BUSN602 Week 2 Homework Problems:
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You will complete your homework in Microsoft Excel, in the template provided in the assignment. Your work must be organized and properly formatted. Short essay answers must include references.
• Chapter 5: DQ5-1, E5-2; P5-2, P5-6
• Chapter 7: DQ7-17; E7-3, E7-4, P7-5
• Identify and define five economic indicators.
Name your assignment file as “LastnameFirstinitial-BUSN602-Week2", and submit by midnight ET, Day 7.
List and describe briefly the economic policy objectives of the nation.
Important policy objectives of the federal government include economic growth, high employment, price stability, and a balance in international transactions. The achievement of these objectives is the responsibility of monetary policy, fiscal policy, and debt management carried out by the Federal Reserve System, the President, the Congress, and the U.S. Treasury. Describe the responsibilities of the various policy makers in trying to achieve the four economic policy objectives.
Assume that Bank A receives a primary deposit of $100,000 and that it must keep reserves of 10 percent against deposits.
a. Prepare a simple balance sheet of assets and liabilities for the bank immediately after the deposit is received.
b. Assume Bank A makes a loan in the amount that can be “safely lent.” Show what the bank’s balance sheet of assets and liabilities would look like immediately after the loan.
c. Assume that a check in the amount of the “derivative deposit” created in Part b was written and sent to another bank. Show what Bank A’s (the lending bank’s) balance sheet of assets and liabilities would look like after the check is written.
Assume a financial system has a monetary base of $25 million. The required reserves ratio is 10 percent and there are no leakages in the system.
a. What is the size of the money multiplier?
b. What will be the system’s money supply?
What are the life cycle stages of corporations and other business firms?
Match the following financial instruments and securities with their issuers.
a. corporate stocks
b. Treasury bonds
c. municipal bonds
d. negotiable certificates of deposit
1. commercial banks
3. U.S. government
4. state/local governments
Match the following financial instruments and securities with their typical maturities.
a. corporate stocks
b. Treasury bills
d. commercial paper
1. less than one year
2. no maturity
3. up to about 30 years
4. up to one year
The components that comprise a nation’s gross domestic product were identified and discussed in the chapter. Assume the following accounts and amounts were reported by a nation last year. Government purchases of goods and services were $5.5 billion; personal consumption expenditures were $40.5 billion; gross private domestic investment amounted to $20 billion; capital consumption allowances were $4 billion; personal savings were estimated at $2 billion; imports of goods and services amounted to $6.5 billion; and the exports of goods and services were $5 billion.
a. Determine the nation’s gross domestic product.
b. How would your answer change if the dollar amounts of imports and exports are reversed?
An economic indicator is data, usually of macroeconomic scale, used by investors to interpret current or future investment possibilities and to judge the overall health of an economy. Identify and define five economic indicators. Use the library or internet sources to complete this exercise.