Prepare the statement of retained earnings for the month of April 30.
5c. Prepare the balance sheet at April 30.
6a. Prepare journal entries to close the temporary accounts and then post to Requirement 6b.
6b. Post the journal entries to the ledger.
7. Prepare a post-closing trial balance.

Using account balances from Requirement 6b, prepare an unadjusted trial balance as of April 30.

Please take time to view the video, “Was America Founded to Be Secular? “ as a starting point for this discussion. Explicitly discuss the concepts of religious pluralism, civil religion, and discrimination as defined in the course material in your analysis, as well as information from the historical material you discovered in your research on the Internet. Please share your thoughts.

include sources

What do you think the long-term ramifications will be for other countries without the US contributions to WHO

13) A study published in 2008 in the American Journal of Health Promotion (Volume 22, Issue 6) by researchers at the University of Minnesota (U of M) found that 124 out of 1,923 U of M females had over $6,000 in credit card debt while 61 out of 1,236 males had over $6,000 in credit card debt.

a) Verify that the sample size is large enough in each group to use the normal distribution to construct a confidence interval for a difference in two proportions.

b) Construct a 95% confidence interval for the difference between the proportions of female and male University of Minnesota students who have more than $6,000 in credit card debt (pf - pm).

d) Does the interval contain the difference in sample proportions of female and male University of Minnesota students who have more than $6000 in credit card debt Phat_f - Phat_m ?

e) Explain why the previous question is silly and did not require you to even look at the interval.

f) According to your interval in (b) is it reasonable to assume that there is no difference between men and women at U of M regarding credit card debt? Clearly answer “yes” or “no.” ______ The briefly explain your answer? [3pt]

Frederick Cooper Lamp Company was founded in Chicago in 1923 by Frederick Cooper, an artist specializing in sculpture and watercolor art. The firm was launched in response to requests from clients that Cooper incorporate his works of art into lamps.

Relying on hand labour alone to make its lamps, chandeliers, and sconces, Cooper’s company quickly became recognized as a manufacturer of high-quality, distinctive products. Throughout its history, one of Cooper Lamp’s signature treatments was “the use of silk and other fine and exotic materials to produce unique hand sewn lampshades, many of which are adorned with distinctive bead and fringe treatments.” The firm used the focused differentiation business-level strategy, which essentially means that Cooper Lamp made expensive products that provided unique value to a small group of customers who were willing to pay a premium to purchase uniqueness (we fully describe the focused differentiation strategy later in the chapter).The words of a company official reflect Cooper Lamp’s strategy: “We offer a very high quality product. Our shades are hand-sewn, using unique fabrics. We use unique materials. We put things together in a unique fashion and as a result we have a very good name among the designers and decorators, and the stores. We sell to very high-end stores, [including] Bloomingdale’s, Neiman Marcus, [and] Horchow.” Thus, Cooper made “really expensive lamps for a niche market.” Cooper’s cheapest lamps sold for $200, while its crystal chandeliers cost upwards of thousands of dollars.

The reason we use the past tense to describe Cooper’s strategy is that the firm as it was known changed in August 2005. At that time, Cooper left its historic Chicago manufacturing facility, as required by the terms of its sale to developers who intend to convert its historic 240,000- square foot building into residential condos. The four-story building was sold and workers were laid off because the firm had to reduce the costs it incurred to manufacture its high-quality products. Some of the dismissed workers had been with the company for over 40 years. Other changes were in play as well, as indicated by the following comments from an employee: “We’ve sold the name but we can’t say who bought it. That was part of the deal. But we can say Frederick Cooper will not be who it was before. But we’re not going out of business. The new name will be Frederick Cooper Chicago.”

What caused the demise of Frederick Cooper Lamp Company? The answer is perhaps familiar: declining demand for high-quality handmade products; inefficient, high-cost manufacturing facilities; and cheap imports from other nations that offer customers a reasonable degree of quality at a substantially lower price. From a strategic perspective, the firm’s demise resulted from its below-average returns, which was a direct result of its not successfully implementing its business-level strategy.

Sources: R. Berg, 2005, Frederick Cooper workers to strike, Chicago Indymedia, www.chicago.indymedia.org,

Question: Using the case example of the Frederick Cooper Lamp, Identify evidence of the different types of generic strategies being pursued by the company. Then, explain what factors are influencing the choice of strategies that you identify and why? Provide current examples to support your answers by exemplifying each generic strategy alone.

Suppose the company E-bikes R US is the sole supplier of e-bikes and faces the following inverse demand function: p = 100 - 2Q, and total cost is given by TC = 16q + 2. The deadweight loss from E-bikes R US equals

A) $21.

B) $441.

C) $882.

D) $1,764.

Suppose the company E-bikes R US is the sole supplier of e-bikes. As other e-bike firms enter the market, the market power of E-bikes R US

A) is unaffected.

B) declines.

C) increases.

D) increases according to the Lerner Index but decreases according to the price/marginal cost ratio.

Suppose the company E-bikes R US is the sole supplier of e-bikes. The more elastic the demand curve faced by E-bikes R US, the monopolist

A) will have a larger Lerner Index.

B) will face a lower marginal cost.

C) will earn more profit.

D) will lose more sales as it raises its price.

37. Suppose there is a competitive market for e-bikes that is in the long-run. If firms in the e-bike market are not identical, then an increase in cost will

A) shift marginal cost to the right.

B) push the most inefficient firms out of the market.

C) push the most efficient firms out of the market.

D) There is not enough information to answer.

There are defining moments in our lives, both personal and shared, that leave lasting impressions on us. Every generation experiences some national disaster or trauma, 9/11 being one of the more recent in our nation’s history. Describe how, if at all, you believe life has changed since 9/11, both for you as an individual and as a nation.

For the past two years, Minsu, a Korean American, worked as a high school physical education teacher. He was also a body-builder and a part-time graduate student in educational technology at State University. As part of preparing a masters thesis, Minsu decided to participate in Arnold’s World Body-building training program and analyze advanced technology used to help students absorb physical education. Arnold’s training program had a regular faculty, curriculum, an enrolled body of students, and advanced technology in its gym equipment. Minsu earned $4,000 during the fall 20X5 as a body-builder; he came in second in the state contest. Minsu paid $5,000 in spring 20X5 for tuition related to his masters degree at State University for one class on advanced computer technology and another $3,000 to participate in the gym. How much can Minsu deduct? Minsu knows about relevant educational tax credits and wants you to focus just on the deductions.

M. Anthony, LLP, produces music in a studio in London. The cost of producing one typical song follows. Average Cost per Song: Labor, including musicians and technicians $ 17,200 Variable overhead, including clerical support 3,200 Fixed overhead 21,200 Marketing and administrative costs (all fixed) 28,080 Total cost per song $ 69,680 The fixed costs allocated to each song are based on the assumption that the studio produces 60 songs per month. Required: Treat each question independently. Unless stated otherwise, M. Anthony charges $82,000 per song produced. a. How many songs must the firm produce per month to break even? b. Market research estimates that a price increase to $92,000 per song would decrease monthly volume to 52 songs. The accounting department estimates that fixed costs would remain unchanged in total, and variable costs per song would remain unchanged if the volume were to drop to 52 songs per month. How would a price increase affect profits? c. Assume that M. Anthony's studio is operating at its normal volume of 60 songs per month. It has received a special request from a university to produce 30 songs that will make up a two-CD set. M. Anthony must produce the music next month or the university will take its business elsewhere. M. Anthony would have to give up normal production of 10 songs because it has the capacity to produce only 80 songs per month. Because of the need to produce songs on a timely basis, M. Anthony could not make up the production of those songs in another month. Because the university would provide its own musicians, the total variable cost (labor plus overhead) would be cut to $15,200 per song on the special order for the university. The university wants a discounted price; it is prepared to pay only $42,000 per song and believes a fee reduction is in order. Total fixed costs will be the same whether or not M. Anthony accepts the special order. Should M. Anthony accept the special order? d. Refer to the situation presented in requirement (c). Instead of offering to pay $42,000 per song, suppose the university comes to M. Anthony with the following proposition. The university official says, "We want you to produce these 30 songs for us. We do not want you to be worse off financially because you have produced these songs. On the other hand, we want the lowest price we can get." What is the lowest price that M. Anthony could charge and be no worse off for taking this order?