Answer:
Date Accounts Titles and Explanations Debit Credit
Sept, 11 Cash $450
2016 Sales $450
(To record the Cash Sales)
Sept, 11 Warranty Expenses $40.50
2016 ($450 x 9%)
Estimated Warranty Payable $40.50
(To record the Warranty Expenses)
July, 24 Estimated Warranty Payable $32
2017 Repairs Parts Inventory $32
(To record the material taken from Inventory)
The Destin Company has one temporary difference of $160 caused by accelerated tax depreciation on 12/31/14. The difference will reverse evenly over the next four years. Tax Rates are 20% in 2014, 30% in 2015, and 40% in 2016 and beyond. Pretax book income in 2014 is $1,000. What is 2014 Income Tax Expense?
Answer: = $168
Explanation:
Destin Company had a $1,000 income in 2014 but also a temporary difference of $160.
This means that they were taxed on the income less the temporary difference.
= 1,000 - 160
= $840
Tax Expense = 840 * 20%
= $168
Use the following information for Jett Co. to answer the following question: 2015 2014 Sales 1,200 1,000 COGS 850 700 Operating Expenses 200 200 Income Taxes 30 35 Jett Co.'s average tax rates for 2015 and 2014 are: A. 15.5% and 10.0% B. 20.0% and 35.0% C. 25.8% and 35.4%. D. 31.4% and 36.8%.
Answer:
B. 20.0% and 35.0%
Explanation:
Jett Co.'s Average tax rates for 2015 = Income taxes paid / Taxable income
When, Taxable Income = Sales - Cost of goods sold - Operating expenses
= $1,200 - $850 - $200
= $150
Hence, Jett Co.'s Average tax rates for 2015 = $30 / $150
= 20%
Jett Co.'s Average tax rates for 2014 = Income taxes paid / Taxable income
When Taxable Income = Sales - Cost of goods sold - Operating expenses
= $1,000 - $700 - $200
= $100
Hence, Jett Co.'s Average tax rates for 2014 = $35 / $100
= 35%
Galvatron Metals has a bond outstanding with a coupon rate of 6.1 percent and semiannual payments. The bond currently sells for $947 and matures in 23 years. The par value is $1,000 and the company's tax rate is 40 percent. What is the company's aftertax cost of debt
On January 1, 2014, Pert Company purchased 85% of the outstanding common stock of Sales Company for $350,000. On that date. Sales Company's stockholders' equity consisted of common stock, $100,000; other contributed capital, $40,000; and retained earnings, $140,000. Pert Company paid more than the book value of net assets acquired because the recorded cost of Sales Company's land was significantly less than its fair value.
During 2014 Sales Company earned $148,000 and declared and paid a $50,000 dividend. Pert Company used the partial equity method to record its investment in Sales Company.
Required:
1. Prepare the investment-related entries on Pert Company's books for 2014.
2. Prepare the working paper eliminating entries for a working paper on December 31, 2014.
Answer and Explanation:
The journal entries are shown below:
a. For investment related entries
Investment in sales Dr $350,000
To cash $350,000
(being the investment is recorded)
Investment in sales Dr ($148,000 × 85%) $125,800
To Subsidiary income $125,800
(Being the investment in sales is recorded)
Cash Dr $42,500
To Dividend income $42,500
(Being the dividend income is recorded)
b. For work paper eliminating entries
Equity income ($148,000 × 85%) $125,800
To Dividend $42,500
To investment in sales $83,300
(Being the equity income is recorded)
Common stock Dr $100,000
Other contributed capital Dr $40,000
Retained earnings Dr $140,000
Difference between implied and book value Dr $131,765 (Bal figure)
To Investment in S Company $350,000
To Non controlling interest $61,765 ($350,000 ÷ 0.85 × 0.15)
(Being the consolidated items are recorded)
Land Dr $131,765
To Difference between implied and book value Dr $131,765
(Being the land is recorded)
Working note:
Particulars Parent share Non-conrolling interest Total value
Purchase price
& implied value $350,000 $61,765 $411,765
Less:
Book value -$238,000 -$42,000 -$280,000
Difference
amount $112,000 $19,765 $131,765
Less:
Land value -$112,000 -$19,765 -$131,765
Balance $0 $0 $0
Johnson's Plumbing's fixed costs are $700,000 and the unit contribution margin is $17. What amount of units must be sold in order to realize an operating income of $100,000
Answer:
Target profit in units = 47058.82 rounded off to 47059 units
Explanation:
The break even units of sales are the number of units that must be sold in order for the company to have enough total revenue to cover its total costs. It is a point in the number of units where there is no profit or no loss.
We can use the break even analysis and formulas to calculate the number of units required to earn a certain target profit. Thus, we will just need to add the target profit amount to the fixed costs in the break even in units formula. The formula to calculate the target profit in units is,
Target profit in units = (Fixed costs + Target profit) / Contribution margin per unit
Target profit in units = (700000 + 100000) / 17
Target profit in units = 47058.82 rounded off to 47059 units
Fuji film was also able to succeed in the US due to their history of catering to a sophisticated Japanese photo market in their native market. Which aspect of the diamond of national competitive advantage does this draw from
Answer:
Option B. Demand conditions
Explanation:
The demand conditioning is the domestic demand of the product that forms greater impact on the demand and innovation of the product in its domestic market. This great domestic demand of Fuji film products stipulated greater innovation which not only differentiated the product but also increased the demand in other markets like US and Europe.
This increased Demand conditions enabled the company to gain competitive advantage.
Use the following information for Shafer Company to compute inventory turnover for year 2.
Year 2 Year 1
Net sales $656,000 $584,600
Cost of goods sold 390,200 361,010
Ending inventory 79,400 81,080
Answer:
Inventory turnover for year 2 is 4.91 times.
Explanation:
Inventory turnover measures liquidity of company`s inventory
Inventory turnover = Cost of goods sold / Ending inventory
= $390,200 / $79,400
= 4.91 times
Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect Andy's demand for ____________.
Answer:
Andy's demand for beer will increase.
Explanation:
Andy’s demand for beer will increase because it is given that pizza and beer are complements. Therefore, there is an inverse relationship between the price of one complement goods and the number of other complement goods. Here, we can see that price of one good ( say pizza) decreases so the demand for other goods (say beer) will increase because there is an inverse relationship between these commodities.
Sudoku Company issues 7,000 shares of $7 par value common stock in exchange for land and a building. The land is valued at $45,000 and the building at $85,000. Prepare the journal entry to record issuance of the stock in exchange for the land and building.
Answer:
The journal entry to record this exchange is :
Land $45,000 (debit)
Buildings $85,000 (debit)
Common Stocks $49,000 (credit)
Share Premium $81,000 (credit)
Explanation:
The price of Common Stock is equivalent to the price required to settle the Market Cost of Land and Buildings.
Also note that the Common Stocks have a par vale of $7, this means that any amount paid in excess of the par value is accounted in the Share Premium Reserve.
The journal entry to record this exchange is :
Land $45,000 (debit)
Buildings $85,000 (debit)
Common Stocks $49,000 (credit)
Share Premium $81,000 (credit)
Land $45,000
Building $85,000
To Common stock $49,000 (7,000 shares × $7)
To Premium on issue of common stock 81,000
(Being recording of the issuance of the stock in exchange for the land and building)
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A 30 year $1,000 par 4 3/4% Treasury Bond is quoted at 95-11 - 95-15. The note pays interest on Jan 1st and Jul 1st. A customer buys 1 bond at the ask price. What is the current yield, disregarding commissions
Answer:
4.98%
Explanation:
Calculation for the current yield
First step
Since the the bond was purchased at 95 +15/32nds this means that we have to find the bond percentage.
Calculated as
Bond Percentage = 95 + 15/32nds
Bond percentage =95.46875%
Second step is to multiply the bond percentage by $1,000
95.46875% *$1,000
= $954.6875
The last step is to find the current yield
Current yield=$47.50 /$954.6875
Current yield = 4.98%
Therefore the current yield will be 4.98%
Bogart Company is considering two alternatives. Alternative A will have revenues of $147,400 and costs of $103,400. Alternative B will have revenues of $188,200 and costs of $121,600. Compare Alternative A to Alternative B showing incremental revenues, costs, and net income.
Answer:
B is better than A
Explanation:
Here, we want to compare “A” to “B”. It means if B’s amount is higher than A’s amount, it should be positive; If B’s amount is lower than A’s amount, it should be negative.
Net income for each alternative = Revenues – Costs
Since the net income is positive, B is better than A.
Please check attachment for for actual tabular calculations
Kant Corporation retires its $100,000 face value bonds at 102 on January 1, following the payment of interest. The carrying value of the bonds at the redemption date is $96,250. The entry to record the redemption will include a
Answer:
Refer to the explanation below
Explanation:
Please see the journal entry below;
Dr Bonds payable $100,000
Dr Loss on retirement of bonds
$5,750
( $102,000 + $3,750 - $100,000)
To Cash $102,00( $100,000 × 1.02)
To Discount on bonds payable
$3,750( $100,000 - $96,250)
(Being redemption that is recorded)
Because bonds payable and loss on retirement of bonds decreases the liability and increased the loss, hence were debited. Cash and discount on bonds payable were credited because it decreases the assets and increased liabilities respectively.
At July 31, Farmer Company has this bank information: cash balance per bank $8,344; outstanding checks $804; deposits in transit $1,383; and a bank service charge $58.
Determine the adjusted cash balance per bank at July 31.
The adjusted cash balance per bank at July 31:___________.
Answer:
The adjusted balance per bank is $8923
Explanation:
Adjusted cash balance per bank
Cash balance per bank (unadjusted) 8344
(+) Deposits in transit 1383
(-) Outstanding checks (804)
Cash balance per bank (adjusted) 8923
The adjusted cash balance per bank is calculated by adjusting the transactions that do not appear on the current bank statement.
The deposits in transit is the amount of cash deposited in the bank, that will increase the bank balance, which is still in process and has not been added to the bank account as of now. Thus, we will add this amount to calculate the adjusted bank balance.
The outstanding checks amount is the amount of checks that have been issued by the business but which are yet to be presented by the recipients of checks and will result in a reduction in the bank balance. Thus, we deduct them to calculate the adjusted balance.
The bank charge is deducted by the bank itself thus we assume that it has already been deducted. So, no adjustment is made for this.
Oriole Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of $65,000 and fair value of $87,000. Under the 3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2017. Oriole expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2017.
Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.)
Date
Rent Receipt/ Payment
Interest Revenue/ Expense
Reduction of Principal
Receivable/ Liability
1/1/17 $
$
$
$
12/31/17
12/31/18
12/31/19
Prepare the journal entry at commencement of the lease for Oriole. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
1/1/17
Prepare the journal entry at commencement of the lease for Sharrer. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
1/1/17
Prepare the journal entry at commencement of the lease for Sharrer, assuming (1) Sharrer does not know Oriole’s implicit rate (Sharrer’s incremental borrowing rate is 9%), and (2) Sharrer incurs initial directs costs of $9,500. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.)
Date
Account Titles and Explanation
Debit
Credit
1/1/17
Answer and Explanation:
1. The Preparation of amortization table is shown below:-
Date Rent payment Interest Reduction of Liability
revenue Principal
01.01.2017 $0 $0 $0 $87,000
31.12.2017 $33.759 $6,960 $26,799 $60201
(87,000 × 8%)
31.12.2018 $33.759 $4,816 $28,943 $31,258
(60,201 × 8%)
31.12.2022 $33,759 $2,501 $31,258 $0
(32,258 × 8%)
Working note
The computation of the yearly lease amount is shown below:-
Period Table value PV at 8%
1 0.92593
2 0.85734
3 0.79383
Total 2.57710
Lease rent $33.759
($87,000 ÷ 2.5771)
2. The Journal entry is shown below:-
Lease receivable Dr, $87,000
Cost of goods sold Dr, $65,000
To Sales $87,000
To Inventory $65,000
(Being lease commenced is recorded)
3. The Journal entry is shown below:-
ROU assets Dr, (right of use) $87,000
To lease liability $87,000
(Being ROU assets recognized is recorded)
4. ROU assets Dr, (right of use) $96,500
To lease liability $87,000
To Cash $9,500
(Being ROU assets recognized of direct costs is recorded)
Which term is defined as the most appealing trade-off or item given up as the result of an
economic decision?
Increasing cost
Opportunity cost
Recycled trade off
Economic trade off
Answer:
it could be the increase in cost due to economical well-being either the increase in debt or credit
A company earned $7,605 in net income for October. Its net sales for October were $19,500. Its profit margin is:
Answer: 39%
Explanation:
From the question, we are informed that company earned $7,605 in net income for October and that its net sales for October were $19,500.
To calculate its profit margin, we have to divide the net income by the net sales. This will be:
= 7605/19500
= 0.39
= 39%
To reduce product development time, Caterpillar connected its engineering and manufacturing divisions with its active suppliers, distributors, overseas factories, and customers, through ________.
Answer: an extranet
Explanation:
An extranet is a private network that is controlled that gives access to vendors, suppliers, partners, vendors or a group of customers that are authorized.
Therefore, to reduce product development time, Caterpillar connected its engineering and manufacturing divisions with its active suppliers, distributors, overseas factories, and customers, through an extranet.
What would you pay for a bond that pays an annual coupon of $70, paid semiannually, par value, matures in 6 years, and has a yield to maturity of 8%
Answer:
Price per bond is $953.77
Explanation:
The price to be paid for the bond can be computed using pv excel function as below:
=-pv(rate,nper,pmt,fv)
rate is the yield to maturity of 8%
nper is number of coupons that the bond would pay i.e 6 annual coupons in 6 years
pmt is the annual coupon of $70
fv is the face value of $1000 by default
=-pv(8%,6,70,1000)=$953.77
Loreal-American Corporation purchased several marketable securities during 2021. At December 31, 2021, the company had the investments in bonds listed below. None was held at the last reporting date, December 31, 2020, and all are considered securities available-for-sale. Cost Fair Value Unrealized Holding Gain (Loss) Short term: Blair, Inc. $ 512,000 $ 389,000 $ (123,000 ) ANC Corporation 466,000 512,000 46,000 Totals $ 978,000 $ 901,000 $ (77,000 ) Long term: Drake Corporation $ 512,000 $ 576,000 $ 64,000 Aaron Industries 704,000 676,000 (28,000 ) Totals $ 1,216,000 $ 1,252,000 $ 36,000 Required: 1. Prepare appropriate adjusting entries at December 31, 2021. 2. What amount would be reported in the income statement at December 31, 2021, as a result of the adjusting entry
Answer:
Loreal-American Corporation
1. Adjusting Journal Entries;
Debit Unrealized Loss: Short-term Investments $123,000
Credit Investment in Blair Inc. $123,000
To record the unrealized loss on Investment in Blair Corporation.
Debit Investment in ANC Corporation $46,000
Credit Unrealized Gain: Short-term Investments $46,000
To record the unrealized loss on Investment in ANC Corporation.
Debit Investment in Drake Corporation $64,000
Credit Unrealized Gain on Long-term Investments $64,000
To record the unrealized gain on Investment in Drake Corporation.
Debit Unrealized Loss on Long-term Investments $28,000
Credit Investment in Aaron Industries $28,000
To record the unrealized loss on Investment in Aaron Industries.
2. Amount reported in the Income Statement at December 31, 2021 from the adjusting entry:
Unrealized Loss on Short-term Investments $77,000
Unrealized Gain on Long-term Investments $36,000
Unrealized Loss on Available for sale Investments $41,000
Explanation:
Cost Fair Value Unrealized Holding
Gain (Loss)
Short term: Blair, Inc. $ 512,000 $ 389,000 $ (123,000)
ANC Corporation 466,000 512,000 46,000
Totals $ 978,000 $ 901,000 $ (77,000)
Long term:
Drake Corporation $ 512,000 $ 576,000 $ 64,000
Aaron Industries 704,000 676,000 (28,000)
Totals $ 1,216,000 $ 1,252,000 $ 36,000
The purchase price of a natural gas-fired commercial boiler (capacity X) was $181,000 eight years ago. Another boiler of the same basic design, except with capacity 1.42X, is currently being considered for purchase. If it is purchased, some optional features presently costing $28,000 would be added for your application. If the cost index was 162 for this type of equipment when the capacity X boiler was purchased and is 221 now, and the applicable cost capacity factor is 0.8, what is your estimate of the purchase price for the new boiler
Answer:
$308,500.85
Explanation:
$181,000 eight years ago in real dollars was $181,000 / 162 = $111,728.40
new boiler with a 1.42X capacity x capacity factor = 1.42 x 0.8 = 1.136 (the price of the new boiler is 1.136 times the old boiler)
current price of the new boiler in real dollars = 1.136 x $111,728.40 = $126,923.46
real dollars converted to current nominal dollars = $126,923.46 x 2.21 = $280,500.85
price of the new boiler + additional optional features = $280,500.85 + $28,000 = $308,500.85
True or False: Firms operating in more price-competitive industries, or exhibiting lower levels of market power, generally exhibit lower levels of business risk, all other things being equal. This statement is: True False
Answer:
The statement is false
Explanation:
Determining the profitability depends on market power. At a higher market power, the level of profitability will be high.
Conversely, a company operating in a system where its market power is low which results into inability to compete with other companies will cause a low probability.
Scenario 9-1 For a small country called Boxland, the equation of the domestic demand curve for cardboard is Q D = 200 − 2P , where Q D represents the domestic quantity of cardboard demanded, in tons, and P represents the price of a ton of cardboard. For Boxland, the equation of the domestic supply curve for cardboard is Q S = -60 + 3P , where Q S represents the domestic quantity of cardboard supplied, in tons, and P again represents the price of a ton of cardboard. Refer to Scenario 9-1. Suppose the world price of cardboard is $45. Then, relative to the no-trade situation, international trade in cardboard a. benefits Boxlandian consumers by $672 and harms Boxlandian producers by $598.50. b. benefits Boxlandian consumers by $721 and harms Boxlandian producers by $598.50. c. harms Boxlandian consumers by $336 and harms Boxlandian producers by $525.00. d. benefits Boxlandian consumers by $721 and harms Boxlandian producers by $525.00.
Answer: a. benefits Boxlandian consumers by $672 and harms Boxlandian producers by $598.50.
Explanation:
Equilibrium price will be at level where quantity demanded equals quantity supplied.
200 − 2P = -60 + 3P
200+60 = 5P
5P = 260
P = $52
Equilibrium Quantity Demanded = 200 − 2P = 200 - 2 * 52 = 96 units
In a no-trade situation the demand in Boxland is 96 units at a price of $52. If they were to buy at the world price of $45, they would benefit;
= (96 * 52) - (96 * 45)
= 4,992 - 4,320
= $672
Producers however would produce the following at a price of $45;
Q S = -60 + 3P
= -60 + 3(45)
= 75 units
They would be supplying less units and be hurt.
1. Do you think that punishments deter crime? Why or why not? Do you think there is a better way to reduce crime than punishment?
Explanation:
In my honest opinion i don not think punishment deter crime, but it does to a great extent reduce the rate of crime, if actually punishment deter crime, then there will not be offenders anymore.
Another possible way to reduce crime than punishment is to place a fine for offender to pay and also place offenders on community service, in this way offenders get to move freely in the society while they get to pay a huge sum for the offence they have committed
Answer:
I really believe that punishments reduce crime, if someone has done something wrong they have to be punished because, if not, how are they going to know that what they have done is wrong? So, in this way, some criminals stop committing crimes because they see that what they have done is not good and has consequences.
Punishment is known to be a bad stimulus to reduce crime; instead, education has been much more effective, because in this way criminals learn what they can do to improve their lives.
Explanation:
Poe Company is considering the purchase of new equipment costing $80,000. The projected net cash flows are $35,000 for the first two years and $30,000 for years three and four. The revenue is to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Poe requires a 10% return on its investments. The present value of $1 and present value of an annuity of $1 for different periods is presented below. Compute the net present value of the machine. 1 0.9091 0.9091 2 0.8264 1.7355 3 0.7514 2.4869 4 0.6830 3.1699
Answer:
$23,773.65
Explanation:
Net present value is the present value of after tax cash flows from an investment less the amount invested
NPV can be calculated using a financial calculator :
cash flow in year 0 = $-80,000.
Cash flow in year 1 and 2 = $35,000.
Cash flow in year 3 and 4 = $30,000.
I = 10%
NPV = $23,773.65
To find the NPV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
A break-even analysis includes operating expenses and total monthly debt payments,
plus
school costs
gross profit margin.
Onet profit margin
zero term margin.
Answer: Gross profit margin.
Explanation:
Break-Even Analysis enables a business to know how much cash it has under given situations by helping it know how much sales it needs in order to have a certain amount of cash.
It is calculated by the formula;
(Operating Expenses + Annual Debt Service)/Gross Profit Margin = Break-Even Sales
Operating Expenses in this equation is net of Depreciation as depreciation is a non-cash expense.
g The aggregate supply curve shifts A. rightward if the money wage rate falls. B. leftward if the aggregate demand curve shifts leftward. C. rightward if potential GDP decreases. D. leftward if potential GDP increases. E. rightward if the money wage rate rises.
Answer:
The correct option to the question above is option A "rightward if the money wage rate falls."
Explanation:
The aggregate supply curve is a graphical illustration of how the total quantity of goods and services is available for a given price and time.
When the aggregate supply curve shifts to the right, it increases. While, when the aggregate supply curve shifts to the left, it decreases.
An increase in the aggregate supply curve shows a fall in price, which makes a high price level resulting in a greater supply of real GDP.
Money wages is the amount of money paid in wages. Money wages is indirectly proportional to real wages. The aggregate supply curve decreases if the money wage rate increases and the aggregate supply curve increases when the money wage rate falls.
Aggregate supply is affected by GDP. When A GDP decreases, it also decreases aggregate supply.
The balanced scorecard approach relies not only on financial performance measures, but includes customers, internal business processes, and organizational learning and growth.
a. True
b. False
Joe wants to start an SEP-IRA that will have $460,000 in it when he retires in 15 years. How much should he invest semiannually in his IRA to do this if the interest is 15% compounded semiannually?
Answer:
$4,448.77
Explanation:
time until retirement = 15 years x 2 semiannual contributions = 30 payments
interest rate =15% / 2 = 7.5%
future value = $460,000
we can use the future value of an annuity formula:
future value = payment x annuity factor
FV annuity factor 7.5%, 30 periods = 103.3994
payment = future value / annuity factor
payment = $460,000 / 103.3994 = $4,448.77
The amount that should be invested is $4,448.77.
Calculation of the amount:Since
time until retirement = 15 years x 2
= 30 payments
And,
interest rate =15% / 2 = 7.5%
Also,
future value = $460,000
Now we can use the future value of an annuity formula:
Here,
future value = payment x annuity factor
where,
FV annuity factor 7.5%, 30 periods = 103.3994
So,
payment = future value / annuity factor
= $460,000 / 103.3994
= $4,448.77
hence, The amount that should be invested is $4,448.77.
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When a country produces on its production possibilities curve, then this country's unemployment is expected to be at one of its lowest rates, however, prices in this country are not expected to be relatively low.
a. True
b. False
Answer:
TRUE
Explanation:
the production possibility curve shoes the number of goods that can be produced in an economy when its resources are fully employed.
if a country produces on its production possibilities curve, it means that its resources are fully employed and so unemployment would be at its lowest.
Exhibit 35-4 Refer to Exhibit 35-4. Under a fixed exchange rate system, at the exchange rate of E 3, the dollar is __________ and there is a __________.
Please find diagram for question attached
Question options:
a.
overvalued; surplus of dollars
b.
undervalued; shortage of pesos
c.
overvalued; shortage of dollars
d.
undervalued; surplus of pesos
Answer:
Overvalued and there is a shortage of dollars
Explanation:
An increase in dollar price to buy peso means that dollar here is overvalued as it is above the equilibrium price(E2),and therefore it would be expensive to buy goods that are sold for a certain amount of dollars or in dollar currency with the Mexican pesos. This is because the fixed exchange rate system tries to ensure smooth and inexpensive trade between countries as it has to do with currency trading barriers by pegging a currency to another(in this case dollars) but here the dollar price increase for peso makes it more expensive to buy dollar products with pesos. Also this is caused here by the shortage of dollars.