ECO/372 Learning Team Aggregate Demand and Supply Models The Keynesian economists would look at the current proposal of increasing taxes as a governmental expression of the intermediate approach to the economy. The government taking control and having the people pay the price for their higher tax bracket. These funds would be used to decrease the amount of money owed by the United States. The effects of the economy would be absorbed and educated responses would be to lessen those impacts. To increase their taxes would be appropriate and this would be stream lining taxes at a time when the economy needs a boost.
Inversely, when a share repurchase is seen as treasury stock, the cost of the treasury stock is naturally disclosed as a decrease in total shareholders’ equity. Alcoa would report the purchase of the treasury stock by debiting treasury stock and crediting cash for the charge of the purchase. The treasury stock ought to be disclosed independently in the shareholders' equity area of Alcoa’s balance sheet as an unallocated cut of shareholders' equity. These shares are treated as issued although not part of common stock outstanding. If subsequently resold for a sum larger than the cost, Alcoa should report for the sale of the treasury stock by debiting cash for the sale cost, crediting treasury stock for cost, and crediting additional paid-in capital from repurchased stock for the excess of the selling price over the cost.
Since, the FED set the interest rate in which the banks borrow from, Edgars’ ability to borrow enough money or establish a line of credit to start his business will be affected by inflation, interest rate and financial policies. However, in some situations, an unanticipated inflation can benefit Edgar, as this type of situation whenever inflation rates are underestimated for the life of a loan, the bank loses and Edgar will
Premier Investments Ltd dropped its current ratios sharply from 4.27 to 1.74. That indicates Premier Investments Ltd transferred its current assets to noncurrent assets or it got more current liabilities. However, it is still has less current liabilities covered it assets compared with David Jones Ltd. So David Jones Ltd needs to make a financial plan to meet the coming current liabilities, or they may get a financial crisis. Quick ratio Current ratio measures the current assets to be turned into cash to meet its debts in one year.
If the big government cuts of taxes for the “job creators,” it will have no positive effect on the economic status, but will decline and collapse eventually. As our nation sinks into inflation, Stockman says “today’s natural security is really doubled Eisenhower’s when he left office in 1961.” The Soviet Union era (the nuclear bomb and Sputnik) caused the economy to spend $400 Billion in today’s dollars; Stockman compares that situation to Ryan’s future plan. Similarly Ryan’s
If the interest rate is low, it will cause more funds to be available, greater expansion and increased employment. If the interest rate is high, it will cause fewer funds to be available, less expansion, and decreased employment. Fiscal policy is an important tool for managing the economy because of its ability to affect the total amount of output produced or the gross domestic product. The first impact of a fiscal expansion is to raise the demand for goods and services. This greater demand leads to increases in both output and prices.
When the demand for U.S. dollars increases, the value of the dollar will increase or appreciate (Stone 2008, pp. 685). As a result, U.S. products become more expensive for foriegners causing a reduction in exports and increasing imports. This not only effects the U.S. economy, but also affects the economies in other countries. Monetary policies influence and are influenced by international developments, including exchange rates, and based on these market conditions the U.S. government can make strategic changes to these policies to maintain the country’s economic stability (full employment, stable growth and price stability).
The theory behind this was that if taxes were increased or left at their same rate, the amount of money brought into the government would be x. But if taxes are cut, GDP rises. The rise in GDP plus the lower taxes would be greater than x, causing an increase in tax revenues. This would push the supply curve to the right also increasing real Gross
Due to the preceding factors that contributed to Mexico’s financial crisis it appears the bailout was a correlation not a cause of the short term negative financial impacts on its citizens. It is possible that Mexico would have experienced the hyperinflation and extreme poverty due to its own financial decision making. Having IMF and foreign country bailouts allowed for a long term financial strategy to stabilize the economy and have additional financial decision makers to assist in the countries long term
Managing aggregate demand(eg) can be self-financing because when the increase in aggregate demand causes an increase in employment, it means that fewer people would be on unemployment benefits. Therefore, the government has less government expenditure and because more people are employed, the government can collect taxes from more people. However, in order to finance government expenditure the government may also need to increase borrowing and in order to achieve this, the government may have to raise interest rates. This may mean that as a policy, managing aggregate demand may not be self-financing. Managing aggregate demand reduces some types of employment more than others.