HERE IS/ARE THE FULL QUESTION(S):
The small island nation of Kaboom is a simple economy with no government, no taxes, and no imports or exports. Kaboomers (citizens of Kaboom) are creatures of habit. They have a rule that everyone saves exactly 40 percent of income. Assume that planned investment is fixed and remains at 225 million Kaboomian dollars. Further assume that autonomous consumption (independent of Y) is zero, so consumption (C) is MPC times Upper YMPC×Y.
The following data are estimates for the island of Kaboom:
bullet• Real GNP (Y): 422 million Kaboomian dollars
bullet• Planned investment spending (I):225 million Kaboomian dollars
You are asked by the business editor of the Explosive Times, the local newspaper, to predict the economic events of the next few months.
Based on the data given, you predict inventories will DECREASE and the level of real GNP will INCREASE.
Things will stop changing when SAVINGS EQUAL INVESTMENT.
Kaboom's economy will reach equilibrium when its real GNP = 563 MILLION Kaboomian dollars
Answer: debit to Stock Investments for $55,080.
Explanation:
As this is an investment in another company, it will count as an asset which means that when it increases, the account will have to be debited. It will therefore be debited for $55,080 to show the investment.
Cash will decrease by the same amount which means that it will have to be credited because assets are credited when they decrease.
Dr Stock Investments $55,080
Cr Cash $55,080
Answer:
$980,879
Explanation:
Recall that
PVAn = (CF1 / (i - g)) × [1 - ((1+g)n/ (1+i))n]
Where
CFI = 120000 × 2.5%
= 123000
i = 15%
g = 2.5%
n = 50
Thus
PVAn = ($123,000 / (15% - 2.50%)) × [1 - ((1+2.5%)50 / (1+15%))50]
= 984000 × 1 - (51.25)/(57.5)
= 984000 × 0.996828
= 980,878.752
= $980, 879
