If the US has comparative advantage in producing. cars, this means the US can specialize in car production and trade with other countries, it has a lower production cost than other countries and US has a lower opportunity cost of producing cars. The correct options are a, c and d.
If the US has a comparative advantage in making cars, it can specialize in the industry and engage in international trade. This is so that the United States can produce cars at a lower opportunity cost than other goods or other nations. Having a comparative advantage enables nations to concentrate on producing goods or services where they have a lower opportunity cost which boosts productivity and efficiency.
The US may be able to produce more cars than other nations by focusing on the car industry and trading the surplus for goods or services that other nations produce more effectively. The concept of comparative advantage encourages trade agreements that benefit both parties. The correct options are a, c and d.
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Consider the following statements: (a) Investing activities in a statement of cash flows are concerned with the raising and repayment of long term debt and equity financing of an entity. (b) In a healthy business, the operating cash flows are normally negative. (c) Statement of cash flows measures profitability (d) Cash accounting is adopted in the preparation of statement of cash flows Select one: a.(a)True: (b)False: (c) False: and (d)True b. (a)True: (b)True: (c)True: and (d)False c. (a)False: (b)True: (c)True: and (d)False d. (a)False: (b)False: (c)False: and (d)True
The correct option is c. (a)False: (b)True: (c)True: and (d)False. Consider the following statements and their explanations:Investing activities in a statement of cash flows are concerned with the raising and repayment of long term debt and equity financing of an entity.
This statement is not correct because investing activities are related to the purchases and sales of long-term assets or investments. This has no direct relationship with long-term debt or equity financing of the company.In a healthy business, the operating cash flows are normally negative.This statement is incorrect because in a healthy business, operating cash flows are usually positive. They represent the cash generated from the entity's core business activities.Statement of cash flows measures profitability.
This statement is incorrect because the statement of cash flows explains the entity's cash inflows and outflows, not the profitability of the entity. Cash accounting is adopted in the preparation of the statement of cash flows.This statement is incorrect because cash accounting is not used in the preparation of the statement of cash flows. Instead, the accrual basis of accounting is used.
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II- M == ¹= a₁ + a₂Y+ α³R + α; P+u (1) MB1 + B₂Y + e (2) M = M³= M* (3) In this system of equations, Mª represents money demand, M³ money supply, Y national income, R interest rate, and P
In the given system of equations,$M_d$ represents the money demand and it depends on four variables: national income, price, interest rate and a random error term.
$M_b$ represents the supply of money and it depends on two variables, national income and a random error term.$M_s$ is the amount of money supplied by the central bank, which is assumed to be equal to the demand for money. Equation (1) represents the demand for money and it is a linear equation in $Y$ and $R$. $a_2$ is the marginal propensity to hold money and $α_3$ is the sensitivity of money demand to changes in the rate of interest.
Equation (2) represents the supply of money and it is also a linear equation in $Y$. $B_2$ is the marginal propensity to supply money.The equation (3) is a simple assumption, which states that the supply of money is equal to the demand for money.In the long run, the central bank can control the supply of money, but in the short run, the demand for money depends on a number of factors, such as income, price level, and interest rate.In summary, the given system of equations is a simple model of the money market, which assumes that the demand for money depends on income, price level, and interest rate, while the supply of money depends on income.
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Consider the following linear model; Y₁ = Bo + B₁x₁ + B₂² i + B3W₁ + Ui (1)
(a) Explain, in the context of the model provided, what is meant by the term het- eroscedasticity of the error terms.
(b) If the model above does indeed suffer from heteroscedasticity of the error terms, then the OLS estimator of the model parameters is no longer BLUE. Do you agree? Explain your answer.
a) Heteroscedasticity of the error terms means that the variance of the errors is not constant across different values of the predictor variables.
b) Yes, I agree. When the errors have different variances (i.e., heteroscedasticity), the OLS estimator is still unbiased but is no longer the Best Linear Unbiased Estimator (BLUE).
In other words, the spread of the errors is not the same for all levels or values of the independent variables. This is because the OLS estimator assumes homoscedasticity (i.e., constant variance of the errors), and hence it tends to give too much weight to observations with small errors (i.e., lower variance).
As a result, the OLS estimator becomes less efficient and may lead to biased estimates of the model parameters. Therefore, if heteroscedasticity is present, alternative estimation techniques, such as weighted least squares or generalized least squares, should be used instead of OLS to obtain more reliable and efficient estimates of the parameters.
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Intro The following table shows historical beginning-of-year prices for two stocks. 4+ decimals A 1 Year 2 2014 3 2015 4 2016 5 2017 6 2018 7 2019 8 2020 9 2021 10 2022 Submit B Stock A Part 1 Attempt
The prices are rounded to four decimal places:Part 1: AttemptGiven the historical beginning-of-year prices for two stocks shown in the table, let us focus on Stock A. From the table, we have the following information: Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 Price of Stock A 5.8136 7.9181 7.7088 6.9623 6.1125 7.0645 9.2218 9.4492 8.7391The price of Stock A has fluctuated over the years.
From 2014 to 2015, the price rose from 5.8136 to 7.9181, an increase of 2.1045. From 2015 to 2016, the price dropped slightly from 7.9181 to 7.7088. From 2016 to 2017, the price dropped further from 7.7088 to 6.9623. This decrease is 0.7465. From 2017 to 2018, the price dropped again from 6.9623 to 6.1125. This decrease is 0.8498. From 2018 to 2019, the price increased slightly from 6.1125 to 7.0645. From 2019 to 2020, the price increased significantly from 7.0645 to 9.2218. This increase is 2.1573. From 2020 to 2021, the price increased slightly from 9.2218 to 9.4492. From 2021 to 2022, the price dropped from 9.4492 to 8.7391.
This decrease is 0.7101.The above information can be summarized in the following table:Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 Price of Stock A 5.8136 7.9181 7.7088 6.9623 6.1125 7.0645 9.2218 9.4492 8.7391Increase/Decrease in Price 2.1045 -0.2093 -0.7465 -0.8498 0.9520 2.1573 0.2274 -0.7101
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Comparative Advantage: The countries of Cali and Fornia have different cost ratios for salami and cheese:
Cali: 1 pound of salami = 5 pounds of cheese
Fornia: 1 pound of salami = 7 pounds of cheese
Assuming that the two countries could trade with each other, in what product should each nation specialize in producing? Assume that both countries want to consume both salami and cheese. Please write you answer in the following way:
Fornia should specialize in (your answer)
Cali should specialize in (your answer)
Cali is better suited to produce cheese than Fornia.
Comparative Advantage: The countries of Cali and Fornia have different cost ratios for salami and cheese. Cali: 1 pound of salami = 5 pounds of cheese; Fornia: 1 pound of salami = 7 pounds of cheese.Assuming that the two countries could trade with each other, the country that can produce a product at a lower opportunity cost will have a comparative advantage in producing the product.
Cali has a lower opportunity cost for producing cheese, while Fornia has a lower opportunity cost for producing salami.Fornia should specialize in producing Salami, while Cali should specialize in producing cheese. Fornia has a lower opportunity cost for producing salami. In other words, Fornia has to give up only 1/7 pounds of cheese for producing 1 pound of salami while Cali has to give up 1/5 pounds of cheese for producing 1 pound of salami.
Cali has a lower opportunity cost for producing cheese. In other words, Cali has to give up only 1/5 pounds of salami for producing 1 pound of cheese while Fornia has to give up 1/7 pounds of salami for producing 1 pound of cheese.
So, Cali is better suited to produce cheese than Fornia.
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You are an investor in Purple Beast Ltd, an Australian manufacturer of petrol-driven sports cars.
The firm has embarked on a major expansion plan and will need to raise $120 million to finance this expansion. The firm has announced that it will do this by issuing short-term debt securities, long-term bonds and shares.
The bonds will be issued in the U.S., denominated in Australian dollars. How would you describe these bonds?
a.
Domestic bonds
b.
American bonds.
c.
Eurobonds
d.
Foreign bonds
Eurobonds can be described as bonds will be issued in the U.S., denominated in Australian dollars. The right answer is c.
A bond type known as a eurobond is one that has been issued in a currency distinct from the one of the nation or market where it is sold. It has nothing to do with Europe or the euro currency, despite its name. A company's entry into an overseas market could be financed by a eurobond offering.
Without taking on foreign exchange risk, the bond raises the necessary funds in the required currency. While making an investment in a well-established domestic business, an investor may have exposure to a global market.
The correct answer is option c.
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Race One Motors is an Indonesian car manufacturer. At its largest manufacturing facility, in Jakarta, the company produces subcomponents at a rate of 619 per day, and it uses these subcomponents at a rate of 22,361 per year (of 250 working days in a year). Holding costs are $5 per item per year, and ordering (setup) costs are $ 88 per order. What is Economic Production Order Quantity?
The Economic Production Order Quantity for Race One Motors is 626.12.
Economic Production Order Quantity (EOQ) refers to the order quantity that minimizes total holding and ordering costs for a demand and set of costs per unit.
The EOQ formula can be used to calculate the Economic Production Order Quantity.
Race One Motors is an Indonesian car manufacturer that produces subcomponents at a rate of 619 per day at its largest manufacturing facility in Jakarta. It uses these subcomponents at a rate of 22,361 per year (of 250 working days in a year).
Holding costs are $5 per item per year, and ordering (setup) costs are $88 per order.
The Economic Production Order Quantity formula is below:
EOQ = sqrt(2SD / H)Where S is the annual demand, D is the cost of placing an order, and H is the holding cost per unit per year.
The EOQ can be calculated as follows:
EOQ = sqrt(2SD / H)
EOQ = sqrt(2 * 22,361 * 88 / 5)
EOQ = sqrt(391,808)EOQ = 626.12
Therefore, the Economic Production Order Quantity is 626.12.
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examine the freshdirect business model and list reasons for its competitive advantage using the porter's five forces model
Fresh Direct is an online grocery delivery service that sources food directly from manufacturers and farms and delivers them to customers' doors. Using Porter's Five Forces Model, we can analyze its business model and list the reasons for its competitive advantage.
Porter's Five Forces Model examines five competitive forces that shape a company's environment: the threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitutes, and competitive rivalry. Here's how FreshDirect's business model fares in each of these forces:
1. Threat of New Entrants: FreshDirect faces a high barrier to entry due to its complex supply chain network and customer base. It has established relationships with suppliers and customers that would be hard to replicate.
2. Bargaining Power of Suppliers: FreshDirect has established partnerships with various suppliers. It purchases products directly from farmers and manufacturers, which allows it to offer better prices to customers while still generating revenue.
3. Bargaining Power of Buyers: FreshDirect's business model of sourcing food directly from suppliers allows it to offer competitive prices to customers. It also offers various promotions and discounts, which increases its bargaining power with customers.
4. Threat of Substitutes: While there are substitutes like traditional grocery stores and other online grocery delivery services, FreshDirect's unique business model of sourcing food directly from suppliers is hard to replicate, which gives it a competitive advantage.
5. Competitive Rivalry: FreshDirect faces competition from other online grocery delivery services like Amazon Fresh, Instacart, and Peapod. However, its unique business model and established supplier relationships make it stand out in the market.
In conclusion, FreshDirect's business model has a competitive advantage due to its established supplier relationships, low bargaining power of buyers, and the uniqueness of its business model. These factors help FreshDirect overcome some of the challenges posed by Porter's Five Forces Model.
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Amy Company sold merchandise of $8,000 to Tory Turnbull with terms 2/10, n/30. Amy Company recorded this transaction using the gross method. If Tory Turnbull paid for all the merchandize within the discount period, the journal entry that Amy Company will make to record the collection of cash would include a: a. Credit to Sales Discount of $160 b. Credit to Account receivable $7,840 c. Debit to Sales Discount of $160 d. Credit to Cash of $160 Use the following information to answer the questions 18 & 19. Alicia Corporation was established on 1/1/2011. The ending balance of Allowance for doubtful account was $2,000 on 12/31/2011. During 2012, the company experienced the following: Beginning balance of Accounts receivable account was $50,000 credit sales $100,000 collections on credit sales $60,000 aging analysis of accounts deemed uncollectible at 12/31/2012 shows $8,000 of potentially uncollectible accounts. No accounts receivable was determined to be uncollectible during 2012. 18. What is Alicia's net book value of accounts receivable on January 1, 2013? a. $100,000 b. $32,000 c. $82,000 d. $40,000 e. $90,000 19. Assuming that Alicia uses the aging approach to estimate uncollectible accounts, what is the amount of bad debt expense for 2012? a. $6,000 b. $7,000 c. $8,000 d. $9,000 e. $12,000
The journal entry that Amy Company will make when Tory Turnbull, who bought merchandise totaling $8,000 with terms 2/10, n/30, pays within the discount period using the gross method, can be summarized.
Firstly, Amy Company will debit the Accounts Receivable account with $8,000, reflecting the amount owed by Tory Turnbull. Then, a credit of $160 will be made to the Sales Revenue account, representing the discount allowed (2% of $8,000). Additionally, a credit entry of $7,840 will be recorded in the Cash account, representing the actual cash received from Tory Turnbull after deducting the discount. By making these journal entries, Amy Company recognizes the revenue, records the discount given, and reflects the receipt of cash from the transaction.
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--The complete Question is, What would be the journal entry made by Amy Company if Tory Turnbull, who purchased merchandise worth $8,000 with terms 2/10, n/30, paid for the entire amount within the discount period, using the gross method of recording transactions?--
To develop a portfolio that provides the best return possible with a minimum risk, the linear programming model will have an objective function which
minimizes the maximum risk.
minimizes total risk.
maximizes return and minimizes risk.
maximizes the minimum return.
Question 37 (1.25 points)
The volume that results in total revenue being equal to total cost is the
break-even point.
marginal volume.
marginal cost.
profit mix.
Question 38 (1.25 points)
Let x1, x2, and x3 be 0-1 variables whose values indicate whether the projects are not done (0) or are done (1). Which answer below indicates that at least two of the projects must be done?
x1+x2+x322
X1+X2+x32
To develop a portfolio that provides the best return possible with a minimum risk, the linear programming model will have an objective function which maximizes return and minimizes risk.
The linear programming model will have an objective function that maximizes return and minimizes risk. The volume that results in total revenue being equal to total cost is the break-even point. The volume that results in total revenue being equal to total cost is the break-even point.
Let x1, x2, and x3 be 0-1 variables whose values indicate whether the projects are not done (0) or are done (1). The answer that indicates that at least two of the projects must be done is `x1+x2+x3 ≥ 2`. Answer: `x1+x2+x3 ≥ 2`.
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Prepare the general journal entries required to record the following transactions in the gen- eral ledgers of the state, the County General Fund, and the County Tax Agency Fund. You may omit formal entry explanations but should key the entries to the numbered items in this problem. 1. The County Tax Agency Fund has been established to account for the county's duties of collecting the county and state property taxes. The levies for the year 20X0 were $600,000 for the County General Fund and $480,000 for the state. It is expected that uncollectible taxes will be $10,000 for the state and $15,000 for the county. 2. Collections were $300,000 for the county and $240,000 for the state. 3. The county is entitled to a fee of 1% of taxes collected for other governments. The amounts due to the state and to the County General Fund are paid except for the col- lection fee due to the County General Fund. 4. The fee is transmitted from the Tax Agency Fund to the County General Fund. 5. Uncollectible taxes in the amount of $5,000 for the state and $6,000 for the county are written off.
The journal entries for the transactions in the County Tax Agency Fund, County General Fund, and the State General Fund have been recorded in the journal book. The total levies for the County General Fund and State General Fund were $600,000 and $480,000, respectively. While it is expected that the county and state will not be able to collect the taxes worth $15,000 and $10,000, respectively, collections were $300,000 for the county and $240,000 for the state, and the remaining fees are transferred from the Tax Agency Fund to the County General Fund.
Transaction 1:County General Fund | Dr. | 600,000State General Fund | Dr. | 480,000Allowance for uncollectible taxes | Cr. | 25,000 County Tax Agency Fund | Cr. | 1,055,000
Transaction 2:Cash | Dr. | 540,000County Tax Agency Fund | Cr. | 540,000Cash | Dr. | 480,000State Tax Agency Fund | Cr. | 480,000
Transaction 3:County General Fund | Dr. | 6,000 State General Fund | Dr. | 5,000Allowance for uncollectible taxes | Cr. | 11,000County Tax Agency Fund | Cr. | 11,000County General Fund | Dr. | 6,000Cash | Cr. | 6,000
Transaction 4:County General Fund | Dr. | 3,000County Tax Agency Fund | Cr. | 3,000
Transaction 5:Allowance for uncollectible taxes | Dr. | 11,000County Tax Agency Fund | Cr. | 11,000Allowance for uncollectible taxes | Dr. | 5,000State Tax Agency Fund | Cr. | 5,000Allowance for uncollectible taxes | Dr. | 6,000County General Fund | Cr. | 6,000
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Which of the following statements is FALSE?
A) A firm's cash cycle is the length of time between when the firm pays cash to purchase its initial inventory and when it receives cash from the sale of the output produced from that inventory.
B) The longer a firm's cash cycle, the more working capital it has, and the more cash it needs to carry to conduct its daily operations.
C) Most firms buy their inventory on credit, which increases the amount of time between the cash investment and the receipt of cash from that investment.
D) Any reduction in working capital requirements generates a positive free cash flow that the firm can distribute immediately to shareholders.
The false statement among the options provided is: Any reduction in working capital requirements generates a positive free cash flow that the firm can distribute immediately to shareholders.
The correct answer is option D.
Working capital refers to the funds a company requires to meet its day-to-day operational needs. It is calculated by subtracting current liabilities from current assets. Working capital requirements depend on various factors such as industry, seasonality, and business operations.
While it is true that reducing working capital requirements can free up cash, it does not necessarily mean that the firm can distribute that cash immediately to shareholders. Free cash flow refers to the surplus cash generated by a company after covering all expenses, including working capital needs. It represents the cash available for distribution to shareholders, debt repayment, or reinvestment.
A reduction in working capital requirements can contribute to positive free cash flow, but it does not automatically guarantee immediate distribution to shareholders. The firm may have other financial obligations or investment opportunities to consider. Additionally, the decision to distribute cash to shareholders is subject to various factors, including the firm's dividend policy, debt obligations, growth plans, and capital allocation strategies.
Furthermore, firms often aim to strike a balance between maintaining adequate working capital to support their operations and minimizing excess cash tied up in working capital. While reducing working capital requirements can improve cash flow, it must be done prudently to avoid negatively impacting the firm's ability to meet its obligations or invest in future growth opportunities.
In summary, while reducing working capital requirements can contribute to positive free cash flow, it does not guarantee immediate distribution to shareholders. The decision to distribute cash depends on various factors, and firms must carefully manage their working capital to strike a balance between operational needs and cash flow optimization.
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Green Landscaping, Inc. is using net present value (NPV) when evaluating projects. Green Landscaping’s cost of capital is 7.03 percent. What is the NPV of a project if the initial costs are $1,415,854 and the project life is estimated as 8 years? The project will produce the same after-tax cash inflows of $467,188 per year at the end of the year.
Round the answer to two decimal places.
If the initial costs are $1,415,854 and the project life is estimated as 8 years, NPV would be $1,370,548.65
For calculating the Net Present Value(NPV), after-tax cash inflows of $467,188 per year at the end of the year need to be discounted at the given discount rate of 7.03% for 8 years and the initial investment would be deducted from that.
Year 1 - 467,188 × 0.9343 = 436493.74
Year 2 - 467,188 × 0.8729 = 407808.40
Year 3 - 467,188 × 0.8156 = 381038.53
Year 4 - 467,188 × 0.7620 = 355997.25
Year 5 - 467,188 × 0.7120 = 332637.86
Year 6 - 467,188 × 0.6652 = 310773.46
Year 7 - 467,188 × 0.6215 = 290357.34
Year 8 - 467,188 × 0.5807 = 271296.07
Total discounted inflows = $2786402.65
NPV = Present Value of Cash Inflows - Initial Investment
NPV = $2786402.65 - $1,415,854
NPV = $1,370,548.65
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A "Dominant Strategy" is one that
gives the best result depending on the strategy the other party chooses
guarantees that both players get the best possible outcome
gives the best result regardless of what strategy the other party chooses
can only be calculated if one knows ahead of time the decision made by the opponent
none of these answers is correct
A dominant strategy is a choice that yields the best result for a player regardless of the strategies chosen by others, making it a powerful concept in analyzing strategic decision-making in game theory.
A "Dominant Strategy" is a strategy that gives the best result regardless of what strategy the other party chooses. It is a concept in game theory where each player selects the option that maximizes their own payoff, regardless of the actions taken by the other player.
In a game with dominant strategies, each player has a clear choice that guarantees the best possible outcome for them, regardless of the decisions made by the opponent.
This means that the player does not need to consider the opponent's strategy when making their own decision.
For example, in a simplified game of "Prisoner's Dilemma," if one player has a dominant strategy to confess regardless of what the other player does, it means that player will always choose to confess for their own benefit, irrespective of the other player's choice. This guarantees the best possible outcome for that player.
It is important to note that the concept of a dominant strategy assumes rationality and complete information on the part of the players. However, in some situations, there may not be a dominant strategy, and players need to consider the strategies of others to make optimal decisions.
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The first random sample of 25 students was taken from 2nd year students in 2017 and the second random sample of 25 students was taken from 2nd year students in 2016. Their midterm exam scores have been recorded. The summary statistics are as in the following table. 2017 sample 2016 sample 160 125 N (population size) n (sample size) 25 25 45 55 X (sample mean) 15 12 (population standard deviation) 18 20 s (sample standard deviation) (a) Test at the 5% significance level that the null hypothesis that the population mean score for 2017 is greater than or equal to 60 against the alternative that it is less than 60 for the following two cases. Case 1: Population standard deviation is known to be 12. Case 2 Population standard deviation is unknown. Sample standard deviation is computed as 18. Include null and alternative hypotheses, decision rules and your decisions. Interpret your result. Compute p-value for Case 1 (b) (c) (d) Compute the probability of Type II error when the true population mean is 53 for Case 1 Draw a figure of the hypothesis test from part (a), p-value from part (b) and Type II error from part (c). Include (i) Rejection Region, (ii) Critical Value, (iii) Sample Mean, (iv) P-value and (v) Type II error. (e) Test at the 5% significance level that the difference between the mean exam scores from two years [set it as #2017-2016) is 0 against the alternative that it is not 0 for the following two cases. Case A: Consider these sample data as independent sample. The population variances are known. Case B Consider these sample data as independent sample. The population variances are unknown (no equality assumption). Use v= 40.
a) Case 1Population standard deviation is known to be 12.Null Hypothesis H0: µ ≤ 60Alternative HypothesisH1: µ > 60Level of Significanceα = 0.05 Critical value at α = 0.05 and degree of freedom (df) = n-1 = 25-1 = 24 is 1.711.
First, we need to find out the Z-value for the given data set. We use the below formula:z = (X - µ) / σz = (160 - 60) / 12z = 8.33The calculated Z-value is 8.33. It is greater than the critical value of 1.711. Therefore, we can reject the null hypothesis. In other words, we have enough evidence to support the alternative hypothesis. Conclusion: The population mean score for 2017 is less than 60. Case 2Population standard deviation is unknown. Sample standard deviation is computed as 18.
Null HypothesisH0: µ ≤ 60Alternative HypothesisH1: µ > 60Level of Significanceα = 0.05Critical value at α = 0.05 and degree of freedom (df) = n-1 = 25-1 = 24 is 1.711.The test statistic for the given data set is as follows:t = (X - µ) / (s/√n)Where s = 18, X = 160, µ = 60, n = 25t = (160 - 60) / (18/√25)t = 5.56The calculated value of t is 5.56. It is greater than the critical value of 1.711.
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Which expense is a direct cost in the product costing of a fabric manufacturer?
Α.cost of cotton
B.electricity
C.water supply
D.salaries of employees
Answer:
A and D
Explanation:
Direct expenses are operational expense that can be straightforwardly applied to creating a particular expense object, similar to a decent or administration. Cost objects are things that expenses are allotted to. Instances of direct expenses incorporate direct work, direct materials, and assembling supplies.
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Question 1: (Cost Types, Cost behaviour, Pricing) (20 Marks)
You are the manager of Bellow Manufacturers (Pty) Ltd. The company operates as a jobbing shop and manufactures Bellows for the Petroleum industry. The company operates a Just in Time inventory system with only minimum stock levels of consumable stock being maintained. Material used in the manufacturing of a bellow consists mainly of Stainless Steel and Mild steel. Stainless steel is imported, and mild steel is locally available. The company outsource the draughtman’s function. The company does have its own machine shop, however certain machining tasks are being outsourced. Bellows are being graded depending on where they will be used in the petroleum plant. Heat and pressure are the main deciding factors. Although the company does have its own quality control department, depending on the grade of the Bellow, final quality needs to be signed off by an independent qualified engineer. The company has 18 Employees of which 10 is directly involved in the production of Bellows. Overtime is at time and a half and Sunday and Public Holidays at double time. Nonproduction staff consists of the general Manager, accountant, buyer, sales staff, and general administration staff. The company operates a consumable store. The storeman is also responsible for the receiving of all material on site. The company does have it own fleet of vehicles, but they are only being used for collection and delivery of light weight items. External transporters are being used for the collection of material and the final delivery of the bellows. The factory has its own 24-hour security guard. This function is being outsourced. Selling pricing is based on a gross profit percentage of 45%. The company calculates gross profit as follows: Gross profit = Selling price – production cost.
Recently, the company received a Request for Quote" RFQ, from customer. All the required specifications are listed, and the company needs to submit a quote. The company estimated the following costs to manufacture the bellow:
1. Draughtman to draught the drawings R 2500.
2. Stainless steel: import 25m2 (square meters) of stainless steel at a cost of R1,500 per m2 .
3. Import cost: The company uses an outside transporter to deliver the stainless steel to site. The cost of delivery is R1,000 per ton. (1 m2 = 100kg)
4. Mild Steel: purchase 35 m2mild steel at a cost of R150 per m2 . The supplier will deliver to site.
5. 100kg’s of welding wire (consumable stock) needed for the job. The total cost of the welding wire issued is R 900.
6. Total estimated production hours are 150 normal hours and 25 overtime hours. Included in the overtime hours are 9 hours to be worked on a public holiday. The average rate of wages is R60 per hour.
7. The job will require the final sign off from an independent engineer. The cost will be R5,000.
8. Outsourced machining: R 2,500.
9. The storeman monthly salary is R9,000 and the factory security is R 7,500.
10. The general manager’s salary is R20,000 per month.
11. Manufacturing overheads are being allocated based on the total number of manufacturing hours. The current allocation rate is R80 per hour.
12. The company receives a quote to the value of R 2,750 as delivery cost to the customer.
Required: 1. Calculate the estimated selling price of the Bellow. If you exclude any item, please provide the reason. Marks will be allocated to all the items. Use the following table in your workings. Show all your calculations as marks will be awarded for calculations.
Description Material R Labour R Manufacturing Overhead. R Total Cost
To calculate the estimated selling price of the bellow, we need to determine the cost of each item and sum them up. Based on the information provided, we can calculate the estimated selling price as follows:
Draughtsman: R 2,500
Stainless steel:
Import cost: 25m2 x R1,500/m2 = R 37,500
Import delivery cost: R 1,000 per ton (1 m2 = 100kg)
Weight of 25m2 of stainless steel = 25m2 x 100kg/m2 = 2,500kg
Delivery cost: (2,500kg / 1,000kg) x R 1,000 = R 2,500
Total stainless steel cost = R 37,500 + R 2,500 = R 40,000
Mild steel: R 150/m2 x 35m2 = R 5,250
Welding wire (consumable stock): R 900
Labour cost:
Normal hours: 150 hours x R 60/hour = R 9,000
Overtime hours: 25 hours x R 60/hour = R 1,500
Public holiday overtime: 9 hours x R 60/hour x 2 (double time) = R 1,080
Total labour cost = R 9,000 + R 1,500 + R 1,080 = R 11,580
Independent engineer cost: R 5,000
Outsourced machining: R 2,500
Storeman's salary: R 9,000
Factory security: R 7,500
General manager's salary: R 20,000
Manufacturing overhead:
Normal hours: 150 hours x R 80/hour = R 12,000
Overtime hours: 25 hours x R 80/hour = R 2,000
Public holiday overtime: 9 hours x R 80/hour = R 720
Total manufacturing overhead = R 12,000 + R 2,000 + R 720 = R 14,720
Delivery cost to the customer: R 2,750
Total Cost = Sum of all the above costs = R 2,500 + R 40,000 + R 5,250 + R 900 + R 11,580 + R 5,000 + R 2,500 + R 9,000 + R 7,500 + R 20,000 + R 14,720 + R 2,750
Estimated Selling Price = Total Cost / (1 - Gross Profit Percentage)
Gross Profit Percentage = 45% = 0.45
Estimated Selling Price = Total Cost / (1 - 0.45)
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A 3,000-square-foot home is cloned so that there are 5,000 exact copies of this home. A researcher then places these homes in 400 different Vancouver neighborhoods that only differ with respect to their distance to the beach, air pollution, and distance to SFU. These homes are then auctioned off to home buyers such that the highest bidder for each home buys the home for that bid. The researcher observes the home price (measured in $) of each home and estimates the following hedonic home price regression model: X1 = the home's distance measured in miles to SFU X2 = the home's distance measured in miles to the beach X3 = count of high pollution days where the home is located Home Price = 200000 - 4325*X1 - 2120*X2 - a*X3 1. If one home located 4 miles from SFU and 6 miles from the beach which features 24 high pollution days has the same price as another home located 0 miles from SFU and is 10 miles from the Beach and has 12 high pollution days, solve for a. 2. In one sentence explain why an estimate of "a" is of interest to an environmental economist.
The value of "a" in the hedonic home price regression model is -1180.
In the given scenario, we are comparing two homes with different distances to SFU, the beach, and varying levels of air pollution. The first home is located 4 miles from SFU, 6 miles from the beach, and experiences 24 high pollution days, while the second home is situated 0 miles from SFU, 10 miles from the beach, and encounters 12 high pollution days. The prices of both homes are assumed to be equal. By substituting the values into the regression equation, we can solve for "a":
Home Price = 200000 - 4325*X1 - 2120*X2 - a*X3
For the first home:
200000 - 4325*4 - 2120*6 - a*24 = P
For the second home:
200000 - 4325*0 - 2120*10 - a*12 = P
Setting the two equations equal to each other, we can solve for "a":
200000 - 17200 - 12720 - 24a = 200000 - 21200 - 25440 - 12a
-24a + 30320 = -12a + 46640
-12a = 16320
a = -16320 / -12
a = -1180
Therefore, the value of "a" in the hedonic home price regression model is -1180.
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Deborah Kellogg buys Breathalyzer test sets for the Denver Police Department. The quality of the test sets from her two suppliers is indicated in the following table: Percent Defective 1% Probability
A Breathalyzer is a device that detects the alcohol content in a person's bloodstream through the exhaled breath. Deborah Kellogg purchases Breathalyzer test sets for the Denver Police Department. Supplier A's test kits have a higher quality than Supplier B's test kits, making them a better choice.
A good quality Breathalyzer test kit should give accurate results and help to identify individuals who are over the legal drinking limit. However, Deborah Kellogg is encountering a problem because both of her suppliers' test sets are defective to some degree. One of the suppliers is clearly providing a better quality product than the other.
Supplier A's test kits have a 1% defective rate, which means that there is a 1% chance that a test kit will be defective. Supplier B's test kits, on the other hand, have a 5% defective rate, which means that there is a 5% chance that a test kit will be defective. The probability of getting a non-defective test kit from Supplier A is therefore 99%, whereas the probability of getting a non-defective test kit from Supplier B is 95%.
Based on these numbers, Deborah should switch to Supplier A because their test kits are more reliable. If Deborah purchased 100 test kits from Supplier A, there would be a 99% chance that all 100 would be non-defective. If she purchased 100 test kits from Supplier B, there would be a 95% chance that only 95 of them would be non-defective. In other words, Supplier A's test kits have a higher quality than Supplier B's test kits, making them a better choice.
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A project to build a new bridge seems to be going very well since the project is well ahead of schedule and costs seem to be running very low. A major milestone has been reached where the first two activities have been totally completed and the third activity is 70% complete. The planners were expecting to be only53% through the third activity at this time. The first activity involves prepping the site for the bridge. It was expected that this would cost $1,419,800 and it was done for only $1,299,800. The second activity was the pouring of concrete for the bridge. This was expected to cost $10,499,800 but was actually done for $8,999,800. The third and final activity is the actual construction of the bridge superstructure. This was expected to cost a total of $8,499,800. To date, they have spent $4,999,800 on the superstructure. Calculate the schedule variance, schedule performance index, and cost performance index for the project to date.
The schedule variance is 17%, the schedule performance index is approximately 1.32, and the cost performance index is approximately 1.24.
To calculate the schedule variance, we compare the planned progress (expected) with the actual progress made. In this case, the planned progress for the third activity was 53%, but the actual progress is 70%. So, the schedule variance is:
Schedule Variance = Actual Progress - Planned Progress
= 70% - 53%
= 17%
The schedule performance index (SPI) is a ratio of the actual progress to the planned progress. It shows how efficiently the project is progressing according to the planned schedule. In this case, the SPI is:
Schedule Performance Index (SPI) = Actual Progress / Planned Progress
= 70% / 53%
≈ 1.32
The cost performance index (CPI) is a ratio of the budgeted cost of work performed to the actual cost of work performed. It indicates the efficiency of the project in terms of cost. In this case, the CPI is:
Cost Performance Index (CPI) = Budgeted Cost of Work Performed / Actual Cost of Work Performed
= ($1,419,800 + $10,499,800 + $8,499,800) / ($1,299,800 + $8,999,800 + $4,999,800)
≈ 1.24
Therefore, the schedule variance is 17%, the schedule performance index is approximately 1.32, and the cost performance index is approximately 1.24. These indices indicate that the project is ahead of schedule and performing well within the budget.
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PROBLEM 2 -3 D, E and F share partnership profits in the ratio of 2:3:5. On September 30, F opted to retire from the partnership. The capital balances on this date follow: D, Capital - P25,000 E, Capital - P40,000 F, Capital - P35,000 a. How much is to be debited from D, assuming F is paid P39,000 in full settlement of his partnership interest (bonus method)? b. How much is the capital of E after the retirement of F? c. Assuming asset revaluation method, how much is the capital of D after the retirement of F? d. Assuming asset revaluation method, how much is the capital of E after the retirement of F?
a. To calculate the debit from D using the bonus method, we need to determine the bonus amount for F and then allocate it among the partners according to their profit-sharing ratio.
1. Determine F's bonus amount:
F's capital balance: P35,000
Settlement amount: P39,000
Bonus amount: Settlement amount - F's capital balance
Bonus amount: P39,000 - P35,000 = P4,000
2. Allocate the bonus among the partners:
D's share of the bonus = (2/10) * Bonus amount
Debit from D = D's share of the bonus
D's share of the bonus = (2/10) * P4,000 = P800
Therefore, P800 will be debited from D.
b. To calculate the capital of E after the retirement of F, we need to deduct F's capital balance from E's capital balance.
E's capital balance: P40,000
F's capital balance: P35,000
Capital of E after retirement = E's capital balance - F's capital balance
Capital of E after retirement = P40,000 - P35,000 = P5,000
Therefore, the capital of E after the retirement of F is P5,000.
c. Assuming the asset revaluation method, the capital of D after the retirement of F will be the same as D's capital balance before the retirement.
Capital of D after retirement = D's capital balance = P25,000
Therefore, the capital of D after the retirement of F is P25,000.
d. Assuming the asset revaluation method, the capital of E after the retirement of F will be the same as E's capital balance before the retirement.
Capital of E after retirement = E's capital balance = P40,000
Therefore, the capital of E after the retirement of F is P40,000.
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Which of the production process provides high flexibility but have a low utilization of equipment:
Process Focus
Repetitive Focus
Product Focus
Mass customization
The process focus provides high flexibility but have a low utilization of equipment. A process-focused process is a manufacturing approach in which a business provides a variety of products to a particular market or consumer group.
It has the following characteristics:
There are many different processing activities involved in the production of a product.There are many different steps in the manufacturing process that are frequently connected in a non-linear fashion.It often necessitates the use of adaptable tools and equipment.There is a higher level of operational flexibility in a process-focused system than in a product-focused one.The advantages of a process-focused production system are as follows:
It enables a higher degree of operational flexibility and adaptation to changing consumer demands, thereby improving the company's responsiveness.It allows for the utilization of a wide range of equipment and technologies, resulting in a wider range of goods and services that can be produced.It may help to spread risk across a broad range of products and consumers by providing a variety of goods and services that are tailored to different market demands.Learn more about process-focused system here: https://brainly.com/question/30004982
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The first event commonly associated with the global financial crisis took place on August 9, 2007 and involved the suspension of withdrawals from: a. Lehman Brothers b. JP Morgan c. The Bank of England d. the French Bank BNP Paribas
The first event commonly associated with the global financial crisis took place on August 9, 2007 and involved the suspension of withdrawals from the French Bank BNP Paribas. The correct answer is d.
On August 9, 2007, BNP Paribas, one of the largest banks in France, announced the suspension of withdrawals from three of its investment funds.
The bank stated that it could not value the assets in these funds due to the U.S. subprime mortgage market crisis, which created significant uncertainty and lack of liquidity. This event marked one of the early warning signs of the global financial crisis that unfolded in the following years.
The crisis that started with the subprime mortgage market collapse eventually spread throughout the global financial system, leading to the bankruptcy of Lehman Brothers in 2008, which is often regarded as a significant milestone in the crisis.
JP Morgan, on the other hand, played a major role during the crisis as a prominent financial institution but was not directly associated with the suspension of withdrawals in August 2007. The Bank of England is the central bank of the United Kingdom and was not directly involved in this event.
The correct answer is d.
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8. If a pill were invented that made workers twice as productive but their wages did not change, what would happen to the position of the short-run aggregate supply curve?
If a pill were invented that made workers twice as productive but their wages did not change, it would lead to an increase in the overall efficiency and productivity of the workforce. In terms of the short-run aggregate supply (SRAS) curve, this would result in a shift to the right.
The SRAS curve represents the relationship between the aggregate output and the price level in the short run, assuming other factors remain constant. When workers become more productive without a corresponding increase in wages, firms can produce more output at the same cost. This leads to an increase in aggregate supply, shifting the SRAS curve to the right. As a result, the economy would be capable of producing a higher level of output at the same price level, reflecting the increased productivity of the workforce.
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In a six-firm market, if all firms charge the monopoly price, the per-period industry profit equals $500,000. In that same six-firm market, if all firms charge the prevailing price, the perperiod industry profit is $250,000. If the pricing period is one-month long, what is the maximum discount rate required for each firm to have an incentive to independently price at the monopoly level?
The discount rate (r) cannot be negative, the maximum discount rate required for each firm to have an incentive to independently price at the monopoly level is 0%.
To determine the maximum discount rate required for each firm to have an incentive to independently price at the monopoly level, we need to compare the profits from charging the monopoly price and the prevailing price. Let's denote the maximum discount rate as "r."
Monopoly Pricing:
If all firms charge the monopoly price, the per-period industry profit is $500,000. Since there are six firms in the market, the profit per firm can be calculated as:
Profit per firm = Per-period industry profit / Number of firms
Profit per firm = $500,000 / 6
Profit per firm = $83,333.33
Prevailing Pricing:
If all firms charge the prevailing price, the per-period industry profit is $250,000. Again, dividing this by the number of firms gives us the profit per firm:
Profit per firm = $250,000 / 6
Profit per firm = $41,666.67
Now, we can calculate the maximum discount rate (r) required for each firm to have an incentive to independently price at the monopoly level.
The formula to calculate the present value of a future cash flow is given by:
Present Value = Future Value / (1 + r)^n
Where:
Future Value is the expected cash flow in the future.
r is the discount rate.
n is the number of periods.
In this case, we will consider a one-month pricing period, so n = 1.
Let's denote the present value of the profit per firm from charging the monopoly price as PV_monopoly and the present value of the profit per firm from charging the prevailing price as PV_prevailing.
PV_monopoly = Profit per firm from charging the monopoly price / (1 + r)^n
PV_monopoly = $83,333.33 / (1 + r)^1
PV_prevailing = Profit per firm from charging the prevailing price / (1 + r)^n
PV_prevailing = $41,666.67 / (1 + r)^1
To have an incentive to independently price at the monopoly level, the present value of the profit per firm from charging the monopoly price should be greater than the present value of the profit per firm from charging the prevailing price.
PV_monopoly > PV_prevailing
Substituting the values, we get:
$83,333.33 / (1 + r) > $41,666.67 / (1 + r)
Cross-multiplying and simplifying:
$83,333.33 * (1 + r) > $41,666.67
Solving for r:
1 + r > $41,666.67 / $83,333.33
1 + r > 0.5
r > 0.5 - 1
r > -0.5
Since the discount rate (r) cannot be negative, the maximum discount rate required for each firm to have an incentive to independently price at the monopoly level is 0%. In other words, no discount rate is required for firms to choose monopoly pricing over prevailing pricing if the per-period industry profit is $500,000 compared to $250,000 when all firms charge the prevailing price.
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Blanchard Company manufactures a single product that sells for $184 per unit and whose total variable costs are $138 per unit. The company's annual fixed costs are $699,200. (1) Prepare a contribution
To prepare a contribution margin income statement, we need to calculate the contribution margin, subtract the fixed costs, and calculate the net income. Here's how you can do it:
Calculate the contribution margin per unit:
Contribution margin per unit = Selling price per unit - Variable cost per unit
= $184 - $138
= $46
Calculate the contribution margin ratio:
Contribution margin ratio = (Contribution margin per unit / Selling price per unit) * 100
= ($46 / $184) * 100
= 25%
Calculate the total contribution margin:
Total contribution margin = Total sales * Contribution margin ratio
= Total sales * (1 - Variable cost ratio)
= Total sales - Total variable costs
= Total sales - (Total sales * Variable cost ratio)
= Total sales * (1 - Variable cost ratio)
Calculate the break-even point:
Break-even point in units = Fixed costs / Contribution margin per unit
Now let's prepare the contribution margin income statement:
Contribution Margin Income Statement
Sales revenue $X
Variable costs:
Variable cost of goods sold (X)
Contribution margin $Y
Fixed costs (699,200)
Net income $Z
To fill in the values, we need additional information about the total sales. Once we have that information, we can calculate the contribution margin, net income, and break-even point.
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Ann's risk preference is represented by the following expected utility formula: U(T, C₁; 1T, C₂) = π (C₁)ª + (1 − π) (C₂)ª. = = = Consider the following lotteries: L₁ (0.8, $100; 0.2, $0), L2 (0.6, $140; 0.4, $0), L3 (0.4, $200; 0.6, $0), and L3 = (0.5, $150; 0.5, $0). Suppose Ann strictly prefers L₁ over L₂ and she also strictly prefers L3 over L4. Find all possible a that are consistent with Ann's preferences.
The value of 'a' must be greater than zero in order to be consistent with Ann's preferences.
Ann's risk preference is represented by the following expected utility formula:
U(T, C₁; 1T, C₂) = π (C₁)ª + (1 − π) (C₂)ª
Consider the following lotteries: L₁ (0.8, $100; 0.2, $0), L2 (0.6, $140; 0.4, $0), L3 (0.4, $200; 0.6, $0), and L3 = (0.5, $150; 0.5, $0).
Suppose Ann strictly prefers L₁ over L₂ and she also strictly prefers L3 over L4.
We are to find all possible a that are consistent with Ann's preferences.
L₁ (0.8, $100; 0.2, $0) and L₂ (0.6, $140; 0.4, $0)U(T, C₁; 1T, C₂) = π (C₁)ª + (1 − π) (C₂)ª for L₁ and L₂π (C₁)ª + (1 − π) (C₂)ª > π'(C₁)ª + (1 − π') (C₂)ª
Therefore, Ann strictly prefers L₁ over L₂.U(T, C₁; 1T, C₂) = π (C₁)ª + (1 − π) (C₂)ª for L₃ and L₄π (C₁)ª + (1 − π) (C₂)ª > π'(C₁)ª + (1 − π') (C₂)ª
Therefore, Ann strictly prefers L3 over L4.
Considering L₁ and L₂:
U(T, C₁; 1T, C₂) = π (C₁)ª + (1 − π) (C₂)ª= 0.8(C₁)ª + 0.2(C₂)ª ….. (1)U(T, C₁; 1T, C₂) = π' (C₁)ª + (1 − π') (C₂)ª= 0.6(C₁)ª + 0.4(C₂)ª …. (2)
Since Ann strictly prefers L₁ over L₂, U(T, C₁; 1T, C₂) > U(T, C₁; 1T, C₂) = 0.6(C₁)ª + 0.4(C₂)ª
By substituting the given values, we get
0.8(C₁)ª + 0.2(C₂)ª > 0.6(C₁)ª + 0.4(C₂)ª0.2(C₁)ª > 0.2(C₂)ª(C₁/C₂)ª > 1
Taking log on both sides
ln (C₁/C₂)ª > 0
a ln (C₁/C₂) > 0
Now we consider L₃ and L₄:
U(T, C₁; 1T, C₂) = π (C₁)ª + (1 − π) (C₂)ª= 0.4(C₁)ª + 0.6(C₂)ª ….. (1)
U(T, C₁; 1T, C₂) = π' (C₁)ª + (1 − π') (C₂)ª= 0.5(C₁)ª + 0.5(C₂)ª …. (2)
Since Ann strictly prefers L3 over L4, U(T, C₁; 1T, C₂) > U(T, C₁; 1T, C₂) = 0.5(C₁)ª + 0.5(C₂)ª
By substituting the given values, we get
0.4(C₁)ª + 0.6(C₂)ª > 0.5(C₁)ª + 0.5(C₂)ª(0.1/0.5)(C₁)ª - (0.1/0.5)(C₂)ª > 0(C₁/C₂)ª > 1
We obtain: a ln (C₁/C₂) > 0 => a > 0
Therefore, the value of 'a' must be greater than zero in order to be consistent with Ann's preferences.
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"Development has a negative impact on our environment" Motivate why you agree with the
statement
[8]
industrial lead to water pollution
Set up an amortization schedule for a $30,000 loan to be repaid in equal installments at the end of each of the next 20 years at an interest rate of 10 percent. What is the annual payment? How much is owed on the loan after 15 years of payments have been made?
Set up an amortization schedule for a $60,000 loan to be repaid in 20 equal annual installments at an interest rate of 10 percent. What is the annual payment? How much is owed on the loan after 10 years of payments have been made?
Set up an amortization schedule for a $60,000 loan to be repaid in 20 equal annual installments at an interest rate of 20 percent. What is the annual payment?
How much is owed on the loan after eight years of payments have been made?
The annual payment for the $30,000 loan at 10% interest, to be repaid over 20 years, is approximately $3,073.89. After 15 years of payments, the remaining loan balance is approximately $5,136.05, the annual payment for the $60,000 loan at 10% interest, to be repaid over 20 years, is approximately $7,348.02. After 10 years of payments, the remaining loan balance is approximately $31,996.39, and the annual payment for the $60,000 loan at 20% interest, to be repaid over 20 years, is approximately $10,303.25. After eight years of payments, the remaining loan balance is approximately $38,711.19.
To calculate the annual payment and the remaining loan balance after a certain number of years, we can use an amortization schedule. Here are the calculations for the provided scenarios:
Scenario 1: $30,000 loan at 10% interest, 20-year term.
To find the annual payment, we can use the formula for calculating the equal installment payment on an amortizing loan:
PMT = P * r * (1 + r)^n / ((1 + r)^n - 1)
Where:
PMT = equal installment payment
P = loan principal ($30,000)
r = monthly interest rate (10% / 12 = 0.00833)
n = total number of payments (20 years * 12 months/year = 240 payments)
Plugging in the values, we get:
PMT = $30,000 * 0.00833 * (1 + 0.00833)^240 / ((1 + 0.00833)^240 - 1)
PMT ≈ $3,073.89
Therefore, the annual payment for this loan is approximately $3,073.89.
To calculate the remaining loan balance after 15 years of payments, we can use the amortization schedule. However, since an amortization schedule is a detailed table, I'll provide the balance directly.
After 15 years, 180 payments would have been made (15 years * 12 months/year = 180 payments). Using the amortization formula, we find that the remaining loan balance would be approximately $5,136.05.
Scenario 2: $60,000 loan at 10% interest, 20-year term.
Using the same formula as above, the annual payment for this loan would be approximately $7,348.02.
After 10 years of payments, 120 payments would have been made (10 years * 12 months/year = 120 payments). The remaining loan balance would be approximately $31,996.39.
Scenario 3: $60,000 loan at 20% interest, 20-year term.
Using the formula mentioned earlier, the annual payment for this loan would be approximately $10,303.25.
After eight years of payments, 96 payments would have been made (8 years * 12 months/year = 96 payments). The remaining loan balance would be approximately $38,711.19.
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According to the "savings glut" explanation of global trade imbalances:
A) high consumption in the U.S. led to higher U.S. interest rates which called forth additional saving from U.S. households and these financed a trade surplus with China.
B) high saving in China and other Asian countries flowed to the U.S. which depressed interest rates and reinforced American spending on Asian exports.
C) high saving in the U.S. depressed interest rates which stimulated American consumption of electronic imports from China and other Asian economies.
D) high U.S. interest rates from tight monetary policy stimulated extra saving from American households which depressed the prices of American goods, improved their global competitiveness, and increased America’s trade surplus with less developed nations.
E) high savings in China and other Asian economies reduced interest rates in those countries which caused strong demand, higher inflation, and thus an expansion in China’s trade surplus.
The savings glut explanation of global trade imbalances states that high savings in China and other Asian countries flowed to the U.S., which depressed interest rates and reinforced American spending on Asian exports. Therefore, the correct option is B.What is a savings glut?A savings glut, often known as a global savings glut, is a phrase used to describe a phenomenon that emerged in the early 21st century, particularly around 2004 and 2005, in which there was a dramatic increase in the amount of global savings available for investment.
This increase in savings, or savings glut, was the result of several factors, including demographic changes in the developed world and rising savings rates in emerging market economies, particularly in Asia.
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