Suppose an economy has enough labor, capital, and land to produce 1,000 apples per year. Apples are the only product of the economy and the price is $10 per apple. In 2019, money supply is $5, 000 and velocity of money is constant.
a. State the quantity theory of money.
b. Compute nominal GDP and velocity of money in 2019.
In 2020, the central bank of the economy increases the money supply by 10%.
c. Compute nominal GDP and price level in 2020. What is the inflation rate between 2019 and 2020?
d. According to the Fisher effect,
i. how are nominal and real interest rates related to one another?
ii. what will be the impact of the increase in money supply by 10% on nominal and real interest rates respectively?
In: Economics
Suppose you are on the Board of Governors of the Federal Reserve System of the United States (US) economy and are reviewing the following hypothetical economic data in 2019-2020: Real GDP per capita growth rate = 3.1% Unemployment rate = 3.2% Inflation rate = 5.3%
a.Determine what phase of the business cycle the US economy is likely to be experiencing in 2019-2020. Provide specific reasons for your answer
b. Use a well-labelled AD/AS diagram to show the position of this economy in 2019-2020. Explain whether the US government should use expansionary or contractionary monetary policy to move the economy back to the long run, fullemployment GDP equilibrium. Draw the AD curve shift(s) associated with this policy change on your diagram.
In: Economics
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In: Accounting
On 1 July 2019, Gail Ltd acquired all the issued shares of Ray
Ltd for $90 000. The financial statements of Ray Ltd showed the
equity of Ray Ltd at that date to be:
Share capital-10000 $5 50,000
General reserve 25000
Retained earning 15000
All the assets and liabilities of Ray Ltd were recorded at amounts
equal to their fair values at that date.
During the year ending 30 June 2020, Ray Ltd undertook the
following actions.
• On 1 January 2020, transferred $5 000 from the general reserve
existing at 1 July 2019 to retained earnings.
Required:
(a) Prepare the pre-acquisition entries at 1 July 2019.
(b) Prepare the pre-acquisition entries at 30 June 2020.
In: Accounting
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In: Accounting
Parker Corp. develops computer video games for sale. A new development project which began in 2018 reached technological feasibility at the end of Sept. 2019 and the project was available for release to customers early in 2020. Development costs incurred prior to Sept. 30 were $1,600,000 and costs incurred from Oct. 1 to product availability were $1,200,000. Revenues in 2020 from the sale of the new product were $4,000,000 and the company anticipates another $12,000,000 in revenues. The economic life of the software is 3 years.
(a) What amount should Parker capitalize as an intangible asset?
(b) What amount should be amortized in 2020?
(c) At the beginning of 2021, Parker estimates the net realizable value of the software to be $500,000. Prepare any entries required.
In: Accounting
Gunna Ltd acquired a printing machine on 1 July 2018 for $100,000. It is expected to have a useful life of 5 years, with the benefits being derived on a straight- line basis. The residual is expected to be $nil. On 1 July 2019 the machine is deemed to have a fair value of $75,000 and a revaluation is undertaken in accordance with Gunnamatta Ltd’s policy of measuring property, plant and equipment at fair value. The asset is sold for $89 000 on 1 July 2020. Required: Provide the journal entries necessary to account for transactions and events at the following date. Narrations are required. (7 marks. Word limit: n/a) a) 30 June 2019 b) 1 July 2019 c) 30 June 2020 d) 1 July 2020
In: Accounting
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In: Accounting
On January 1, 2020, Winthrop Inc. entered into a lease agreement to lease equipment:
Required:
In: Accounting
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In: Accounting