This is because as price falls consumers can afford more goods as their real incomes increase and they feel richer. Real income is the bundle of goods and services that an individual can purchase. As we move from A1 to A2 utility increases from U1 to U2 because we move to a higher indifference curve so now the individual can now consume a better bundle of goods. This backs up the non satiation assumption of consumption which states more is better thus when we increase consumption total utility increase. The four axioms of consumption: Transitivity, Non-satiation, Marginal rate of substitution in consumption and Completeness must be met in order to be able to draw
When there is a greater disposable personal income this will allow consumption to increase due to the money saved from the lower tax rate. Through consumption increasing this will favour economic because the gross domestic product has increased. When government expenditures are increased it will have a multiplier effect on aggregate demand. Because of the multiplier effect, the government can increase spending by only a small amount to achieve a larger, necessary increase in aggregate demand. By doing so, the economy will be able to attain an equilibrium level of real
• A financial asset is considered to have value if it has the ability to generate positive cash flows. • A financial asset is considered to have value if it is acquired at its market value • A financial asset is considered to have value if it is acquired a its book price. When determing the value of a firm, which of the following statements is true? • The timing of cash flows a firm can generate is very important in determing the value of a firm. All else being equal, cash received sooner is better.
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.
Hershey is larger company than Tootsie. The gap between them is evident in the free cash flow. Hershey is also able to leverage more. The current cash debt coverage ratio for Tootsie is greater implying that the cash flow from operating activities will pay for a higher proportion of current liabilities for Tootsie as compared to Hershey. The cash debt coverage ratio for Tootsie is higher indicating that the operating cash flow can meet a higher proportion of total liabilities.
Monetary policy is the use of interest rates to manipulate the level of aggregate demand in the economy and loose (expansionary) monetary policy is a reduction in the interest rates. This will result in an injection of extra consumption because it is cheaper to borrow money on credit cards and therefore allowing consumers to spend more which will cause an increase in aggregate demand (AD). Additionally, extra consumption will allow shops to gain more profit preventing “business failures.” Furthermore, mortgages will be cheaper and therefore consumers feel richer and there will an extra injection of consumption. AD will also increase due to an increase in investment, causing an increase in aggregate demand from AD1 to AD2 as shown below. However,
If the spread is positive, the banks will “always” borrows from other banks. This equals no effect on the money supply. If the Fed wants to restrict the money supply, they may raise the discount rate so that banks and lenders are discouraged from borrowing from the Federal Reserve Bank (McConnell & Brue, 2004). The Fed mandates the required reserve ratio (RRR) for banks and other financial institutions. This ratio determines the dollar amount a financial institution
Debt should not be a problem because we can just borrow more, right? This statement would be correct if our ability to borrow was unlimited, but it is not. At first the government borrowed internally from private sectors. The government did this by selling bonds to the private sectors, essentially selling its own countries funds to spend on its country. The problem of deficit spending out of a recession is inflation.
Furthermore, we know from basic economics that the economy is a never ending cycle of selling and spending. With the Fair Tax Bill, the cycle of economics will be rapidly increased as each and every person will receive every one of the hard earned dollars in their paychecks; nothing will be held back. Americans will be able to pay off their existing debts sooner and purchase new goods and services with a new found, stronger, dollar. This strength of purchase creates a need for product, which results in an need for an increase in production. By eliminating the tax punishment, the Fair Tax Bill will also lead to increased saving and free monies for investing in American companies.
As a result, the wealthy must assume the responsibility of distributing his fortune in a way that it will be put to good use, and not wasted on thoughtless expenses. In this, Carnegie represented a caption of industry who had risen to power by his own hand and refused to worship wealth. I agree with this assumption because this system would be a good way to help those who are less fortunate. Carnegie based his philosophy on the observation that the heirs of large fortunes frequently squandered them in riotous living rather than growing them. Even giving one's fortune to charity was no guarantee that it would be used correctly, since there was no guarantee that a charitable organization would actually use the money pursuant to one’s wishes.