19. Make a graph showing the spending and tax revenue of your satate government for as many years as you can find (use the government of your home country if you are not from the United States).

a. What trends do you notice?

b. What spending categories make up the largest share of the state budget?

c. What are the largest sources of revenue?

The standard RBC model predicts that a positive shock to government spending adversely affects private consumption spending. Provide two different changes to the standard RBC model that would generate a positive relationship between C and G. You don’t have to solve the model again to answer this question. Just focus on the intuition and the mechanisms that would generate the result. (10 points)

How does the classical/neoclassical theory’s “Say’s Law” (or the saving-investment mechanism) suggest that the economy will adjust when a demand-side “shock” caused by a decline in consumption spending occurs? Why did Keynes believe (and why do many economists still believe) that these adjustments will not occur? Answer both of these questions with regard to a demand-side “shock” caused by a decline in investment spending.   

1.The Indiana State budget was $35.9 billion for the 2001-2003 biennium and 68.1 billion for the 2017-2019 biennium. The price deflator was 0.83 for the the 2001-2003 period and 1.16 for the 2017-2019 period, with a base year of 2009.

What was the average annual rate of increase in nominal spending between the 2001-2003 biennium and the 2017-2019 biennium? The number of years between the two time periods is 14; i.e., consider the time between the end of one biennium to the beginning of the next.

2.The Indiana State budget was $35.9 billion for the 2001-2003 biennium and 68.1 billion for the 2017-2019 biennium. The price deflator was 0.83 for the the 2001-2003 period and 1.16 for the 2017-2019 period, with a base year of 2009.

The average annual rate of increase in real spending is 2.21%. Why is average annual rate of increase in real spending so different from the average annual rate of increase nominal spending that you calculated in the previous question?

Please show work if you can, so that I can try to understand the problem!

Overhead Application, Fixed and Variable Overhead Variances

Zepol Company is planning to produce 600,000 power drills for the coming year. The company uses direct labor hours to assign overhead to products. Each drill requires 0.75 standard hour of labor for completion. The total budgeted overhead was $1,777,500. The total fixed overhead budgeted for the coming year is $832,500. Predetermined overhead rates are calculated using expected production, measured in direct labor hours. Actual results for the year are:

Required:

1. Compute the applied fixed overhead.
$

2. Compute the fixed overhead spending and volume variances. Enter amounts as positive numbers and select Favorable or Unfavorable.

3. Compute the applied variable overhead.
$

4. Compute the variable overhead spending and efficiency variances. Enter amounts as positive numbers and select Favorable or Unfavorable.

The Wall Street Journal reported that the age at first startup for 90% of entrepreneurs was 29 years of age or less and the age at first startup for 10% of entrepreneurs was 30 years of age or more. (a) Suppose a sample of 200 entrepreneurs will be taken to learn about the most important qualities of entrepreneurs. Show the sampling distribution of p where p is the sample proportion of entrepreneurs whose first startup was at 29 years of age or less. If required, round your answers to four decimal places. np = n(1-p) = E(p) = σ(p) = (b) Suppose a sample of 200 entrepreneurs will be taken to learn about the most important qualities of entrepreneurs. Show the sampling distribution of p where p is now the sample proportion of entrepreneurs whose first startup was at 30 years of age or more. If required, round your answers to four decimal places. np = n(1-p) = E(p) = σ(p) = (c) Are the standard errors of the sampling distributions different in parts (a) and (b)? Justify your answer. The input in the box below will not be graded, but may be reviewed and considered by your instructor.

Consider the following time series data.

.

(a)  Use a multiple regression model with dummy variables as follows to develop an equation to account for seasonal effects in the data. Qtr1 = 1 if Quarter 1, 0 otherwise; Qtr2 = 1 if Quarter 2, 0 otherwise; Qtr3 = 1 if Quarter 3, 0 otherwise.

If required, round your answers to three decimal places. For subtractive or negative numbers use a minus sign even if there is a + sign before the blank. (Example: -300) If the constant is "1" it must be entered in the box. Do not round intermediate calculation.

.

(b) Use a multiple regression model to develop an equation to account for trend and seasonal effects in the data. Use the dummy variables you developed in part (b) to capture seasonal effects and create a variable t such that t = 1 for Quarter 1 in Year 1, t = 2 for Quarter 2 in Year 1,… t = 12 for Quarter 4 in Year 3.

If required, round your answers to three decimal places. For subtractive or negative numbers use a minus sign even if there is a + sign before the blank. (Example: -300)

.

(c)  Is the model you developed in part (b) or the model you developed in part (d) more effective?

Coronavirus: A visual guide to the economic impact  

Global shares take a hit
Big shifts in stock markets, where shares in companies are bought and sold, can affect many investments in pensions or individual savings accounts (ISAs).
The FTSE, Dow Jones Industrial Average and the Nikkei have all seen huge falls since the outbreak began on 31 December.
The Dow and the FTSE recently saw their biggest one day declines since 1987.

Investors fear the spread of the coronavirus will destroy economic growth and that government action may not be enough to stop the decline.
In response, central banks in many countries, including the United Kingdom, have slashed interest rates.
That should, in theory, make borrowing cheaper and encourage spending to boost the economy.
Global markets did also recover some ground after the US Senate passed a $2 trillion (£1.7tn) coronavirus aid bill to help workers and businesses.
But some analysts have warned that they could be volatile until the pandemic is contained.

In the United States, the number of people filing for unemployment hit a record high, signalling an end to a decade of expansion for one of the world's largest economies.
  


Factories in China slowed down
In China, where the coronavirus first appeared, industrial production, sales and investment all fell in the first two months of the year, compared with the same period in 2019.
China makes up a third of manufacturing globally, and is the world's largest exporter of goods.


Restrictions have affected the supply chains of big companies such as industrial equipment manufacturer JCB and carmaker Nissan.
Shops and car dealerships have all reported a fall in demand.
Chinese car sales, for example, dropped by 86% in February. More carmakers, like Tesla or Geely, are now selling cars online as customers stay away from showrooms.

Growth set to stagnate
If the economy is growing, that generally means more wealth and more new jobs.
It's measured by looking at the percentage change in gross domestic product, or the value of goods and services produced, typically over three months or a year.
The world's economy could grow at its slowest rate since 2009 this year due to the coronavirus outbreak, according to the Organisation for Economic Cooperation and Development (OECD).

The think tank has forecast growth of just 2.4% in 2020, down from 2.9% in November.
It also said that a "longer lasting and more intensive" outbreak could halve growth to 1.5% in 2020 as factories suspend their activity and workers stay at home to try to contain the virus.

Questions:
1. Elaborate the impact of this Covid-19 from the article. [30 marks]

Scenario:  

Beta Computers is experiencing financial difficulties attributed to declining sales of its mainframe computer systems. Several years ago, the company obtained a large loan from Midland State Bank. The covenants of the loan agreement strictly state that if Beta is unable to maintain a current ratio of 3:1, a quick ratio of 1:1, and a return on assets of 12 percent, the bank will exercise its right to liquidate the company’s assets in settlement of the loan. To monitor Beta’s performance, the bank demands quarterly financial statements that have been reviewed by an independent CPA.

Nick Price, Beta’s CEO, has just reviewed the company’s master budget projections for the first two quarters of the current year. What he has learned is disturbing. If sales trends continue, it appears that Beta will be in violation of its loan covenants by the end of the second quarter. If these projections are correct, the bank might foreclose on the company’s assets. As a consequence, Beta’s 750 employees will join the ranks of the unemployed.

In February of the current year, Rembrant International contacted Beta to inquire about purchasing a custom-configured mainframe computer system. Not only would the sale generate over a million dollars in revenue, it would put Beta back in compliance with its loan covenants. Unfortunately, Rembrant International is an extremely bad credit risk, and the likelihood of collecting on the sale is slim. Nonetheless, Nick Price approved the sale on February 1, which resulted in the recording of a $1.4 million receivable.

On March 31, Edgar Gamm, CPA, arrived at Beta’s headquarters. In Gamm’s opinion, the $1.4 million receivable from Rembrant International should immediately be written off as uncollectible. Of course, if the account is written off, Beta will be in violation of its loan covenants and the bank will soon foreclose. Gamm told Price that it is his professional duty to prevent any material misstatement of the company’s assets.

Price reminded Gamm that if the account is written off, 750 employees will be out of work, and that Gamm’s accounting firm probably could not collect its fee for this engagement. Price then showed Gamm Beta’s master budget for the third and fourth quarters of the current year. The budget indicated a complete turnaround for the company. Gamm suspected, however, that most of the budget’s estimates were overly optimistic.

As an employee, write an internal memo to your manager addressing the following:

Should Gamm insist that the Rembrant International account be classified as uncollectible? Should the optimistic third and fourth quarter master budget projections influence his decision? What would you do if you were in his position? Defend your actions.

If you were the president of Midland State Bank, what would you do if you discovered that the Rembrant International account constituted a large portion of Beta’s reported liquid assets and sales activity for the quarter? How would you react if Edgar Gamm’s accounting firm had permitted Beta to classify the account as collectible?

Case 23.2 – An Ethical Dilemma Scenario: Beta Computers is experiencing financial difficulties attributed to declining sales of its mainframe computer systems. Several years ago, the company obtained a large loan from Midland State Bank. The covenants of the loan agreement strictly state that if Beta is unable to maintain a current ratio of 3:1, a quick ratio of 1:1, and a return on assets of 12 percent, the bank will exercise its right to liquidate the company’s assets in settlement of the loan. To monitor Beta’s performance, the bank demands quarterly financial statements that have been reviewed by an independent CPA. Nick Price, Beta’s CEO, has just reviewed the company’s master budget projections for the first two quarters of the current year. What he has learned is disturbing. If sales trends continue, it appears that Beta will be in violation of its loan covenants by the end of the second quarter. If these projections are correct, the bank might foreclose on the company’s assets. As a consequence, Beta’s 750 employees will join the ranks of the unemployed. In February of the current year, Rembrant International contacted Beta to inquire about purchasing a custom-configured mainframe computer system. Not only would the sale generate over a million dollars in revenue, it would put Beta back in compliance with its loan covenants. Unfortunately, Rembrant International is an extremely bad credit risk, and the likelihood of collecting on the sale is slim. Nonetheless, Nick Price approved the sale on February 1, which resulted in the recording of a $1.4 million receivable. On March 31, Edgar Gamm, CPA, arrived at Beta’s headquarters. In Gamm’s opinion, the $1.4 million receivable from Rembrant International should immediately be written off as uncollectible. Of course, if the account is written off, Beta will be in violation of its loan covenants and the bank will soon foreclose. Gamm told Price that it is his professional duty to prevent any material misstatement of the company’s assets. Price reminded Gamm that if the account is written off, 750 employees will be out of work, and that Gamm’s accounting firm probably could not collect its fee for this engagement. Price then showed Gamm Beta’s master budget for the third and fourth quarters of the current year. The budget indicated a complete turnaround for the company. Gamm suspected, however, that most of the budget’s estimates were overly optimistic.

Should Gamm insist that the Rembrant International account be classified as uncollectible? Should the optimistic third and fourth quarter master budget projections influence his decision? What would you do if you were in his position? Defend your actions.

If you were the president of Midland State Bank, what would you do if you discovered that the Rembrant International account constituted a large portion of Beta’s reported liquid assets and sales activity for the quarter? How would you react if Edgar Gamm’s accounting firm had permitted Beta to classify the account as collectible?