A graphical view of balanced-budget fiscal policy Suppose the government enacts a "balanced budget" change in fiscal policy by increasing spending and raising taxes. Assume the tax increase affects both consumption and production spending. Use the slides in following exhibit to preview potential effects of this policy on aggregate supply (AS), aggregate demand (AD), and the market equilibrium (E) when the initial curves and equilibrium are given by AS1, AD1, and E1, respectively. Initial View View 1 View 2 View 3View View 5 PRICE LEVEL REAL GDP AD 1 AS 1 E 1 The total effect of the change in spending and taxation is best represented by . True or False: According to the principle of Ricardian equivalence, the effect of increased government spending on aggregate demand would be smaller if it were financed through borrowing instead of taxation. True False

Instructions: use the following information to construct the 2000 balance sheet and income statement for carolina business machines. round all numbers to the nearest whole dollar. all numbers are in thousands of dollars. be sure to read the whole problem before you jump in and get started. at the end of 1999 the firm had $43,000 in gross fixed assets. in 2000 they purchased an additional $14,000 of fixed asset equipment. accumulated depreciation at the end of 1999 was $21,000. the depreciation expense in 2000 is $4,620. at the end of 2000 the firm had $3,000 in cash and $3,000 in accounts payable. in 2000 the firm extended a total of $9,000 in credit to a number of their customers in the form of accounts receivable. the firm generated $60,000 in sales revenue in 2000. their cost of goods sold was 60 percent of sales. they also incurred salaries and wages expense of $10,000. to date the firm has $1,000 in accrued salaries and wages. they borrowed $10,000 from their local bank to finance the $15,000 in inventory they now have on hand. the firm also has $7,120 invested in marketable securities. the firm currently has $20,000 in long-term debt outstanding and paid $2,000 in interest on their outstanding debt. over the firm's life, shareholders have put up $30,000. eighty percent of the shareholder's funds are in the form of retained earnings. the par value per share of carolina business machines stock is

Double corporation acquired all of the common stock of simple company for

The following are budgeted data: january february march sales in units 16,200 22,400 19,200 production in units 19,200 20,200 18,700 one pound of material is required for each finished unit. the inventory of materials at the end of each month should equal 20% of the following month's production needs. purchases of raw materials for february would be budgeted to be: