Natalie is struggling to keep up with the recording of her accounting transactions. She is spending a lot of time marketing and selling mixers and giving her cookie classes. Her friend John is an accounting student who runs his own accounting service. He has asked Natalie if she would like to have him do her accounting.

John and Natalie meet and discuss her business. John suggests that he do the following for Natalie.

1.   Hold onto cash until there is enough to be deposited. (He would keep the cash locked up in his vehicle). He would also take all of the deposits to the bank at least twice a month.

2.   Write and sign all of the checks.

3.   Record all of the deposits in the accounting records.

4.   Record all of the checks in the accounting records.

5.   Prepare the monthly bank reconciliation.

6.   Transfer all of Natalie’s manual accounting records to his computer accounting program. John maintains all of the accounting information that he keeps for his clients on his laptop computer.

7.   Prepare monthly financial statements for Natalie to review.

8.   Write himself a check every month for the work he has done for Natalie.

Instructions

1. Identify the weaknesses in internal control that you see in the system that John is recommending. NOTE: Be specific and address the 8 issues presented.
2. Suggest any improvements to the Internal Controls if John is hired to do Natalie’s accounting? Specifically address the weaknesses identified.

Congress just passed close to a $500 billion increase in government spending:

A. How will this impact the Federal Deficit and the National Debt? What are the pros and cons of running such a large deficit and debt?   

Of the following examples, which is associated with government spending for investment?

If Congress passed a new budget that increased taxes it would

Contractionary fiscal policy is recommended when

Assume the government has a budget deficit and that the economy is experiencing a period of growth higher than predicted, tax receipts (collected) by the government are likely to

Illustrate the following event with an AS or AD shift:

a. Government cuts defense spending.

Instructions: Grab either the AD or AS curve and drag-and-drop it in a new position to represent the resulting shift in AD or AS.  

b. Interest rates rise.

Instructions: Grab either the AD or AS curve and drag-and-drop it in a new position to represent the resulting shift in AD or AS.  

c. Imported oil gets cheaper.

Instructions: Grab either the AD or AS curve and drag-and-drop it in a new position to represent the resulting shift in AD or AS.  

d. Taxes on the rich are increased.

Instructions: Grab either the AD or AS curve and drag-and-drop it in a new position to represent the resulting shift in AD or AS.  

e. Consumer confidence increases.

Instructions: Grab either the AD or AS curve and drag-and-drop it in a new position to represent the resulting shift in AD or AS.

f. Taxes on consumers are cut.

Instructions: Grab either the AD or AS curve and drag-and-drop it in a new position to represent the resulting shift in AD or AS.

g. Oil becomes much more expensive.

Instructions: Grab either the AD or AS curve and drag-and-drop it in a new position to represent the resulting shift in AD or AS.

h. Interest rates fall.

Instructions: Grab either the AD or AS curve and drag-and-drop it in a new position to represent the resulting shift in AD or AS.

18. The spending variance measures

a. the difference between expected expenditures for the actual number of outputs and the expected expenditures for the planning budgeted number of outputs

b. the difference between expected expenditures for the actual number of outputs and the actual expenditures for the actual number of outputs.

c. the difference between budgeted expenditures and actual expenditures for the planned number of outputs.

d. what the costs and revenues should have been for the budgeted number of outputs.

e. what the costs and revenues should have been for the static planning budgeted number of outputs.

In the Keynesian AE model, if the autonomous components of consumption, investment, government spending, and net export spending total $250 billion, and the MPS is 0.25, what will unplanned changes in inventory be when output is $1.010 trillion?

$4 billion

–$4 billion

–$5 billion

$5 billion

If real output is currently less than the natural level of real output, which of the following will result from an increase in aggregate demand?

It will make the current recessionary gap smaller.

It will make the current inflationary gap smaller.

It will make the current inflationary gap larger.

It will make the current recessionary gap larger.

What would be the impact on aggregate demand (AD) if the Canadian dollar appreciated?

AD would be unaffected.

AD could either increase or decrease.

AD would increase.

AD would decrease.

What would be the impact on aggregate demand (AD) if exports and imports both fell, but imports fell more than exports?

AD would be unaffected.

AD would decrease.

AD would increase.

AD could either increase or decrease.

During a boom, governments tend to run budget surpluses. What effect will these surpluses have on the savings supply curve?

It will result in a movement along the curve.

It will shift the curve to the right.

There will be no change in the curve.

It will shift the curve to the left.

You are the account manager in charge of Internet advertising at Impact Sales. Spending on Internet advertising has increased steadily over the last few years and you predict the growth will continue.

) Do you think a linear model is appropriate for this data? Explain clearly.

f) Find a quadratic model for this data since 2000.

g) Which model better fits your data? Support your answer with a scatter plot of the data and both models on the same set of axis.

h) Using the quadratic model what is the average rate of change between 2002 and 2004?

i) As the account manager what would you budget for Internet advertising in 2008?

TABLE:

Year Internet Advertising Spending (Billions)

2001 0

2002 0.3

2003 0.8

2004 1.9

2005 3

2006 4.3

2007 5.8

A. Sometimes in order to stimulate more consumer spending, the federal government will compel banks to relax lending standards for a time to entice more people and more business organizations to take out more loans than they would normally do under more restrictive standards.

Is the relaxing of lending standards a wise policy to implement from time-to-time, or is the risk to the overall economy too great to make use of such a policy? Explain in detail why or why not, and also keep in mind that such a relaxed standards policy played a significant role in the economic troubles the country endured primarily in 2007-2008.


B. Since business taxes increase the cost of doing business, and these lead to higher consumer prices and fewer investments, would both business organizations and consumers benefit from lower business taxes, or would only business organizations benefit? Explain.