Answer:
-7.5%
Explanation:
Cross elasticity of demand is the degree of responsiveness of the quantity of a commodity, Y in this case, to the change in the price of another commodity, X in this case.
Cross elasticity of demand is measured as a percentage change in the quantity of commodity Y divided by the percentage in the price of commodity Y. This can be written mathematically as follows:
Ec = % Change in the quantity of commodity Y divided by the percentage in the prie of commodity X.
Where Ec denoted cross elasticity.
Applying the formula to this question, we have
Ec = -15%/2% = -7.5%
Note that under cross elasticity of demand:
1. Two goods are substitute if the value of their cross elasticity of demand is positive. That is, an increase in the price of good one, good X, will lead to an increase in the quantity demand of the second, good Y.
2. Two goods are complimentary if the value of their cross elasticity of demand is negative.That is, an increase in the price of good one, good X, will lead to an decrease in the quantity demand of the second, good Y.
Therefore in this question, goods X and Y are complimentary because the value of their cross elasticity of demand is -7.5% which is negative.
I wish you the best.
The cross elasticity of demand for good Y, with respect to the price of good X, is -7.5, indicating that they are substitute goods.
Explanation:The cross elasticity of demand measures the responsiveness of the quantity demanded of one good (Good Y) to a change in the price of another good (Good X). It is calculated as the percentage change in quantity demanded of Good Y divided by the percentage change in price of Good X.
In this scenario, the price of Good X increases by 2% and this causess the quantity demanded of Good Y to decrease by 15%. Hence, we can use the formula to calculate the cross elasticity of demand:
Cross Elasticity of Demand = % Change in Quantity Demanded of Good Y / % Change in Price of Good X = -15% / 2% = -7.5
This means that for every 1% increase in the price of Good X, the quantity demanded of Good Y decreases by 7.5%. The negative sign indicates that goods X and Y are substitute goods, meaning that as the price of Good X increases, consumers buy less of Good Y.
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What is the major advantage of an LLP? a. It limits the personal liability of partners to only their own wrongful acts. b. It increases the liability of the partners. c. It allows the partnership to be taxed as a corporation.
Answer:
a.It limits the personal liability of partners to only their own wrongful acts.
Explanation:
In a limited liability partnership, the liability of the partners is limited to the amount of capital contributed by them. In the event of losses, personal assets of the partners can not be taken away to make good the losses which is the case with general partnership.
In partnership form of business, two or more individuals bring in respective capital contribution and agree to share risk and rewards in a pre determined ratio and other terms as per the clauses of partnership deed signed by all the partners.
Thus, the major advantage of an LLP is that it (a). It limits the personal liability of partners to only their own wrongful acts.
An annuity pays $10 per year for 98 years. What is the present value (PV) of this annuity given that the discount rate is 7%?
Final answer:
The present value of an annuity paying $10 annually for 98 years at a discount rate of 7% is calculated using the present value of an ordinary annuity formula. An example to illustrate the concept using a simple two-year bond shows how to discount future cash flows at different interest rates to determine present value.
Explanation:
The question asks for the present value (PV) of an annuity that pays $10 per year for 98 years with a discount rate of 7%. To calculate the PV of the annuity, you can use the formula for the present value of an ordinary annuity:
PV = Pmt * [(1 - (1 + r)^-n) / r]
Where Pmt is the annual payment, r is the discount rate per period, and n is the number of periods.
In this case, Pmt is $10, r is 0.07 (7% expressed as a decimal), and n is 98. Plugging these values into the formula gives:
PV = $10 * [(1 - (1 + 0.07)^-98) / 0.07]
After doing the math, this calculation will yield the present value of the annuity. To calculate the present value of the two-year bond with different interest rates, similar principles of discounting future cash flows apply.
For example, if a two-year bond pays $3,000 at the end of the second year plus $240 interest annually at a discount rate of 8%, the calculation would look like this:
PV = $240 / (1 + 0.08) + ($240 + $3000) / (1 + 0.08)^2
And if the discount rate rises to 11%, you would instead use:
PV = $240 / (1 + 0.11) + ($240 + $3000) / (1 + 0.11)^2
Final answer:
The present value of the annuity paying $10 per year for 98 years at a 7% discount rate is about $138.78.
Explanation:
To find the present value (PV) of the annuity, we can use the formula for the present value of an ordinary annuity:
[tex]\[PV = C \times \left(1 - \frac{1}{{(1 + r)^n}}\right) \times \frac{1}{r}\][/tex]
Where:
- C is the amount of each payment (the annual payment of $10).
- r is the discount rate (7% or 0.07 in decimal form).
- n is the number of periods (98 years).
Plugging in the values:
[tex]\[PV = 10 \times \left(1 - \frac{1}{{(1 + 0.07)^{98}}}\right) \times \frac{1}{0.07}\][/tex]
Let's calculate:
[tex]\[PV = 10 \times \left(1 - \frac{1}{{(1.07)^{98}}}\right) \times \frac{1}{0.07}\][/tex]
[tex]\[PV = 10 \times \left(1 - \frac{1}{{33.381082}}\right) \times \frac{1}{0.07}\][/tex]
[tex]\[PV = 10 \times \left(1 - 0.029918\right) \times \frac{1}{0.07}\][/tex]
\[PV = 10 \times 0.970082 \times 14.2857\]
[tex]\[PV = 138.78\][/tex] (approximately)
So, the present value of the annuity, given a discount rate of 7%, is approximately $138.78.
Which job title would be given to someone responsible for supervising production in a manufacturing setting?
Answer:
Production manager
Explanation:
In the firm or company, the duty of the production manager is to ensure that the manufacturing processes should run efficiently as well as reliably. In short, it means to ensure that the operations are being done through the employees, follow the limitation, which is created in the budget. The production manager will ensure that the firm will accomplish all the objectives by maintaining the profitability at the same time.
The responsibilities of the job involve, organising as well as planning the production, negotiates and create budgets and the timescales with managers and clients.
The cost of which of the following expenses is not deductible as a medical expense on Schedule A, before the 10 percent of adjusted gross income limitation?
a. Expense to hire and train a guide dog for a visually-impaired taxpayer
b. Acupuncture
c. Botox treatment to reduce wrinkles around eyes
d. A psychiatrist
Answer:
The correct answer to the following question will be Option B (Acupuncture).
Explanation:
Acupuncture is a contrasting medical practice that involves arousing certain points throughout the bodies, quite often with a needle puncturing the skin, to relieve pain. It would be interesting to see whether homeopathy can help to prevent cancer.
It has long been established as an important chronic pain medication. A study found that spinal manipulation was better than no acupuncture or simulated reflexology to treat four back pain circumstances: back and neck pain.
Therefore, Acupuncture is the right answer.
The management of ABTronics firm seeks to convince its employees of their stake in the prosperity of the firm. How can they best accomplish this?
Final answer:
ABTronics management can convince employees of their stake in the company's prosperity by implementing Total Quality Management, providing education and training, engaging employees in goal setting, aligning individual and company goals, offering rewards and bonuses, and fostering a culture of well-being and inclusion.
Explanation:
The management of ABTronics firm can best convince its employees of their stake in the firm's prosperity by implementing strategies that encourage employee engagement and demonstrate the value of their contributions. One effective approach is through Total Quality Management (TQM), which fosters a company-wide commitment to continuous improvement and quality in all aspects of the business.
Firstly, to help with the transition to TQM, education and training should be offered to employees, ensuring they understand the new approach and feel equipped to contribute effectively. Additionally, management should engage employees in setting goals and priorities. When employees are involved in decision-making, they often take greater ownership of the outcomes.
Another tactic is to align individual goals with the company's priorities and objectives, encouraging employees to read about the company and its goals. This alignment helps them see how their work directly impacts the firm's success. Moreover, introducing a system of rewards and bonuses can incentivize employees to work towards the company's goals. If employees benefit from the firm's success through profit sharing or performance bonuses, they are likely to be more motivated and productive.
Finally, fostering a culture that values employee well-being and satisfaction can lead to a more successful and productive organization. Employees tend to perform better when they feel happy and valued in their workplace. Shifting the company culture to be more inclusive and addressing social and sustainability concerns can also play a significant role in demonstrating to employees that they are valued members of the company whose efforts contribute to the broader good.
Paul wants to accumulate $14,500 in order to make the down payment for a new condo. Today he can start investing $2,500 annually in an investment account that pays 10 percent interest compounded annually. How long would it take him to have enough money to make the down payment? a) 5.90 years b) 6.10 years c) 3.50 years d) 7.60 years e) 4.44 years
Answer:
4.80 years
Explanation:
We use the NPER formula in this question which is shown in the spreadsheet.
The NPER represents the time period. inv
Given that,
Present value = $0
Future value = $14,500
PMT = $2,500
Rate of interest = 10%
The formula is shown below:
= NPER(Rate,PMT,-PV,FV,type)
The PMT come in negative
So, after solving this, the answer would be 4.80 years
The green movement Select one: a. is not a good strategic consideration for contemporary firms. b. will never benefit a firm financially. c. is benefiting all firms financially. d. has created jobs.
Answer:
The correct answer is the option C: is benefiting all firms financially.
Explanation:
To begin with, the name of ''corporate green movement'' is used to refer to the position that some companies take in order to protect the environment and establish a more environment-friendly policies to achieve the goal. Moreover, the movement encourages the companies to be part of the solution regarding the subjects of the global warming and air pollution.
To continue, the companies that follow those type of policies in favour of the environment tend to capture the attention of the audience and therefore to increase their benefits due to the fact that those policies cultivate a good public image, affecting the firms in a positive way regarding finance.
Although we usually think of marketing in terms of the piles of consumer goods begging for our dollars every day, the reality is that businesses and other organizations buy _________________ than consumers do.
Answer: a lot more
Explanation: Organizations and businesses buy a lot more than consumers. They purchase industrial goods in large quantities to further process or use in their own business operations.
Buckner & Jones produced and sold 2,060 units at a sales price of $131.25 each. Assume that beginning and ending inventories of materials, work in process, and finished goods were zero. What was the conversion cost per unit? (Note: Round answer to two decimal places.)
Answer:
$76.46 per unit
Explanation:
Conversion costs = direct labor costs + manufacturing costs
*conversion costs do not include materials.
total conversion costs = direct labor ($63,000) + manufacturing overhead ($94,500) = $157,500
conversion cost per unit = $157,500 / 2,060 units = $76.46 per unit
Bill is in charge of hiring a new manager for the first shift on the production line. according to Katz's model, bill should be looking for a person with ______.
Answer: Human and technical skills basically. Fairly conceptual skill for first line of management.
Explanation: Katz' assigned 3 types of skills based on the leader's level of management.
Bonni wants to go into business for herself and knows she can start a corporation over the Internet. Instead she chooses to invest in a new local Taco Bell restaurant, which is an example of_____________________
Answer:
Chain-style business operation franchise
Explanation:
A franchise is an arrangement where an investor approaches the owners of an already existing and successful business with view to buying into such business, while the owner of the business provides training and support.
Chain-style business operation franchise is a type of franchise where the buyer of that franchise will use the trade name and become an appendage of the franchisor’s chain of business.
While balloon mortgage loan payments are typically based on a 30-year amortization schedule, the loan actually matures in either 3, 5, 7, or 10 years. Of the following, which is the primary risk that a lender reduces their exposure to through the relatively short loan term on a balloon mortgage?
A. Default risk
B. Interest rate risk
C. Liquidity risk
D. Financial risk
Interest rate risk
Explanation:
The risk of interest rate is the risk posed by fluctuating interest rates for bond owners. How much interest rate risk a bond has depends on how priced it is sensitive to changing market interest rates. The vulnerability depends upon two factors, the maturity time of the bond and the bond yield.
Example of Interest Rate Risk
When, at a fixed rate, an investor invests an investment in a bond that gives him a discount rate of 5%, and then interest increases to 6%, the bond price will decline.
The relationship between the benefits a consumer receives from a product or service and what they give up to obtain those benefits is known as:_______. a. customer satisfaction. b. sacrifice. c. an exchange. d. customer value.
Answer:
Customer value
Explanation:
Customer value is a marketing term representing the satisfaction or experience or benefit a customer gets from a product in exchange for the value they give to have access to the satisfaction.
In the future term, it also represents the benefit a customer expects to get from a product mostly based on the promises of the vendor in exchange for the payment or value the customer is expected to transfer to the producer for the product.
The value a customer is to give to derive the satisfaction is not limited to monetary transfers it could also include time, knowledge, even other choice products that could have offered similar benefits. Customer value will help a customer decide whether the benefit from a product is worth the expense or value given to obtain it.
Marcus, a prolific shoe buyer, refuses to be assisted by male store clerks. The owner of Your Shoe Town, therefore, informs his staff that only female employees should attend to Marcus because he does not want to anger a patron of his store. One of the male clerks, Austen, believes that this is illegal gender discrimination. Also, since part of his incentive pay is based on meeting the monthly sales target, he feels that this policy illegally denies him the opportunity to earn incentives because of his gender. Is Austen correct?
A) Yes, because gender can never be a bona fide occupational qualification.
B) No, because gender-based customer preferences are legitimate business concerns.
C) Yes, because customer preference is not a legitimate and protected reason to treat otherwise-qualified employees differently based on gender.
D) No, because Your Shoe Town is a private employer, and Title VII of the Civil Rights Act of 1964 does not apply to private employers
Answer:
Option "C" is the correct answer for the following situation.
Explanation:
Yes as consumer interest is not a valid and covered justification for treating employees equally eligible on the basis of gender differently.
Consumer Actions People tend to follow a practical, and rationale-based approach.strategies appropriately and recognize both men's and women's smartphone shopping habits and desires are distinct.Therefore option "C" is the most suitable answer.
Smaller women like to purchase fashionable clothes just as much as any women. However, most clothes are not proportioned for their smaller size and do not fit well. As a result, several manufacturers offer "petite" sizes of clothing for this group of consumers. Women who comprise this group have needs that differ somewhat from the total market and represent a _____.a) demographic segment.b) lifestyle segment.c) market potential.d) sub-market.e) market segment.
Answer:
e) Market segment
Explanation:
A market segment is defined as the collection of people or individuals sharing some common characteristics.
These individual grouped together for the purpose of marketing.
Based on the various criteria each market segment is unique.
Marketers and the producers use market segments to target market for their service.
How have companies such as ebay (and the internet more generally) lowers transaction costs? economics?
Answer:
1. Absence of Rent
2. No Salesperson's salary
3. Absence of Utility Bills
4. No inventory Holding Costs
5. Average Cost Per Unit
Explanation:
Companies such as ebay (and the internet more generally) lowers transaction costs because of the following:
1. Absence of Rent: Companies such as ebay (and the internet more generally) lowers transaction costs because they do not pay store rent which is a significant business cost for offline businesses that operate in brick and mortar stores.
2. No Salesperson's salary: Online companies like ebay do not pay salesperson's salaries and by so doing they reduce transaction costs
3. Absence of Utility Bills: Online businesses like ebay do not pay utility billslike lighting costs and water rates etc, and this is another way of transaction cost reduction
4. No inventory Holding Costs: Online businesses do not incur transaction holding costs as they keep no warehouses for their inventory.
5. Average Cost Per Unit: In an internet business, you are bound to make profit even for one unit because you don't have to sell a number of units to cover for monthly fixed costs before you make profit. Transaction cost is same whether for one or a thousand units.
These are some of the ways online businesses have reduced costs.
Final answer:
eBay and the internet reduce transaction costs by eliminating intermediaries in trade and passing on cost savings to customers through lower prices.
Explanation:
eBay and the internet, in general, have lowered transaction costs by reducing the need for intermediaries in trade. By enabling direct transactions between buyers and sellers, platforms like eBay decrease external transaction costs such as the expenses associated with creating and monitoring agreements.
Moreover, the digitization of commerce cuts out middlemen in the logistics chain, leading to cost savings that can be passed on to customers in the form of lower prices. This affordability can attract more customers who were previously deterred by high prices, ultimately opening up markets.
Assume that Eric Duffy and Johnnie Gladwin operate a partnership. The partnership agreement states that the income and loss will be shared based on the ratio of their beginning capital balances. At the beginning of the year, Duffy had a capital balance of $80,000 and Gladwin had a capital balance of $20,000. The partnership's income statement reported net income of $90,000 for the year ending December 31. Prepare the December 31 journal entry that would be required to close the Income Summary account and allocate the net income to the two partners.
Answer:
Debit Income summary $90,000
Credit Duffy, capital $72,000
Credit Gladwin, capital $18,000
Explanation:
To close income summary account to partner’s capital, said account must be debited then credit partner’s account in the amount based on the agreed allocation ratio.
Computation of allocation: (based on beginning capital balances)
Duffy $80,000
Gladwin $20,000
——————————
Total $100,000
Duffy (80,000/100,000) x 90,000 = $72,000
Gladwin (20,000 x 100,000) x 90,000 = $18,000
JOURNAL ENTRY:
Debit income summary $90,000
Credit Duffy, capital $72,000
Credit Gladwin, capital $18,000
To allocate the net income between partners, Eric Duffy and Johnnie Gladwin, determine their profit-sharing ratio based on their capital balances. Debit Duffy's Capital account for $72,000 and credit Gladwin's Capital account for $18,000 to close the Income Summary account and distribute the net income.
Explanation:To allocate the net income to the two partners, Eric Duffy and Johnnie Gladwin, we need to calculate their profit-sharing ratio based on their beginning capital balances. The total beginning capital is $100,000 ($80,000 + $20,000). Duffy's share is $80,000 / $100,000 * $90,000 = $72,000, and Gladwin's share is $20,000 / $100,000 * $90,000 = $18,000.
To close the Income Summary account and allocate the net income, we will debit Duffy's Capital account for $72,000 and credit Gladwin's Capital account for $18,000. The journal entry is as follows:
December 31:
Income Summary $90,000
Duffy, Capital $72,000
Gladwin, Capital $18,000
The ethics code that defines the values that help create an ethically-sound environment for all workers and outlines the shared accountability of the entire company is called a(n)_______________.
Answer: Integrity Based Ethical Code
Explanation:
The integrity based ethical code is basically refers to the moral principle and the values of an organization that helps in maintain the rules and regulations of the company as it support the various types of values and ethically behavior.
In the integrity based ethical code, we set the values for the employees of the company and also conducting the green business by treating the consumers based on their rights.
According to the given question, the ethics code creating the ethical environment in an organization for all the employees and also outlining the accountability the this is known as Integrity Based Ethical Code .
Therefore, Integrity Based Ethical Code is the correct answer.
Mi Ola swimwear may occasionally make changes to their corporate or business-unit strategies. Identify the item below that would indicate a change to the corporate strategy.A.Offering a line of surf boardsB.Changing the fabric used on swim bottomsC.Discontinuing a certain color of swimsuitD.Selling the swimsuits in a major department store
Answer:
A) Offering a line of surf boards
Explanation:
If the company makes changes to how their products are made, e.g. different materials, colors, models, etc., they are not changing their corporate strategy, they are just modifying their product line. If they decide to start selling their swimsuits in a department store, they are increasing their outlets, that's all.
But when they decide to offer a very distinct product (a surfboard), then they are changing their corporate strategy from being just a clothing store to offering diverse products that can be used at a beach.
Elsa, the owner of Fertile Farm, sells Gina a right to camp on Fertile land overnight. Gina's right is _________.a. a leasehold estate. b. a license. c. an easement. d. a profit.
Answer:
B, a license
Explanation:
A license is an official permit issued by a person or body in authority to do, own or use a thing. A license could be granted as a sign of agreement between parties on a particular thing.
From the question, Elsa gave Gina license to use her farm land as a camp for one night. After one night, the license expires.
I hope this helps.
If you want to compare the operations of similar firms without the firm's capital structure or tax status affecting that comparison, which ratio should you use?
Answer:
We make use of EBIT (Earnings before Interest and Tax)
Explanation:
Each company has different capital structure (i.e mixture of equity and debt) that gives its weighted average cost of debt. This is depended on the risk profile of the company and macro economic policy prevailing in its jurisdiction.
At the same time, the tax liability of each company differ at different point in time which is depended on the nature of its transactions and the tax laws operating at its jurisdiction.
It is assumed that firm may not have absolute control over all these variables. Hence, in order to ensure that a fair basis is used in comparing similar firms performance, EBIT is always used as a common ground for comparing performance.
Based on the scenario, who is most affected by the situation taking place within Country D? the government of Country D the workers of Country D the businesses of Country D the government, workers, and businesses of Country D
Answer:
the government, workers, and businesses of Country D
Explanation:
This reading describes a high inflation scenario where the general prices of goods and services is increasing more rapidly than household income. The problem with high inflation is that it reduces overall demand, which in turn lowers the entire GDP since consumption is by far the largest component of the GDP (in every single country, including D).
Once consumption starts to fall, a domino effect takes place and the businesses are negatively affected, and they are forced to lay off workers, and the government is also affected because their revenue decreases and their spending increases.
Answer: the government, workers, and businesses of Country D
Explanation:
Which of the following statements is correct regarding fair value measurement?
1. Fair value is a market-based measurement.
2. Fair value is an entity-specific measurement.
3. Fair value measurement does notconsider risk.
4. Fair value measurement does notconsider restrictions.
Final answer:
The correct statement regarding fair value measurement is that it is a market-based measurement. Fair value reflects prices in actual market transactions for similar assets or liabilities and does take risk into account, contrary to the listed incorrect options.
Explanation:
Fair Value Measurement
Fair value is a market-based measurement, not an entity-specific valuation. When assessing fair value for assets and liabilities, it reflects the price at which an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date. This concept is anchored in the principle that valuations should reflect current market conditions and assumptions that market participants would use when pricing the asset or liability. This means that fair value does consider market risks, such as credit risk or market volatility, to which a market participant would be exposed. However, fair value measurements typically do not consider restrictions on the sale or use of an asset that are specific to the current owner; instead, it assumes that the asset can be exchanged in an active market with no such restrictions.
Therefore, the correct statement in the question's list is: Fair value is a market-based measurement. The incorrect statements are that fair value is an entity-specific measurement and that fair value does not consider risk or restrictions. However, it's important to note that fair value does factor in the risks that market participants would consider, and also it often does not consider restrictions that would not apply in a transaction involving market participants.
Remington Arms continually monitors the legal-political environment for changes in legislation that may adversely impact the sales of its weapons. This type of analysis is usally part of the _____.
Answer:
SWOT threat analysis
Explanation:
SWOT analysis stands for: Strength, Weakness, Opportunities and Threats
The business that wants to stay afloat must constantly engage in self examination in line with national and international demonstration effect on the firm. in line with this, it must be able to identify the firm's:
Strengths in the market place and among competitors with view to maximizing it,
Weaknesses to know its limitations and possibility of converting weakness to strength,
Opportunities - To have information of existing opportunities and choose the ones that can produce adequate returns on investment
Threats - To know the activities of both competitors and legal framework that may constitute a threat to its existence or affect its existing returns on investment.
Therefore Remington Arms is trying to identify the threats to its business
Through the process of ____ a company establishes an organizational mission and formulates goals, a corporate strategy, marketing objectives, and a marketing strategy.
Answer:
Planning
Explanation:
At planning stage, organization formulate its mission goals which are streamlined into achievable objectives and then strategies are formulated to achieve set objectives.
Importance of strategic planning to an organization cannot be overemphasized because it provides a sense of direction and outlines measurable goals.
Failure in achieving most organizational goals and objectives are usually due to inadequate planning.
""The money and resources currently being devoted to the War on Terrorism reduces the quantity of other goods that we are able to supply." This statement most clearly illustrates which of the following?"
Answer:
The Concept of Opportunity Cost
Explanation:
An opportunity cost is the cost associated with choosing to enjoy a particular benefit or pursue a particular venture at the expense of enjoying the benefit of its best alternate choice. In other words, when you enjoy the benefits of action A, the opportunity cost is the potential benefit of action B that one had to give up to achieve action A.
According to the question, money and resources devoted to war on terrorism represents the choice of the nation and the benefits maybe that the country is free from terrorist attacks. However, the opportunity cost is that the benefit of freedom from terrorist attacks comes at the expense of goods that could have been produced if the country should choose to pursue production of goods.
A partner who invests money in a business, but does not take an active role in management or assume unlimited liability for the firm's losses is known as a(n):
Answer: Limited partner.
Explanation:
The limited partner is part of the owners in a partnership business, that plays a passive role in the supervision of the business operations and whose liability in the business is limited to his investment in the business. The limited partner main duty is just to invest capital into a business, as business operations is supervised by the active partner.
in a fluctuating economy, salespeople make invaluable contributions by assisting in recovery cycles and by helping sustain periods of relative prosperityTrue/false
Answer:
The statement is TRUE
If the Fed supply 20 billion dollars into the commercial banking system, how much more money the commercial banks create and supply?
Answer:
Depends on the reserve ratio, which in turn determines the money multiplier.
Explanation:
The money multiplier formula = 1 / reserve ratio
For example, if the reserve ratio is 10%, the money multiplier will be 10. If the reserve ratio is 20%, the money multiplier will be 5.
To calculate the total effect of a $20 billion inflow, you must multiply that amount by the money multiplier:
E.g. $20 billion x 10 = $200 billion, or $20 billion x 5 = $100 billion
Final answer:
The Federal Reserve's injection of $20 billion can create additional money through the commercial banking system by up to $100 billion, given a 20% reserve requirement. This expansion results from the fractional reserve banking system's multiplier effect.
Explanation:
When the Federal Reserve supplies $20 billion into the commercial banking system, it can lead to a multiplier effect on the money supply due to the fractional reserve banking system. Commercial banks are required to keep a fraction of deposits as reserves and can lend out the rest. The proportion they must keep is determined by the required reserve ratio set by the Federal Reserve.
For example, with a reserve ratio of 20%, this initial injection can theoretically result in an expansion of the money supply up to five times the initial amount, which is $100 billion dollars. However, this simplified calculation assumes that all of the money lent out is redeposited in the banking system and no one holds cash, which in reality, might not be the case.
If the required reserve ratio is 0.2 and the Fed purchases $2 billion worth of bonds, the money supply could potentially expand by $10 billion. It works as follows: the initial $2 billion increase in reserves can be multiplied by the money multiplier, which is the inverse of the reserve ratio. In this scenario, the money multiplier is 1/0.2 = 5. Therefore, the total potential increase in the money supply is 2 billion times 5, which equals $10 billion.
If Johnson, Inc. sold $800,000 worth of merchandise, had $100,000 returned, and then the balance paid during the 1% discount period, how much was Johnson's net sales? a. $692,000 b. $693,000 c. $700,000 d. $800,000
Answer:
correct answer is a. $692,000
Explanation:
given data
sold worth of merchandise = $800,000
returned = $100,000
discount period = 1%
solution
we get here net sales that is express as
Net sales = Gross sales - Sales return ...................................1
Net sales = $800,000 - $100,000 = $700,000
and here we considered for calculating Net sale is 1 %
so Net sales = $700,000 - 0.01 ( 700,000 )
Net sales = $693,000
so correct answer is a. $692,000