Refer to Book “Principle of Economics” by Karl E.Case, Ray C.Fair and Sharon M.Oster, 10th Edition, 2012, Pearson International Publishing House

Chapter 27 – Aggregate Demand in the Goods and Money Markets. Question #14 on page 587 under “Problems”,

14. Explain the effect, if any, that each of the following occurrences should have on the aggregate demand curve.

a. The Fed lowers the discount rate.

b. The price level decreases.

c. The federal government increases federal income tax rates in an effort to reduce the federal deficit.

d. Pessimistic firms decrease investment spending.

e. The inflation rate falls by 3 percent.

f. The federal government increases purchases to stimulate the economy.

the technology for cutting hair has changed in the last 100 years, whereas technology for growing wheat has improved dramatically. What do you think happened to the relative prices of haircuts and wheat? What do you think has happened to the relative income of barbers and farmers? Explain how this is possible. The price elasticity of demand for a good measures how much the quantity of the good demanded responds to a decline in the goods price. Specifically, the price elasticity of demand is the ratio of the percentage change in quantity demanded to the percentage change in price. How is a good's price elasticity of demand related to whether technological progress in producing a good will lead to a rise of decline in the share of the economy's tota spending on that good?

1. if a country’s nominal GDP increases, it means the country is producing more goods and services

2. If nominal GDP increased by 5.1% and real GDP increased by 2.5% last year, Prices went up during the year.

3. The marginal propensity to consume is the change in consumption expenditure divided by the percentage change in income

4. The deficit will decrease during recessions and increase during expansions.

5. An increase in the money supply will shift the AD curve upwards and to the right.

6. The larger the MPC, the smaller the Keynesian government spending multiplier.

7. Contractionary monetary policy shifts the AD curve to the right.

8. Structural unemployment is caused by fluctuations in economic activity.

9. Nominal GDP can be equal to real GDP.

10. If the reserve ratio 0.1, the money multiplier is equal to 5

Briefly explain how each of the following would likely affect the value of the dollar and the exchange rate, all else being equal. (Please answer for all 5!)

1. U.S. consumers increase their spending on imported goods.

2. The Federal Reserve reports that it is less concerned about inflation and more concerned about the impending recession in the United States.

3. The U.S. government imposes a large tariff on imported automobiles.

4. The Federal Reserve raised interest rates fearing inflationary pressures due to the booming economy.

5. Both the U.S. and the European Union agreed with the WTO to abide by the free trade agreements. (Here, assume that the U.S. and the E.U. are sole trading partners.)

During the year, Belyk Paving Co. had sales of $2,390,000. Cost of goods sold, administrative and selling expenses, and depreciation expense were $1,435,000, $436,000, and $491,000, respectively. In addition, the company had an interest expense of $216,000 and a tax rate of 30 percent (ignore any tax loss carryback or carryforward provisions.). The company paid out $393,000 in cash dividends. Assume that net capital spending was zero, no new investments were made in net working capital, and no new stock was issued during the year.

Calculate the firm's net new long-term debt added during the year. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  

Part 2: Problems

Answer all the following questions for the year 2009. The tax rate is 35%.

1. What was net income (NI)?

2. What was operating cash flow (OCF)?

3. What was net capital spending (NCS)?

4. What was the change in net working capital (ΔNWC)?

5. What was the cash flow from assets (CFA)?

Problem 2-17 Accounting Values versus Cash Flows [LO2]

In the Ironman movies, there are examples of ironman falling from obscene heights. However, when he hits the ground, neither him or his suit show any real indication of this. Using calculations, prove that Tony stark or his suit would be crushed from such a fall. you may use any scene from any movie. All measurements needed to solve this, must be derived from the scene you choose.