The annual (Initial) GDP of a Simple Open economy is 10,000 units with annual savings of 1500 units and a 20% Tax Rate and a 10% Transfer Payment rate. (a) Show and explain the changes on annual GDP, Consumption, Savings and Net Taxes to an increase in annual Government Spending from 1000 units to 1500 units? (b) What would be the change on the annual GDP, Consumption, Savings and Net Taxes to a decrease in annual Government Spending from 1000 units to 500 units and initial annual savings changed from 1500 units to 1000 units? Show and explain all calculations?

• Compare and contrast the use of government spending changes versus tax changes as a means of influencing the course of the economy. Is one or the other preferable in specific situations? Imagine for a moment that you have two roommates, who each have opposing viewpoints on nearly everything, including politics and economics. Taylor is adamant that the best way to manage the economy is through tax changes, while Morgan insists that it’s better to adjust the economy through government spending. What would a Neoclassical economist say? What would a Keynesian economist say? Which roommate do you agree with, and why? .

A = C + I + G + X - M C = 500 + 0.5Y – 200i I = 14000 + 0.2Y– 200i G = 1200 - 0.1Y X = 2000 M= 1000 -.05Y Y = A L = 0.33Y – 25i (M/P) = 3000 L = (M/P)

e. If the government increases spending G by 100:

i. What would the new IS Curve look like?

ii. What would the new LM curve look like?

iii. What would the new equilibrium income Y and Interest I be?

iv. At this new equilibrium, what would the level of Investment spending be?

Question 3: Suppose federal government decreases taxes by (ΔT= 10 million) and increases government spending by (ΔG = 20 million), as a result output is changed by (ΔY).

a. (10 points) Assuming that the Federal reserve changes money supply such that the interest rate stays constant and marginal propensity to consume is MPC= 0.6. What is the change in output

(ΔY)? What is ΔY ? What is ΔY? Show your work. ΔT ΔG

b. (10 points) If the fed does not change money supply, do you expect the effect of the changes in tax and spending to be larger or smaller? Explain why?

TRUE OR FALSE
a. When potential real GDP is equal to actual real GDP, there is no unemployment.
b. A significant increase in wages will shift aggregate supply curve to the right in the short run.
c. When the government decided to reduce their spending, then the aggregate supply curve will decrease or shift to the left in the short run.
d. If the central Bank wants to expand aggregate demand, it can increase the money supply, which would increase the interest rate.
e. To find spending multiplier, we have to calculate one divided by marginal propensity to consume.

Explain why true and why false!

Question 1

(a) Use the IS-LM model to illustrate and explain the effects of a decrease in consumer spending on equilibrium GDP and interest rates.

(b) Use the IS-LM model to illustrate and explain how a government could use fiscal policy to offset the effects of the decrease in consumer spending from question 1) above.

(c) Use the IS-LM model to illustrate and explain the change of equilibrium GDP and interest rates resulting from a decrease in the money supply. ALSO, under the standard assumptions, explain the dynamic responses of GDP and interest rates as they move from the original equilibrium to their new equilibrium values.

Use the CO2 data and via Multiple regression select the two variables that predict the CO2 level with the best P-value. Make another table with these two variables and answer the questions. Numerical answers are rounded so choose the answer that matches the best:

Hour CO Traffic Wind

1 2.4 50 -0.2

2 1.7 26 0.0

3 1.4 16 0.0

4 1.2 10 0.0

5 1.2 12 0.1

6 2.0 41 -0.1

7 3.4 157 -0.1

8 5.8 276 -0.2

9 6.8 282 0.2

10 6.6 242 1.0

11 6.3 200 2.3

12 5.8 186 3.8

13 5.5 179 4.6

14 5.9  178 5.4

15 6.8 203 5.9

16 7.0 264 5.9

17 7.4 289 5.6

18 7.4 308 4.9

19 6.4 267 3.8

20 5.0 190 2.5

21 3.8  125 1.4

22 3.5 120 0.6

23 3.3 116 0.4

24 3.1 87 0.1

Answer the questions for Assessment:

13. What are the two selected variables? a. Hour and Traffic b. Wind and Traffic c. Hour and Wind

14. Which of the variables has a better P-value and what is this P-value? (Note: numbers are truncated.) a. Traffic; 0.018 b. Traffic; 6.85E-12 c. Wind; 0.0056 d. Wind; 0.174

15. Based on the table, how would you characterize the Regression fit? a. Poor b. Good c. Excellent

16. What is another name for the coefficient 1.274461 and what is its interpretation based on the data? a. The X-intercept; when the average weekday traffic density and the perpendicular wind-speed component are zero.

b. The slope of an average summer weekday's CO2 concentration. It is how much the CO2 concentration will increase when both the average weekday traffic density and the perpendicular wind-speed component increase by 1 unit.

c. The Y-intercept; It is how much the CO2 concentration will increase when both the average weekday traffic density and the perpendicular wind-speed component are zero.

d. The Y-intercept; it is the average summer weekday CO2 concentration when the average weekday traffic density and the perpendicular wind-speed component are zero.

e. None of these

Just before class starts, you realize that you have mistakenly recycled the second page of your cost accounting homework assignment. Fortunately, you still have the first page of the printout from your spreadsheet (shown below) and you remember that you were able to determine the items on the recycled page from this information.

Required:

a. Find the cost of goods sold.

b. Find the direct materials used.

c. Find the purchases of direct materials. (Do not round intermediate calculations. Round your final answer to the nearest whole dollar.)

d. Find the sales revenue. (Round your final answer to the nearest whole dollar.)

Problem 06-2A Variable costing income statement and conversion to absorption costing income LO P2, P3

Trez Company began operations this year. During this first year, the company produced 100,000 units and sold 80,000 units. The absorption costing income statement for this year follows.

  
Additional Information

1. Selling and administrative expenses consist of $350,000 in annual fixed expenses and $2 per unit in variable selling and administrative expenses.
2. The company's product cost of $25 per unit is computed as follows.

Required:
1. Prepare an income statement for the company under variable costing.
2. Fill in the blanks.