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University Degree: Applied Economics

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  1. Explain what you understand by the term 'substance over form'. Is it appropriate that this concept should be used as a guide in setting accounting standards?

    of a transaction of event.1 Hence, SOF essentially means that it is more important to report in financial statements the economic substance or reality, rather than the legal form.2 i.e. if there is conflict between the substance of a transaction and the legal form of a transaction, the economic substance should take precedence over legal form.3 The substance of transactions should be recorded in financial statements.4 According to the references of FRS 5, a key factor in determining the substance of a transaction is to identify whether it changes the existing assets and liabilities of the company either by creating

    • Word count: 1781
  2. There are seven major divergent forces, which shape the Financial Reporting internationally. I am going to explore each one individually with references to UK, USA and Bulgarian Financial Reporting Practices.

    27 76 88 21 As it can be seen UK and USA are very close by scale, while Bulgaria is very different. Financial Reporting cannot be explained only by cultural differences, but yet they influence a lot the accounting practices. For example UK and USA accounting are very similar, they both belong to the so called by Gray 'Anglo' culture and yet there are some differences influenced by other forces. Yet they are very liberal (low uncertainty avoidance), professionally organized (high individualism), flexible (small power distance)

    • Word count: 1993
  3. What is the role of menu costs in New Keynesian models? Is the importance placed on menu costs in these models justified by the empirical evidence?

    All the major innovations of the New Keynesian school are made possible or worthwhile only because of imperfect competition. By this I mean that all the firms set their own profit-maximizing prices rather than take from the market. So what are exactly menu costs? Menu costs are costs of changing nominal price. The classic example of menu costs is the costs that a restaurant faces when it has to reprint its menu to show changes in the prices of its offerings.

    • Word count: 2239
  4. What implication does the permanent income hypothesis of consumption have for the value of the multiplier in the short- and long-run?

    According to the multiplier formula, k=1/(mpw)=1/(1- mpc), the size of the multiplier depends on mpc or on mpw respectively. The marginal propensity to withdraw (mpw) indicates the proportion of a rise in national income that is withdrawn. The marginal propensity to consume (mpc= ?C / ?Y) indicates the proportion of a rise in national income spent on consumption. The bigger mpc, the smaller is mpw and vice versa since the additional sum of mpc and mpw must be equal to one.

    • Word count: 778
  5. The Auditing Process - Applied.

    In essence, both audits have similar objectives. Whilst a traditional audit provides stakeholders and other interested users, a high level of assurance that the audited company is operating in accordance to accounting and ethical standards, a road safety audit provides road users a high level of assurance that the roads they are travelling on are in accordance to road safety standards. More importantly, the credibility of the opinions expressed by auditors is enhanced due to the fact that the auditor(s) or auditing team are independent to the organization or road construction project being audited.

    • Word count: 3775
  6. General purpose financial statements

    The value of GPFR's to decision making is recognised by professional accounting bodies such as the Australian and New Zealand Institute of Chartered Accountants (ICANZ). The ICANZ states that the intended purpose of GPFR's is to 'provide information to meet the needs of external users who are unable to require, or contract for, the preparation of special reports to meet their specific information needs'1. This implies that GPFR's are just as useful in the decision making process to external users as SPFR's are to the internal users who request them.

    • Word count: 840
  7. Compare the Classical and Keynesian models, making the reference to,a) The labour market, b) The AS curve, c) The AD curve, d) The relationship between real and monetary variables.

    * Quantity theory of money (money supply causes price level) Implies * If there is wage price flexibility then the economy quickly adjusts to voluntary full employment equilibrium * Supply causes demand, therefore, concentrate on supply * Direction of causation is from the labour market to aggregate supply REAL SIDE MONETARY SIDE AS Aggregate Supply AD Aggregate demand w/p Real wage w money wage O Output/real income p price level N Employment Classical Labour market demand and Aggregate Supply Labour market demand DN = firms demand for labour MPP = marginal physical product w = MPP x P DN curve is downward sloping because MPP diminishes with fixed capital and technology due to the law of variable proportions.

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  8. "arguaby the annual general report is a poor aid to economic decision making" Discuss.

    This essay will consider arguments concerning the usefulness of Annual Reports as aids to economic decision-making; and highlight some of the problems associated with these documents. It will then put forward reasons for the introduction of new accounting standards and practices, to take into consideration some of the issues with which Annual Reports fail to address, but which can be considered as being of relevance to economic decision making. DISCUSSION, ANNUAL GENERAL REPORT AS AN AID TO ECONOMIC DECISIONS The need for information for economic decision making is ever apparent, many users use financial information for decision making, (Schredelseker, 1999)

    • Word count: 3211
  9. The New Keynesians Theory of Value.

    are good. For 50 years, this "demand - management" model has been the standard approach in college economics. Now along comes a new generation of economists, known as "new" Keynesians, who have wisely changed their way of thinking. In the most popular textbook on macroeconomics, author N. Gregory Mankiw reverses the standard Keynesian pedagogy. In a brilliant move Mankiw begins with the classical model and ends with the Keynesian model, just the opposite of Samuelson & Company. The Keynes theory Keynes was a critic of the free market orthodoxy.

    • Word count: 2450
  10. Use economic theory and supporting material to discuss economic reasons in favour and in disfavour of an imposition of a minimum wage.

    The first report of the commission in June 1998 concluded that a minimum wage of £3.60 should be set up. The second report of the commission in February 2000 tried to analyse the effect of the National Minimum Wage had on the economy after the intervention. Their main conclusion was the minimum wage mostly benefit the economy. Minimum wage legislation is an example of government intervention into the economy due to a market failure. In this case the market failure was that the worker were not provided a level of income that support their standard of living.

    • Word count: 1492
  11. Economics Questions on Entrepreneurs, Equilibrium Pricing. Markets and the Labour Supply Curve.

    All entrepreneurs endeavour to follow the benchmark model for their particular product. There benchmark model is defined as: ?The process of identifying best practice in relation to both products and processes by which these products are created and delivered (www.econguru.com) This model gives the farmer a picture of how production could look and can be illustrated in a number of ways. Diagram 1 show a basic benchmarking system. Benchmarking is important as it helps any entrepreneur to identify the most effective ways in which to produce resources needed within the economy and can also tell an entrepreneur where they ?stand with respect to competitors and other industries across the world.

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  12. Choose an industry that is very competitive, and one that displays signs of monopoly. Use examples to show and analyse how they pursue their objectives, and in what way they differ in their business practices.

    In fact, the vicious competitive nature this industry has led to a price war. According to the Mintel Oxygen report for July 2007 on No-frills/Low-cost Airlines - UK - July 2007 “Despite rolling out new destinations and aircraft, based on double-digit growth, carriers are already talking of a slowdown, ‘weaker market conditions’ and a difficult winter. Worsening load factors have necessitated further price wars and at this rate a consolidation bloodbath looks inevitable.”[2] Indeed this summer Ryanair started up a price war by selling three million summer seats for £10(taxes and charges included), in response to this EasyJet one the main players in the industry lengthened it s summer sales and guarantee through out the summer.

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  13. BAfter the Berlin wall came down movement between East and West became possible. What happened to the income of taxi drivers, and fares paid by consumers, in East and West Berlin after unification; given that living standards are much higher in West than in East Berlin. Assume the market for taxi cabs is competitive.

    As the living standards were higher in West Berlin, the same amount of work buys an increased quantity of goods, and items that may be seen as luxuries in East Berlin; such as cars, computers, mobile phones etc. are more common in the West. When the unification happened, East Berlin?s wages were roughly a third of West Berlins. We are assuming the market for taxi cabs is perfectly competitive, this means that no single business has the power to affect the price of the product.

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  14. Externalities and overfishing in the fishing industry

    to the producer of producing one more unit. The Marginal Social Cost (MSC) curve is the sum of the MEC and MC and consequently has a steeper gradient than the Supply curve. This means that its intersection with the Demand curve has a lower quantity value, creating a cost to society equal to the shaded area, and so the quantity producers want to supply is over that which is socially optimal. This is why the quantity of fish caught is classed as ?overfishing?. The question is why producers, who are a part of society, would want to produce over the SOL.

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  15. The goal of this article is to check theory of growth rate of GDP. According to the theory growth rate of GDP is negatively related to the initial level of real per capita GDP and positively related to the size of the country

    Government consumption in theory is inversely related to the growth rate of GDP. One reason for that is because government expenditures tend to be less economically effective when compared to private expenditures. Another reason is that to support high level of expenditures the government withdraw part of GDP in form of taxes, thus, decreasing private investments. The fertility rate is negatively correlated to the growth rate of GDP because the higher the growths rate of GDP, the higher the value of worker?s time.

    • Word count: 1735
  16. Discuss the empirical evidence supportive of and against market efficiency.

    Studies of Kendall, Alexander and Morgenstern to name a few, found no evidence of serial correlation between the current return on a security and the return on the same security over a previous period that were large enough to cover the transaction costs of trading (Keane 1983, p.35). Hence, they follow random walks and are consistent with the weak form efficiency. Studies of semi-strong form efficiency are done through event studies, where important news events are evaluated to see the effects of these news events on share prices.

    • Word count: 1941
  17. Economics- market failure

    Young healthy people especially cannot comprehend the idea of old age and illness. As well as merit goods we have de-merit goods which covers a wide range of goods available by the market from heroin (illegal) to tobacco/alcohol (legal), even fuel is a de-merit good causing externalities (negative ones as there is also positive ones) in that consuming fuel causes negative externalities (pollution) for the environment and partaking of drugs and alcohol causes negative externalities through extra burden on healthcare, Criminal Justice systems, crime increase and families and friends distress etc. So just why do the government have to intervene?

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  18. Outline and discuss recent (1999-present) trends in the size of government and the composition of government expenditure in the UK and USA.

    of GDP 40.4 40.8 41.2 43.5 46.1 45.9 46.9 56.8 General government revenues % of GDP 40.6 39.0 38.7 39.6 40.8 41.4 41.4 42.2 General government expenditures % of GDP 39.9 40.9 42.4 43.1 44.1 44.1 44.1 47.5 Expenditure Public expenditure on health % of GDP 5.8 6.1 6.2 6.6 6.7 6.9 6.9 .. Private expenditure on health % of GDP .. .. .. .. .. .. 1.5 .. Public social expenditure % of GDP .. .. 20.5 21.1 21.3 ..

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  19. Identifying Individual Preferences in the Airline Industry

    Those then lead to trade-offs and opportunity costs. Consumers in the airline industry could be divided into two groups, which are business and pleasure travellers. Elasticity is the percentage change in one variable resulting from a 1-percent increase in another (Pindyck & Rubinfeld, 2009). When the price elasticity is greater than 1 in magnitude, we say that demand is price elastic because the percentage decline in quantity demanded is greater than the percentage increase in price. If the price is less than 1 in magnitude, the demand is said to be price inelastic.

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  20. Climate Change And Economic Policy. An Australian Perspective

    The Carbon tax was implemented on June 1st 2012 and has been controversial amongst politicians and economists alike according to Clive?s article ?Australia's Carbon Tax: A Sheep in Wolf's Clothing?. The steps taken to implement a policy should be understood first before critiquing from different viewpoints. The four major points of policymaking are: 1. Specify the goals of policy 2. Identify the targets 3. Specify the policy instruments 4. Model the economy linking the instruments to the targets Using this framework, the goal?s of the policy are to mitigate damages caused by the production of greenhouse gasses on the (global)

    • Word count: 2936
  21. Provide a detailed explanation for how the Heckscher-Ohlin theory differs from the Ricardian model

    That assumption is a key to several consequences. Yet, in today global economy, capital is extremely changeable across national borders. Because of this information, whether it may be better to work with a model that includes labor as the only immobile element of production. To explain a little more technically, assume that an industry has production function: Y = F (K,L). And assume that the marginal product of capital is influenced by the world rental cost of capital R: FK(K,L)

    • Word count: 625
  22. Demand Estimation of Indian Tractor industry

    The spectacular achievement reflects the maturity and dynamism of tractor manufacturers and also the policies adopted by the government to enable it to effectively meet the demand. The tractor industry in India has made a significant progress in terms of production and capacity as well as indigenisation of technology. It is a typical sector where both imported technology and indigenous developed technology have developed towards meeting the overall national requirements. The global spotlight on tractors manufacturers certainly interms of volume seems to be swinging away from the USA, UK and Western and Eastern Europe towards India where growth in the number of producers and the total volume inrecent years have been impressive.

    • Word count: 2338

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