Assume That in a Certain Economy, the LM Curve Is

question 24

Essay

Assume that in a certain economy, the LM curve is given by Y = 2,000r - 2,000 + 2 (M / P), and the IS curve is given by Y = 8,000 - 2,000r + u, where u is a shock that is equal to +200 half the time and -200 half the time. The price level (P) is fixed at 1.0. The natural rate of output is 4,000. The government wants to keep output as close as possible to 4,000 and does not care about anything else. Consider the following two policy rules: i. Set the money supply M equal to 1,000 and keep it there, and ii. Manipulate M from day to day to keep the interest rate constant at 2 percent.
a.Under rule i, what will Y be when u = +200? What will Y be under rule i when u = -200?
b.Under rule ii, what will Y be when u = +200? What will Y be under rule ii when u = -200?
c.Which rule will keep output closer to 4,000?

Understand the recording and consolidated reporting process in business combinations.

Distinguish between the pooling of interests and the acquisition method of accounting before and after certain dates as per GAAP.

Calculate goodwill and other intangible assets arising from business combinations.

Recognize how business combinations are reflected in consolidated financial statements.

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Definitions:

Liquidity

The facility of making an asset cash without changing its market value.

Operating Cash Flow

The cash generated from the normal operations of a business, reflecting how much cash is produced by the business's core operations.

Depreciation Expense

The distribution of a physical asset's cost over its expected lifespan for tax and accounting reasons.

Net Working Capital

The gap between a firm's existing assets and its short-term obligations, showcasing its liquidity and ability to run efficiently in the near term.