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Economics, Accounting & Business: Post your doubts here!

S

Sarah Paul

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ive got some doubts:
Explain why the payback period might be an important factor in deciding whether to invest in
new fixed assets.

And also should we write about Elton Mayos theory while he doesnt talk abt money fr the following question:
With reference to theorists on motivation, discuss to what extent people at work are motivated by
financial reward. [20]
 
David Hussey

David Hussey

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:: A^ said:
Q21 - Answer is D. This is just a matter of substituting formulas.
Since its a closed economy, Y = C + I
The formula for C is what they hav given = 30 + 0.8Y
I = 50
Jus substitute them into Y = C + I
Which will be Y = (30+0.8Y) + 50
Solve that and you will get Y = 400
Q22 - Its A. Because, Bond prices and interest rates go in opposite directions. Therefore, When interest falls, people will hold more idle balances as returns on speculative transactions is lower.
Q23 - Its C. Because, Advances in technology causes investment to rise. When investments rise, demand for loans rise, hence, the demand increases..
A reduction in marginal propensity to save means people will be saving less, as a result of which banks will now have less money to lend, hence the supply falls.
Q25 - Its C because as spending in an economy rises due to expansionary fiscal policy, a fixed money supply would mean that the increase in demand for money from the increased spending exceeds the supply of money available in the economy hence interest rates rise, which is a contractionary monetary policy itself which results in the expansionary policy being rather ineffective.
Click to expand...
AlphaBeta said:
Q 30 C because in slump there will be Budget Deficit hence increase taxes to make it balanced budget
and lower taxes in boom because in boom there will be more revenue and less expenditure so lowering taxes will decrease govt revenue and maintainin balanced budget
Click to expand...
Jazakallahu khair guys!
@::A^ (tagging not working) new econ genius eh? mashAllah :D
 
David Hussey

David Hussey

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:: A^ said:
Q21 - Answer is D. This is just a matter of substituting formulas.
Since its a closed economy, Y = C + I
The formula for C is what they hav given = 30 + 0.8Y
I = 50
Jus substitute them into Y = C + I
Which will be Y = (30+0.8Y) + 50
Solve that and you will get Y = 400
Q22 - Its A. Because, Bond prices and interest rates go in opposite directions. Therefore, When interest falls, people will hold more idle balances as returns on speculative transactions is lower.
Q23 - Its C. Because, Advances in technology causes investment to rise. When investments rise, demand for loans rise, hence, the demand increases..
A reduction in marginal propensity to save means people will be saving less, as a result of which banks will now have less money to lend, hence the supply falls.
Q25 - Its C because as spending in an economy rises due to expansionary fiscal policy, a fixed money supply would mean that the increase in demand for money from the increased spending exceeds the supply of money available in the economy hence interest rates rise, which is a contractionary monetary policy itself which results in the expansionary policy being rather ineffective.
Click to expand...
bro q23 can u explain what will happen to the curves if options a,b or d take place, i just want to understand the concept
 
TheZodiac

TheZodiac

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David Hussey said:
TheZodiac bro could u explain this diagram? i couldnt understand them (your notes)

a similar question in pastpaper -
http://papers.xtremepapers.com/CIE/Cambridge International A and AS Level/Economics (9708)/9708_s08_qp_3.pdf
q21

http://papers.xtremepapers.com/CIE/Cambridge International A and AS Level/Economics (9708)/9708_s09_qp_3.pdf
q18
Click to expand...
Actually, in my diagram, I've taken into consideration aggregate demand as a whole. However in mcq no 21, they've just considered consumption.
Answer should be D because the consumption can only shift from C1 to C2 if there is decrease in tax rate. MPC would be thus greater. The rest of the options are not responsible A) Exports are autonomous so that does not affect the gradient of the curve. B) Investment is autonomous so that does not affect the gradient as well. C) This would further decrease the consumption as unemployed individuals would have less money for consumption. D) is the perfect answer because if tax decreases, consumption increases.
 
TheZodiac

TheZodiac

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David Hussey said:
TheZodiac bro could u explain this diagram? i couldnt understand them (your notes)

a similar question in pastpaper -
http://papers.xtremepapers.com/CIE/Cambridge International A and AS Level/Economics (9708)/9708_s08_qp_3.pdf
q21

http://papers.xtremepapers.com/CIE/Cambridge International A and AS Level/Economics (9708)/9708_s09_qp_3.pdf
q18
Click to expand...
Similarly in Q18 Answer should be C.
A) It is very much near to correct answer and would have been correct if the x-axis was national income instead of DPI so this cannot be the answer as decrease in DPI would result in movement along the curve.
B) If tax rates decrease, consumption should increase not decrease.
C) If better interest rate is offered, you'd most likely to invest your money rather than consume. (Liquidity preference theory)
D) Increase in wealth would again increase consumption not decrease it.
 
TheZodiac

TheZodiac

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:: A^ said:
http://papers.xtremepapers.com/CIE/Cambridge International A and AS Level/Economics (9708)/9708_w02_qp_3.pdf

Q29 - how B?
Click to expand...
This is a tough one.
I applied Sherlock Holmes approach on this one. We know for sure that A and D cannot be the answer. If birth rate increases, the income growth per head would fall. If government increases its defence spending, than too the income growth per head would not increase as there would exist unemployment because lack of investment.
B and C are left. Now according to me, imports would have little effect in long run upon the growth of income per head where as if people start to save, there would be more leakage in an economy. As it's developing economy, government would have to invest and this would create job opportunities for individuals. Thus in the long run, it would result in increased income per head.
 
:: A^

:: A^

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TheZodiac said:
This is a tough one.
I applied Sherlock Holmes approach on this one. We know for sure that A and D cannot be the answer. If birth rate increases, the income growth per head would fall. If government increases its defence spending, than too the income growth per head would not increase as there would exist unemployment because lack of investment.
B and C are left. Now according to me, imports would have little effect in long run upon the growth of income per head where as if people start to save, there would be more leakage in an economy. As it's developing economy, government would have to invest and this would create job opportunities for individuals. Thus in the long run, it would result in increased income per head.
Click to expand...
Jazakallah!
 
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