The economy has been officially out of the worst recession since the Great Depression for 10 years. In August, personal consumption expenditure increased by .1% which is a smaller increase than in the previous months where the personal consumption expenditures increased by .5% per month. How does the change in aggregate expenditures in August affect the aggregate expenditures, GDP, and employment? How does that compare to the changes in consumption in the previous months? Investment spending in August fell by .2%. How does this change in investment spending affect the aggregate expenditures, GDP, and employment? Do you feel the change in consumption, or the change in investment spending is more accurate in predicting how GDP might change in the future? Are you concerned about these changes? Why or why not?

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(a) Suppose the government passes a policy that declares that welfare, employment insurance, and all transfer payments will remain constant regardless of changes in income. Will this policy increase or decrease the volatility (size of the variations in real GDP) of the business cycle?

Hint: Consider the concept of automatic stabilizers and the impact of this policy on the multiplier

(b) Would this policy increase or decrease the magnitude (size of the effect) of the effects of discretionary fiscal policy?

(a) Suppose the government passes a policy that declares that welfare, employment insurance, and all transfer payments will remain constant regardless of changes in income. Will this policy increase or decrease the volatility (size of the variations in real GDP) of the business cycle?

Hint: Consider the concept of automatic stabilizers and the impact of this policy on the multiplier

(b) Would this policy increase or decrease the magnitude (size of the effect) of the effects of discretionary fiscal policy?

1. Below is a list of potential problems that inflation might cause. Use the space on the left to name each of these with the terms used in chapter 8.
   • ___________ Lenders and workers are reluctant to help firms produce output because the real value of future dollar payoffs is unclear.
   • ___________  Workers make decisions on the basis of nominal rather than real wage changes.
   • ­­­____________ Unexpected inflation reduces the real value of loan repayments.
   • ____________  Firms cannot distinguish whether there is a change in the relative price of their good or a change in the overall price level.
   • _____________Restaurants need to spend resources to alter the prices on their menus.
   • _____________Individuals own stock shares for many years and then sell them and are required to pay taxes on the nominal capital gain.
   • ______________People leave work early to shop before inflation changes prices

ANSWER TRUE OR FALSE

1) In an open economy an expansionary monetary policy leads to BOTH a decrease in interest rates and a depreciation of the exchange rate.

2) Under a flexible exchange rate regime, interest rate changes can lead to large changes in the exchange rate that can damage the economy.

3) Fixed exchange rate regimes are vulnerable to speculative attacks which can cause an exchange rate crisis.

4) Better inflation outcomes would occur if the Minister of Finance ran monetary policy.

5) The Taylor rule is a useful way to think about monetary policy and states that interest rates should respond to deviations of inflation from target AND deviations of unemployment from the natural rate of unemployment OR deviations of output from potential output.

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Question: Identify an industry or business in which you are interested. This could be a career interest are...

Identify an industry or business in which you are interested.

What economic principles and associated analytical perspectives/tools are most helpful in deeply understanding the changes that are occurring in the strategic context of the industry in question? Provide a specific example of an economic insight that could be gained and subsequently leveraged to heighten the organization's competitive performance. What are some of the kinds of macro-economic changes that will be difficult to predict with existing economic models?

We are evaluating a project that costs $571,800, has a six-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 80,000 units per year. Price per unit is $40, variable cost per unit is $25, and fixed costs are $685,000 per year. The tax rate is 23 percent, and we require a return of 11 percent on this project. a-1. Calculate the accounting break-even point. a-2.What is the degree of operating leverage at the accounting break-even point? b-1.Calculate the base-case cash flow and NPV. b-2.What is the sensitivity of NPV to changes in the quantity sold? c. What is the sensitivity of OCF to changes in the variable cost figure?

In year 1, a company makes xxx sales and xxx expenses. The end result is negative net income. In year 2, the company's sales and expenses are the same and thus still have negative income.

In year 1, the company sold its assets and reduced some current liabilities, resulting in positive cash flow in operating activities. Investing activities were marginally positive with an increase in ppe. Cash flow from financing activities was negative and the overall balance sheet changes as negative. In year 2, the company saw negative cash flows in operating and investing activities, but a positive cash flow in financing activities. The overall balance sheet changes were positive due to a substantial increase in finance activities.

Compared to year 1, how is the health of the company in Year 2?

Suppose, the government of Australia incurs a budget deficit of $50 billion due to increased government spending in 2020 as result of Covid 19. Because of this, the government borrowing in 2021 increases by the same amount.

a) Show this development using a graph representing the market for loanable funds for Australia . Explain in writing the effect of this on interest rates.

b) Compare the size of equilibrium changes in 1) investment, 2) public saving, 3) private saving and 4) national saving (public saving + private saving) with $50 billion increase in borrowing. Compare the changes (increase/decrease) in these variables indicating same, less or more than the $50 billion.

c) Will the equilibrium quantity of national savings change by more or less than the initial change in public saving? Explain your answer (in 50 words or less)

A large trucking company has an internal mechanics team to conduct frequent express oil changes mid-day for the truck drivers. Two men have applied for the open mechanic position. Frank Goodard is fresh out of trade school and expects a $16 per hour salary. His average service time for an oil change is 12 minutes. Carl Johnson is a veteran mechanic who expects $32 per hour. His average service time is 9 minutes for an oil change. A trucker drivers' time is figured at $12 per hour. Truckers arrive for their oil changes at an average rate of 4 per hour.