Place the following types of goods in the correct cell in the table below: private goods, public goods, common resources, and club goods.

Next to each item in the list below, identify the type of good it is (private good, public good, common resource, or club good) and offer a one sentence rationale for why you have identified the item as that type of good. HINT: Use the table above to assist with your rationale.

1. Congested toll roads
2. Knowledge
3. Fish in the ocean
4. National defense
5. Congested non-toll roads
6. Cable tv
7. The environment
8. Fire protection
1. Ice cream cones
10. Uncongested toll roads
11. Clothing

Two goods are in the consumer basket, goods X and Y. The consumer income is I, price of good X is Px, and price of good Y is Py. Use the consumer model to derive the demand curve for good X. Explain your answer in details.

b. Using your answer in part a, clearly explain and show the substitution effect and the income effect.

What is the difference between normal goods and inferior goods? A giffen good is one that has an upward sloping demand curve -- as price increases so does quantity demanded. Is a Giffen good always a inferior good? Why or why not? Can you give an example?

Define Public goods. Why is it that the provision of public goods is problematic under collective action? (not less than 1000 words)

You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company’s costing system and “do what you can to help us get better control of our manufacturing overhead costs.” You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control.

After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March:

During March, the company worked 15,000 machine-hours and produced 9,000 units. The company had originally planned to work 17,000 machine-hours during March.

Required:

1. Calculate the activity variances for March.

2. Calculate the spending variances for March.

• Required 1

Calculate the activity variances for March. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

• Required 2

Calculate the spending variances for March. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

1. Under which President's administration were there multiple years of the federal budget running a surplus?

Richard Nixon (1969-74)

Ronald Reagan (1981-89)

Bill Clinton (1993-2001)

George W. Bush (2001-09)

2. In the March/April 2013 issue of Dollars and Sense, Gerald Friedman shows that the increases in the federal deficit during the G. W. Bush (Bush 2) and B. Obama administrations was primarily due to:

the Wall Street bailout.

decreases in federal revenue.

increased federal spending on the stimulus.

A and C.

3. Which of the following is NOT part of Gerald Friedman's Progressive Tax-Reform Agenda?

Elimination of Federal Income Tax on income below the Poverty Line.

Elimination of the exemption from the Social Security payroll tax of income above $118,500.

Taxing capital gains at the same rate as earned income

. Restoration of a tax on financial transactions.

4. Which is not part of the "Golden Straightjacket?"

Privatize pensions

Increase research and development

funding Reduce corruption

Privatize state-owned enterprises

5. Ha-Joon Chang argues that modern developed countries usually achieved their high level of development by practicing:

Most of the prescriptions in the Golden Straightjacket.

Most of the policy prescriptions known as the Washington Consensus.

Protectionism.

All of the above.

Section B

Read the extracts and then answer all questions.

Extract 1

Bank of England’s Monetary Stance The Bank of England must maintain a very expansionary policy as the economy is still in a precarious situation. There has not really been much of a recovery from what was one of the deepest recessions in the history of this country. I think where monetary policy needs to be right now is to maintain a very expansionary stance and try to boost demand as quickly as possible. It is likely that wage settlements will remain subdued and that is one of the reasons why it seems to me pretty likely that inflation will continue on the downward trajectory. Falling inflation should also help hard-pressed households, finally ending the price squeeze on their disposable income. That will really change the dynamics of consumer spending. ‘However, consumer spending was unlikely to be fuelled by easy credit. I think it will be foolish to expect the availability and cost of credit to households and companies to go back to relatively easy conditions we were in the years leading up to the crisis.’

Source: D. Miles, 23 February 2012.

Extract 2

Failure of Monetary Therapy

In late 2008, UK economy was in intensive care. Jobs have been lost in a massive scale, and business has evaporated. The Bank of England has already cut interest rates by 3.75% from their peak in summer of 2007 to just 2%. Yet, the news from the patient has continued to get worse. Central banks’ great fear is that as the economy deteriorates, interest rates are cut close to zero, and inflation gets very low or negative, the economy slides into an abyss where no one feels like spending, or making new investments, everyone hangs onto their cash, and the economy is driven ever further into decline. That is where Japan got stuck during its ‘lost decade’ of the 1990s – in which prices were plunging, anxious consumers were wary about spending money, and recession and deflation went hand in hand. Fear and uncertainty themselves can have a powerful impact on economies and blunt the effect of monetary action. In the UK, firms became incredibly cautious when uncertainty went up: they did not react to either good or bad news. Within the Bank of England, there was a rising fear that with interest rates at 2%, the Monetary Policy Committee was pulling down hard on the main lever it has at its disposal, but little was happening at the other end. The ineffectiveness of monetary policy was further compounded by the parlous state of the banking system, which was preventing the benefits of interest rate cuts from being passed on. For many businesses, and hopeful first-time buyers, low rates of interest were almost meaningless, as they struggle to get a loan at all. Banks that have seen their balance sheets ravaged understandably have little enthusiasm for making risky new loans. As cash-flow problems mount among businesses, there was a risk of widespread insolvencies and mass layoffs. That could create a nasty feedback loop, as more borrowers default on loans, inflicting yet more damage on banks’ balance sheets. The central bank governor, Mervyn King, is keenly hoping the weaker pound will help the economy to recover strongly once the global downturn is over, as world trade picks up; but if scores of firms have gone bust through lack of funds, there will be fewer exporters to take advantage of rising demand, and recovery could be slow and sickly. Even if every dose of monetary policy medicine is passed on to ordinary firms and families, once rates get close to nought, it may be time for a fresh approach- which is why King and his colleagues are beginning to weigh up quantitative easing. If orthodox monetary policy is not working terribly well at the moment-quantitative easing is going to become a consistent theme. That would be a radical, risky measure, threatening inflation further down the line; but these are not normal times. As the US economy lurches deeper into recession, the UK’s prospects look increasingly grim. King may soon decide it is time to resort to the monetary equivalent of shock treatment.

Source: Adapted in part from The Guardian, 7 December 2008.

A) i) Drawing upon both extracts, identify and explain three factors which determine the level of household consumption in the UK economy. [6 marks]

ii) Explain how discretionary fiscal policy works? [6 marks]

B) Extract 2 asserts that ‘jobs have been lost in a massive scale, and business has evaporated.’ In relation to the above statement, how far do you think quantitative easing is a correct policy action although it would be ‘radical, risky measure, threatening inflation further down the line’? Discuss in terms of inflation and unemployment costs perspectives. [12 marks]

C) Explain how expansionary monetary policy is supposed ‘to boost demand’(Extract 1). [9 marks]

D) ‘The Monetary Policy Committee was pulling down hard on the main lever it has at its disposal, but little was happening at the other end’ (Extract 2). Using appropriate economic reasoning, evaluate in the context of the extract why this might be the case. [7 marks]

[Total: 40 marks]

~ END OF PAPER ~

Section B

Read the extracts and then answer all questions.

Extract 1

Bank of England’s Monetary Stance The Bank of England must maintain a very expansionary policy as the economy is still in a precarious situation. There has not really been much of a recovery from what was one of the deepest recessions in the history of this country. I think where monetary policy needs to be right now is to maintain a very expansionary stance and try to boost demand as quickly as possible. It is likely that wage settlements will remain subdued and that is one of the reasons why it seems to me pretty likely that inflation will continue on the downward trajectory. Falling inflation should also help hard-pressed households, finally ending the price squeeze on their disposable income. That will really change the dynamics of consumer spending. ‘However, consumer spending was unlikely to be fuelled by easy credit. I think it will be foolish to expect the availability and cost of credit to households and companies to go back to relatively easy conditions we were in the years leading up to the crisis.’

Source: D. Miles, 23 February 2012.

Extract 2

Failure of Monetary Therapy In late 2008, UK economy was in intensive care. Jobs have been lost in a massive scale, and business has evaporated. The Bank of England has already cut interest rates by 3.75% from their peak in summer of 2007 to just 2%. Yet, the news from the patient has continued to get worse. Central banks’ great fear is that as the economy deteriorates, interest rates are cut close to zero, and inflation gets very low or negative, the economy slides into an abyss where no one feels like spending, or making new investments, everyone hangs onto their cash, and the economy is driven ever further into decline. That is where Japan got stuck during its ‘lost decade’ of the 1990s – in which prices were plunging, anxious consumers were wary about spending money, and recession and deflation went hand in hand. Fear and uncertainty themselves can have a powerful impact on economies and blunt the effect of monetary action. In the UK, firms became incredibly cautious when uncertainty went up: they did not react to either good or bad news. Within the Bank of England, there was a rising fear that with interest rates at 2%, the Monetary Policy Committee was pulling down hard on the main lever it has at its disposal, but little was happening at the other end. The ineffectiveness of monetary policy was further compounded by the parlous state of the banking system, which was preventing the benefits of interest rate cuts from being passed on. For many businesses, and hopeful first-time buyers, low rates of interest were almost meaningless, as they struggle to get a loan at all. Banks that have seen their balance sheets ravaged understandably have little enthusiasm for making risky new loans. As cash-flow problems mount among businesses, there was a risk of widespread insolvencies and mass layoffs. That could create a nasty feedback loop, as more borrowers default on loans, inflicting yet more damage on banks’ balance sheets. The central bank governor, Mervyn King, is keenly hoping the weaker pound will help the economy to recover strongly once the global downturn is over, as world trade picks up; but if scores of firms have gone bust through lack of funds, there will be fewer exporters to take advantage of rising demand, and recovery could be slow and sickly. Even if every dose of monetary policy medicine is passed on to ordinary firms and families, once rates get close to nought, it may be time for a fresh approach- which is why King and his colleagues are beginning to weigh up quantitative easing. If orthodox monetary policy is not working terribly well at the moment-quantitative easing is going to become a consistent theme. That would be a radical, risky measure, threatening inflation further down the line; but these are not normal times. As the US economy lurches deeper into recession, the UK’s prospects look increasingly grim. King may soon decide it is time to resort to the monetary equivalent of shock treatment.

Source: Adapted in part from The Guardian, 7 December 2008.

A) i) Drawing upon both extracts, identify and explain three factors which determine the level of household consumption in the UK economy. [6 marks]

ii) Explain how discretionary fiscal policy works? [6 marks] B) Extract 2 asserts that ‘jobs have been lost in a massive scale, and business has evaporated.’ In relation to the above statement, how far do you think quantitative easing is a correct policy action although it would be ‘radical, risky measure, threatening inflation further down the line’? Discuss in terms of inflation and unemployment costs perspectives. [12 marks]

C) Explain how expansionary monetary policy is supposed ‘to boost demand’(Extract 1). [9 marks]

D) ‘The Monetary Policy Committee was pulling down hard on the main lever it has at its disposal, but little was happening at the other end’ (Extract 2). Using appropriate economic reasoning, evaluate in the context of the extract why this might be the case. [7 marks]

~END OF PAPER~

Cruz Company has gathered the information needed to complete its Form 941 for the quarter ended September 30, 2019. They are a monthly depositor with the following monthly tax liabilities for this quarter:

State unemployment taxes are only paid to California. The company does not use a third-party designee, the tax returns are signed by the president, Carlos Cruz (Phone: 916-555-9739), and the date filed is October 31, 2019.

Complete Parts 2, 4, and 5 of Form 941 for Cruz Company for the third quarter of 2019.

Santana Rey, owner of Business Solutions, decides to prepare a statement of cash flows for her business using the following financial data.
  

Required:
Prepare a statement of cash flows for Business Solutions using the indirect method for the three months ended March 31, 2020. Owner Santana Rey contributed $26,000 to the business in exchange for additional stock in the first quarter of 2020 and has received $3,900 in cash dividends. (Amounts to be deducted should be indicated with a minus sign.)