Explain how an increase in federal budget deficit due to recession can stabilize the economy. A deficit means that the government spends more than it receives in tax revenues in a given year (O’Sullivan, Sheffrin, & Perez 2010, p. 374). The total deficit is spending, plus all the interest payments on top of the original debt, minus the total tax revenue (http://www.blurtit.com). There are three factors, known as automatic stabilizers, that affect and stabilize the economy, they are: 1) government purchases of goods and services, such as public safety, government transfer of payments, and unemployment insurance, 2) Medicaid or Medicare etc.,and 3) the collection of taxes. If the government cut taxes or increases transfer payments such as unemployment insurance and food stamps this helps to offset the decrease in household income.
I would make an investment in the company’s 5% convertible bonds. Sepracor’s ROA and ROE is above the average and showing that it is profitable; however, the company’s debt to asset ratio is above 1, which means that most of its assets are financed through debt instead of equity. Sepracor would be in trouble if its creditors were to start demanding repayment. C.) To make valid comparisons between Sepracor and Bayer, you would have to compare the rules for fair value under the U.S GAAP and iGAAP. Under IFRS, convertible bonds are separately recorded as liabilities and stockholder’s equities.
The reserves in banks must correlate with the deposits made by customers. A decrease in ratio allows banks to extend and make new loans increasing money supplies. An increase in the ratio counteracts this process lowering availability. The discount rate charge also play a role in monetary policy. This policy is the cost the Feds ensue to depositing businesses when borrowing short-term loans.
Explain the difference in the required return estimates from the Value Line to the WSJ price data. The company’s return on common stock using the constant growth model is 7.72% Expected dividend yield = .60/27= 2.22% Cap. Gains Yield=5.5% The expected returns decreased from 8.36%to 7.72% which indicates the company is not as risky because the higher the risk the higher the return. B. What is the relationship between dividend yield and capital gains yield over time under constant growth assumptions?
“Another negative factor was a 6.6 percent drop, on an annualized basis, in federal defense spending.” She supports that the decrease in GDP is directly related to the decrease in government spending g which proves how fiscal policy can affect overall economic growth. Monetary policy can be defined as: A central banks changing of the money supply to influence interest rates and assist the economy in achieving price stability, full employment, and economic growth. The article discusses how decline in economic growth can in part be due to uncertainty of interest rates which is directly controlled by the Federal Reserve. The author supports this idea by showing that uncertainty of interest rates has affected business investments and the slowing of the housing
Trident University Macro-Economic Indicators: GDP, CPI, Unemployment, Interest Rates TAWANNA J. RICHARD ECO202 MODULE 2 Cases Dr. Canarella GDP 1. Y= C+ I+ E+ G 1750= 1,000+ 200+ 300+ 250 2. If we increase our domestic energy production, and imported less oil from foreign countries the GDP would raise extremely high due to no out sources. Inflation 1. ((111-106)/106)*111 111-106=5 5/106= 0.0471 0.0471*111= 5% 2.
7 years prior and 6 years after Reagan’s policy implementation, the growth rate was 2.8% and 2.1% respectively (Niskanen & Moore 1996). Other factors to consider when analyzing the REAGAN-SIDE ECONOMICS effectiveness of Reagan’s policy are the unemployment rate, productivity, inflation, and the savings rate. During the 1980s, the savings rate declined, contrary to the intentions of Reagan’s economic policy. Supply side 4 advocates maintain that the data for this time period was not all-inclusive in that it does not include the increase in the value of stocks, bonds and other assets during this time (Niskanen & Moore 1996). Being that these types of assets are From significant parts of savings, this is a logical argument.
CASE STUDY BARACK OBAMA AND THE BUSH TAX CUTS 1. Were the Bush tax cuts of 2001-2003 and 2008 a good idea given the information available at the time? Identify the pros and cons of those tax cuts We find two interpretations for the Clinton Boom by the two political parties in USA. The democrats consider that the boom was caused by the increased in the taxes on most successful individuals that led to a reduction in the deficit meanwhile the republicans considered that it was due to reduction of taxes and deregulation. The central banks, the Fed in USA and the ECB in the European Union, used following tools to deal with the Credit Crisis.
You will need to consider at least two of the strategy concepts. Introduction: The objective of this report is to understand how the global economic recession of 2009 affected Caterpillar Inc. this report will set out and analyse Cat’s recent profitability and performance, looking at information over a ten year period 2000-2010. Taking into account the globalised world in which Caterpillar Inc. operates, this report will introduce two strategy concepts that will explain Cat’s performance. The two strategies that will be included are Porter’s Five forces and Chandler’s. The report will conclude with an overall discussion on the findings and reach a final decision relating back to the original question.
If there is an increase, it must be rounded to the nearest tenth of one percent. If there is no increase, or if the rounded increase is zero, there is no COLA. The last year in which a COLA became effective was 2008. Therefore the law requires that we use the average CPI-W for the third quarter of 2008 as the base from which we measure the increase (if any) in the average CPI-W. The base average is 215.495 (US Government).