As seen previously, adjusting for the risk of an asset using the risk-free rate, an investor can easily alter his risk profile. Keeping that in mind, in the context...

Inventory Processing Systems Inventory-processing systems relate to the timing of the assessment of inventory. They can be valued on a continuous basis (physical count of inventory will be...

1. Current Ratio This ratio is a measure of the ability of a firm to meet its short-term obligations. In general, a ratio of 2 to 3 is...

Current and Financial Account Surpluses and Deficits Current account deficits (or surpluses) and financial deficits (or surpluses) do not directly affect an economy. In fact, these deficits (surpluses) are...

Spreads on Forward Currency Quotations The spread on a forward currency quotation is calculated in the same manner as the spread for a spot currency quotation. The reasons that...

Calculating Currency Cross Rates When Given Two Spot Exchange Quotes Involving Three CurrenciesA currency dealer located in a particular country will usually provide a set of exchange rate...

A general rule of efficiency is that an individual or group should specialize in production activities in which it can operate more efficiently than other entities. This principle...

To illustrate the benefits of trade, we should look at the production possibility curves for two nations, Great Britain and the U.S. The production possibility curve (or production...

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The Direct Method The direct method is the preferred method under FASB 95 and presents cash flows from activities through a summary of cash outflows and inflows. However,...

Under U.S. and ISA GAAP, the statement of cash flow can be presented by means of two ways: The indirect method The direct method The Indirect MethodThe indirect...

Stable Prices vs. Sustainable Growth in real GDPPrice level stability refers to the concept that price levels are stable enough so that people do not feel compelled to...

Discretionary Fiscal PolicyDiscretionary fiscal policy is made more difficult due to lags in recognizing the need for changed fiscal policy and the lags that occur with enacting the...

The marginal propensity to consume (MPC) is equal to ΔC / ΔY, where ΔC is change in consumption, and ΔY is change in income. If consumption increases by eighty...

BasicsWhat is fiscal policy?Fiscal policy is the use of government taxation, spending and borrowing to satisfy macroeconomic goals. Potential GDPThe GDP that results from an economy operating at...

Determining Inflation Inflation vs. Price-LevelThe term price-level refers to the prices that must be paid in order to acquire a basket of good and services. The phenomenon of inflation...

I. The Supply and Demand of MoneyPeople hold money: To conduct transactions For precautionary reasons, such as to meet emergencies, such as unexpected medical bills As a store...

Types of InstitutionsThere are three major types of depository institutions: 1.Commercial banks 2.Thrift institutions such as credit unions, savings and loan associations (S&Ls), and savings banks. Credit unions are...