If anything affects these factors will result in affecting the demand. For example, if inflation is getting too high, interest rates will be increased to stabilize the economic growth in the economy. This is the result of having the economy already close to full capacity which means that a further increase in AD will mainly cause inflation. Demand side policies include monetary policy and Fiscal policy. Monetary policy are actions of central bank, currency board or other regulatory committee that determines the size and rate of growth of the money supply, which in turn affects interest rates.
These are designed to increase the level of AD and increase in national income. Lower taxation/higher government spending or lower interest rates will encourage more consumption. The diagram shows an increase in real GDP (economic growth) and a falling output gap. We would expect there to be a fall in unemployment. Therefore two objectives have been met.
There are two views of unemployment known as the classical and Keynesian view. Unemployment rates (which are the percentage of the working population unemployed) vary significantly from country to country with some as low as Belarus’ at 1.0% (2009 est. )(CIA World Factbook) and some as high as Zimbabwe’s at 97% (2009 est. )(CIA World Factbook). The UK’s current level of unemployment is at 2.62 million (BBC News Business, 16th Nov 2011) which has remained high since the global downturn at the end of 2008.
If this year the sales mix is different than the historical average, explain what affect this would have on the breakeven point. Any change in proportion in which the products are sold has significant impact on the break-even point. ("Sales mix and break-even point analysis - explanation and example | Accounting For Management", n.d.) If the sales mix changes, the effect on the breakeven point will depend on the unit contribution margin. If the sales mix were changed in favor of the type of aircraft with the higher unit contribution margin than the breakeven point will actually be reduced because of the higher total revenue. Conversely if the sales mix were changed in favor of one of the lower contribution margin aircraft then the volume of aircraft sold would need to be increased in order to make up for the reduced profit per aircraft.
So output can expand and as long as less than full employment very little pressure for the price level to rise. This implies the economy is in a recession or depression and has excess capacity in production with large amounts of idle capital, labor and other resources. Thus if the economy increases output, price levels do not rise because there is so much unemployment and excess capacity already. Firms use idle resources and can increase output without driving the per-unit cost up and hence the price level. When the economy is operating beyond its full employment level of output then if the economy continues to expand there are no longer idle resources; that is all resources are being used since beyond full employment.
decline of bad loans, increased market values of good loans relative to amount of deposits. Increasingly higher interest rate risk – meaning that there is about 30% of excess interest sensitive assets compared to interest sensitive liabilities. SSB’s Major Strengths and Weaknesses in Terms of Profitability at Year-End 1993 According to the calculated ratios in Table-1, SSB had the following strengths and weaknesses. Strengths: Slightly increasing net interest margin (NIM): This indicates favorable control and management of interest income and interest expenses, in relation to SSB’s total assets. Increased earnings spread: This indicates that SSB has established effective borrowing and lending processes.
We can conclude that they use FIFO because the inventory amount increases through 06 in 65% and then decreases in 07 by -13%. The rise in prices in 2006 is the reason why the inventory is more expensive because the increase in purchases was not as big as the increase in inventory price. If they used LIFO the inventory in 2006 would not have
The long run average cost curve is explained by the economies of scale, and diseconomies of scale. It explains why LRAC goes down, and then goes up.As production increases, there are two basic influences at work: Economies of scale, and Diminishing marginal returns.Economies of scale cause average cost to decrease as production increases.Diminishing marginal returns causes average cost to increase as production increases. If Economies of scale outweighs diminishing marginal returns at low volumes, and eventually diminishing marginal returns outweighs economies of scale at high volumes the curve will be a U shape. A typical average cost curve will have a U-shape, because fixed costs are all incurred before any production takes place and marginal costs are typically increasing, because of diminishing marginal productivity.There is an indication of economies of scale if marginal costs are below average costs and average costs decreasing as quantity increase. An increasing marginal cost curve will intersect a U-shaped average cost curve at its minimum, after which point the average cost curve begins to slope upward.
Question 3 Which price increase is needed to offset the profit impact of the increased raw material costs (assuming that volumes are constant)? Which price decrease will result from instituting price-flex (assume a best case and a worst case)? Answer 3 The selling price would increase by offsetting the raw material cost which is given in the “Appendix A” which shows that increase in the price by 6.5% would result in the positive side and a reductioncompany from reduction in the price. Understanding all this is done with respect to the case material. The volume is a constant which is assumed at 80% in the analysis of the price.
There are two types of Fiscal policy put in place to alter the level of aggregate demand; Expansionary fiscal policy and Contractionary fiscal policy. When an economy is in a recession, expansionary fiscal policy is in order. Typically this type of fiscal policy results in increased government spending and/ or lower taxes. A recession results in a recessionary gap meaning that aggregate demand is at a level lower than it would be in a full employment situation. In order to close this gap, a government will typically increase their spending which will directly increase the aggregate demand curve (since government spending creates demand for goods and services).