# If Congress ends an investment tax credit that used to subsidize domestic investment, how would this affect the market for loanable funds in an open economy context?

Answer: Demand will fall, Interest rates will fall

Explanation:

The investment tax credit would have encouraged more companies to seek loanable funds in order to embark on investment opportunities because they would be taxed less. This increase in demand in the market for loanable funds would have led to rates rising to keep up with demand.

If Congress were to end this credit, the incentive to invest and avoid tax would be gone. Companies would therefore demand less loanable funds and with this drop in demand there will be a drop in interest rates as well to entice people to borrow at the lower rates.

## Related Questions

_____ occurs when a creditor obtains a court order that directs an employer to set aside a portion of an employee's wages to pay a debt owed to the creditor.

Garnishment

Explanation:

Garnishment refers to an order in which a person directs a third party with respect to seize assets  i.e salary earned from employment or money in a bank account so that the unpaid debt amount could be settled out

In the given case, the same situation occurs so this is a case of garnishment and the same is to be considered

Fortune Company's direct materials budget shows the following cost of materials to be purchased for the coming three months: January February March Material purchases \$ 13,180 \$ 15,290 \$ 12,110 Payments for purchases are expected to be made 50% in the month of purchase and 50% in the month following purchase. The December Accounts Payable balance is \$7,900. The expected January 31 Accounts Payable balance is:______________.

The expected January 31 Accounts Payable balance is \$6,590

Explanation:

The December Accounts Payable balance is \$7,900 - this is the 50% purchase amount in December and will be paid in January.

In January, Fortune Company will pay 50% purchase amount in December and 50% purchase amount in January.

Expected payment = \$7,900 + 50% x \$13,180 = \$14,490

At January 31, the expected Accounts Payable balance:

\$13,180 x 50% = \$6,590

The expected Accounts Payable balance for Fortune Company at the end of January is \$10,540, taking into account the payables carried over from December and half of January's purchases.

### Explanation:

The question is regarding the calculation of the expected Accounts Payable balance at the end of January for Fortune Company. The company's payment schedule shows a split of 50% payment in the month of purchase and 50% in the following month. To compute the January 31 Accounts Payable, we need to consider the December Accounts Payable which is to be paid in January (50% of \$7,900 = \$3,950), and half of January's purchase (\$13,180) which will amount to \$6,590. Hence the expected January 31 Accounts Payable is: \$3,950 (December's payable) + \$6,590 (January's payable) = \$10,540.

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Pei's savings account balance is \$12,000 today. Pei opened the account exactly 7 years ago with a \$10,000 deposit. Pei has made no other deposits or withdrawals. What annual interest rate (compounded annually) has the account earned?

2.64%

Explanation:

A = P(1 + r)^n

A = \$12,000

P = \$10,000

n = 7 years

12,000 = 10,000(1 + r)^7

(1 + r)^7 = 12,000/10,000 = 1.2

(1 + r)^7 = 1.2

1 + r = (1.2)^1/7

I + r = 1.0264

r = 1.0264 - 1 = 0.0264

r = 0.0264 × 100 = 2.64%

Comparing risks of different mutual fund/ETF types. For each pair of funds listed below, select the fund that would be less risky and briefly explain your answer.a. Growth versus growth-and-incomeb. Equity-income versus high-grade corporate bondsc. Intermediate-term bonds versus high-yield municipalsd. International versus balanced

Following are the responses to the given points:

Explanation:

For point a:

The fund would have been less dangerous for sales and profitability. Each reason would be that growth funds only appreciate investment returns. And on the other side, the growth and economy grew yield gains in term both of equity investment returns or dividend/interest payments, that result throughout the investor's reduced risk.

For point b:

High-quality bond funds are far less dangerous. The reason for this is the investment income is subject to risk and depends on the financial performance of the firm and many other external factors, including that of the country's macroeconomic scenario. Besides that, equity investment dividends aren't guaranteed. That bondholders benefit from the strong business credibility as well as the loan repayments on the investments are assured, independent of the company earnings performance.

For point c:

Its municipalities with such a good return would be less harmful. That reason is that such bonds are provided by public authorities (such as municipalities). Even so, these devices cannot obtain a reputation for credit mostly on market. Consequently, until investing in such securities, it is important to take into account credit scores (assigned to such bonds).

For point d:

The equilibrium fund is much less risky. It is because balanced funds participate in various types of financial securities like assets and liabilities. It helps balance the risk linked to stock market fluctuations with fixed liability returns. In contrast, foreign money invests mainly in foreign share trading and is thus exposed to market volatility and rapid share price fluctuations.

Marcos owns 1,500 shares of ABC stock which he purchased at \$44 a share. The stock has been steadily decreasing in value and he wants to cut his losses now as he expects the stock price to decline further. Which type of order should Marcos place

Market sell order for 1,500 shares

Explanation:

The type of order that Marcos should place is Market sell order for 1,500 shares because he already owns 1,500 shares of the ABC stock in which the ABC stock shares was purchased at \$44 per share.

Since the stock has been decreasing in value in which he wants to cut his losses now because the stock price may continue to decrease, the best thing for him to do is to use the Market sell order for the 1,500 shares in order to cut the losses that may arise and to avoid losing all the Total amount of the shares bought which is \$66,000 ( 1,500 shares ×\$44).

For each of the following independent situations, prepare journal entries to record the initial transaction on December 31 and the adjustment required on January 31. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)a.
Magnificent Magazines received \$16,800 on December 31, 2015, for subscription services related to magazines that will be published and distributed in January through December 2016.

b.
Walker Window Washing paid \$1,680 cash for supplies on December 31, 2015. As of January 31, 2016, \$280 of these supplies had been used up.

c.
Indoor Raceway received \$4,200 on December 31, 2015, from race participants for providing services for three races. One race is held in January 31, 2016, and the other two will be held in March 2016.

1. Record the receipt of \$16,800 on December 31, 2015, for subscription services related to magazines that will be published and distributed from January through December 2016.

2. Record the January 31, 2016 adjusting entry for the December 31, 2015 receipt of \$16,800 for magazine subscriptions to be published January through December 2016.

3. Record the payment of \$1,680 cash for supplies by Walker Window Washing on December 31, 2015. As of January 31, 2016, \$280 of these supplies had been used up.

4. Record the January 31, 2016 adjusting entry for the December 31, 2015 cash payment of \$1,680 for supplies. As of January 31, 2016, \$280 of these supplies had been used up.

5. Record the receipt by Indoor Raceway of \$4,200 on December 31, 2015, from race participants for providing services for three races. One race is held on January 31, 2016, and the other two will be held in March 2016.

6. Record the January 31, 2016 adjusting entry for the December 31, 2015 receipt of \$4,200 from race participants for providing services for three races. One race is held on January 31, 2016 and the other two will be held in March 2016.

Journal Entries

a1)                                    Magnificent Magazines

Date                                 Details                                    Dr               Cr

\$                \$

December 31, 2015  Cash                                         16,800

Deferred Revenue-subscription               16,800

Being recognition of prepaid subscription service for the year 2016

a2)                                  Magnificent Magazines

Date                                 Details                                     Dr               Cr

\$                \$

January 31, 2016     Deferred Revenue-subscription    1,400

Revenue                                                        1,400

Being revenue for the month of January 2016

b1)                                 Walker Window Washing

Date                                 Details                                    Dr                   Cr

\$                     \$

December 31, 2015     Prepaid expense-Supplies     1680

Cash                                                              1680

Being recognition of advance payment for supplies

b2)                                 Walker Window Washing

Date                                 Details                                 Dr                   Cr

\$                     \$

January 31, 2016        Expense - supplies               280

Prepaid expense-Supplies                           280

Being supply expense for the month of January

c1)                                 Indoor Raceway

Date                                 Details                                    Dr               Cr

\$                \$

December 31, 2015  Cash                                         4,200

Deferred Revenue                                     4,200

Being recognition of race income paid in advance

c2)                                  Indoor Raceway

Date                                 Details                                     Dr               Cr

\$                \$

January 31, 2016     Deferred Revenue                        1,400

Revenue                                                        1,400

Being revenue for the month of January 2016

Explanation:

a) For Magnificent Magazines, the total amount paid \$16800 is given as an advance for services not yet rendered. This amount which is for 12 months is then recognized as revenue when the services as provided on a monthly basis = 16800/12 = 1400

b) Walker windows paid in advance for supplies amounting to \$1680, this is an asset to the company (prepayment) and as at January 2016, only \$280 had been utilized. The utilized \$280 is therefore expensed to the income statement

c) For Indoor Raceway, the \$4200 is a liability as the services have not been provided yet, hence deferred revenue and the revenue is recognized after the service has been rendered in the income statement. For January, being 4200/3 = 1400