Country 1 produces good X, and country 2 produces good Y. People in both countries begin to demand more of good X and less of good Y. Assume that there is no labor mobility between the two countries and that a flexible exchange rate system exists. What will happen to the unemployment rate in country 2? Explain.
> The annual average percentage change in Real GDP is 2.3 percent, and the annual average percentage change in velocity is 1.1 percent. Using the monetary rule discussed in the text, what percentage change in the money supply will keep prices stable (on av
> Last year, Charu bought a bond for $10,000 that promises to pay her $1,000 a year. This year investors can buy a bond for $10,000 that promises to pay $800 a year. If Charu wants to sell her old bond, what is its price likely to be?
> Last year, Manuel bought a bond for $10,000 that promises to pay him $900 a year. This year he can buy a bond for $10,000 that promises to pay $1,000 a year. If Manuel wants to sell his old bond, what is its price likely to be?
> Explain how it is possible to have too much money.
> Why is the demand curve for money downward sloping?
> If bond prices fall, will individuals want to hold more or less money? Explain your answer.
> Why might a person purchase an inflation-indexed Treasury bond?
> Monetary policy can affect relative prices. Do you agree or disagree with this statement? Explain your answer.
> If the face value of a bond is $10,900 and the annual coupon payment is $600, what is the coupon rate?
> “An issuer of a bond is a borrower.” Do you agree or disagree? Explain your answer.
> Which of the two stocks has a bigger gap between its close price and net earnings per share, Stock A with a P/E ratio of 15 or Stock B with a P/E ratio of 44? Explain your answer.
> If the share price of each of 500 stocks rises on Monday does everyone in the stock market believe that stocks are headed even higher? (No one will buy a stock if he or she thinks share prices are headed lower.)
> What does it mean if someone invests in a mutual fund? In a stock market fund.
> What does the phrase “to buy the market” mean?
> What does it mean if the Dow Jones Industrial Average rises by, say, 100 points in a day?
> If you thought that the share price of a stock was going to fall, would you buy a call option or a put option?
> “The currency speculator who sells futures contracts assumes the risk that someone else doesn’t want to assume.” Do you agree or disagree? Explain your answer.
> Why might a person buy a call option?
> How does inflation targeting work?
> Why might a person buy a futures contract?
> “If you can predict interest rates, then you can earn a fortune buying and selling bonds.” Do you agree or disagree? Explain your answer.
> What is the purpose of financial markets?
> What is the case for government intervention in the economy with respect to non-excludable public goods?
> Even if government uses taxes to deal with a negative externality, an inefficient market outcome will not necessarily change into an efficient one. Do you agree or disagree? Explain your answer.
> Government can use taxes and subsidies to change an inefficient market outcome into an efficient outcome. Do you agree or disagree? Explain your answer.
> What is the relationship between MPC and MSC if a negative externality exists? What is the relationship between MPB and MSB if a positive externality exists?
> Government can remove two individuals from a prisoner’s dilemma setting and end up making one individual better off and the other individual worse off. Do you agree or disagree? Explain your answer. (Hint: Think taxes.)
> Does government always make individuals better off if it removes them from a prisoner’s dilemma setting? Explain your answer.
> Government can remove individuals from a prisoner’s dilemma setting by changing the payoffs from various actions. Explain.
> Argue the case for and against a monetary rule.
> Government may provide, or be part of a process that generates, both non-excludable public goods and bads. Do you agree or disagree? Explain your answer.
> As presented in this chapter, what is the case for government? What is the case against government?
> Special-interest groups that seek transfers may find themselves in a prisoner’s dilemma setting. Do you agree or disagree? Explain your answer.
> Special-interest group A receives a 1/1,000 slice of the economic pie. The group’s net benefits from an economic growth policy are $3,000, which are the same as its net benefits from a transfer policy. What (absolute) change in the size of the economic p
> Explain how a tax credit policy for first-time home buyers can raise the demand for, and price of, houses.
> In this chapter, we discussed three types of transfers. Identify and explain each.
> Individuals sometimes disagree over the preferred quality and quantity of a non-excludable public good. Why?
> Under what condition would an individual choose to spend additional time producing instead of stealing? Under what condition would an individual choose to spend additional time stealing instead of producing?
> What does it mean to say that a currency is overvalued? Undervalued?
> A country whose currency is the primary reserve currency can likely borrow at lower interest rates than it could if its currency were not the primary reserve currency. Do you agree or disagree? Explain.
> The discussion of supply and demand in Chapter 3 noted that, if two goods are substitutes for each other, the price of one and the demand for the other are directly related. For example, if Pepsi-Cola and Coca-Cola are substitutes, an increase in the pri
> Explain the details of the purchasing power parity (PPP) theory.
> What are the strong and weak points of the flexible exchange rate system? What are the strong and weak points of the fixed exchange rate system?
> Give an example of how a change in the exchange rate alerts the relative price of domestic goods in terms of foreign goods.
> Suppose the United States and Japan have a flexible exchange rate system. Explain whether each of the following events will lead to an appreciation or depreciation of the U.S. dollar and Japanese yen. (a) U.S. real interest rates rise above Japanese rea
> What does it mean to say that the U.S. dollar has depreciated in value in relation to the Mexican peso? What does it mean to say that the Mexican peso has appreciated in value relative to the U.S. dollar?
> The lower the dollar price of a peso, the higher is the quantity demanded of pesos, and the lower is the quantity supplied of pesos. Do you agree or disagree? Explain.
> If everyone in the world spoke the same language, would the world be closer to or further from being an optimal currency area? Explain.
> How important is labor mobility in determining whether an area is an optimal currency area?
> What is an optimal currency area?
> Both activists and non-activists make good points for their respective positions. Do you think activists could say anything to non-activists to convince them to accept the activist position, and vice versa? If so, what is it that they would say? If not,
> Country X wants to lower the value of its currency on the foreign exchange market. Under a flexible exchange rate system, how can it do that?
> Under a fixed exchange rate system, setting the official price of a peso in terms of dollars automatically sets the official price of a dollar in terms of pesos. Do you agree or disagree? Explain.
> Under a flexible exchange rate system, if the equilibrium exchange rate is 0.10 USD = 1 MXN and the current exchange rate is 0.12 USD = 1 MXN, will the U.S. dollar appreciate or depreciate? Explain.
> Explain the link between the Mexican demand for U.S. goods and the supply of pesos. Next, explain the link between the U.S. demand for Mexican goods and the supply of dollars.
> Even though Jeremy is a better gardener and novelist than Bill, Jeremy still hires Bill as his gardener. Why?
> Suppose the landmass known to you as the United States of America had been composed, since the nation’s founding, of separate countries instead of separate states. Would you expect the standard of living of the people who inhabit this landmass to be high
> Suppose the U.S. government wants to curtail imports. Would it be likely to favor a tariff or a quota to accomplish its objective? Why?
> Consider two groups of domestic producers: those which compete with imports and those which export goods. Suppose the domestic producers that compete with imports convince the legislature to impose a high tariff on imports—so high, in fact, that almost a
> Neither free trade nor prohibited trade comes with benefits only. Both come with benefits and costs. Therefore, free trade is no better or worse than prohibited trade. Comment.
> Whatever can be done by a tariff can be done by a quota. Discuss.
> Suppose it were proved that liquidity traps are not real and that investment is not interest insensitive. Would this be enough to disprove the Keynesian claim that expansionary monetary policy is not always effective at changing Real GDP? Why or why not?
> Consider the following: Two researchers, A and B, are trying to determine whether eating fatty foods leads to heart attacks. The researchers proceed differently. Researcher A builds a model where fatty foods may first affect X in one’s body, and if X is
> Contact a CPA firm to find out about current expectations regarding the technical knowledge required as an entry-level staff person. Write a brief memo (your professor will tell you how long) summarizing what you learned.
> Using Internet resources, locate openings for at least three jobs, other than traditional public accounting positions, which require strong accounting and technology skills. Select one of these jobs, and develop a plan to get you from your current level
> Assume that a manager can obtain information from the organization’s database in three ways: by direct inquiry using a computer, by a daily printout, and by a monthly report. Using the qualities of information discussed in this chapter—understandability,
> Conduct research on the implementation of Section 404 of the Sarbanes- Oxley Act of 2002. Write a paper (your professor will tell you how long the paper should be) to discuss how accountants within an organization are involved in helping their organizati
> Conduct research on the expansion of the role of the accountant into areas such as forensics, nonfinancial information, assurance services, and similar functions. Write a paper (your professor will tell you how long the paper should be) to discuss the op
> An enterprise system supports a business process by: a. Facilitating the functioning of the business process. b. Providing records that business events have occurred. c. Storing data for decision making. Describe how the enterprise system depicted in Fig
> Describe how Web 2.0 tools might be used by any of the managers depicted in Figure 10.1, a horizontal perspective of the OE/S process, or in Figure 10.2, a vertical perspective of the OE/S process.
> Describe how data mining and a CRM system might be used by any of the managers depicted in Figure 10.1, a horizontal perspective of the OE/S process, or in Figure 10.2, a vertical perspective of the OE/S process.
> What goals for the OE/S process (both operations process and information process goals) would be more difficult to achieve with an enterprise system?
> Examine the systems flowchart in Figure 10.11. Figure 10.11: Discuss how this process implements the concept of segregation of duties, discussed in Chapter 8. Be specific as to which entity (or entities) performs each of the four event processing fun
> Give several examples not mentioned in the chapter of potential conflicts between pairs of information qualities.
> A control plan that helps to attain operational effectiveness by ‘providing assurance of creditworthiness of customers’ also helps to achieve the information process control goal of sales order input validity.” Do you agree? Discuss fully.
> Explain how and where the control goals for effectiveness of operations would be shown in the control goal columns of a control matrix prepared for the OE/S process. At a minimum, include the following topics from Chapter 7 in your discussion: a. Differe
> On October 2, 2002, a clerk at Bear Stearns had erroneously entered an order to sell nearly $4 billion worth of securities. The trader had sent an order to sell $4 million worth. Only $622 million of the order was executed, and the remainder of the order
> Referring to Appendix 9A, discuss fully the following statement: “Protecting the private key is a critical element in public key cryptography
> One control that is applicable for almost any system is “enter data close to the originating source.” A customer entering a purchase into a sales system (such as at Amazon.com) is an excellent example of this control. Describe the details of why this pro
> Describe situations in your daily activities, working or not, where you have experienced or employed controls in this chapter.
> The mere fact that event data appear on a prenumbered document is no proof of the validity of the event. Someone intent on defrauding a system by introducing a fictitious event probably would be clever enough to get access to the prenumbered documents or
> In evaluating business process controls and application controls, some auditors differentiate between the point in the system at which the control is “established” and the later point at which that control is “exercised.” Speculate about the meaning of t
> Describe the similarities and differences between limit checks and reasonable checks. Give examples where each may be appropriate.
> Explain why input controls are so important. Discuss fully.
> Examine Figure 1.9. Discuss how vertical information flows may be important to the executive director of an organization that is a public charity. FIGURE 1.9 Management Problem Structure and Infomation Requirements INFORMATION REQUIREMENTS Less In
> If a business process is implemented with OLRT processing, we do not need to worry about update completeness and update accuracy.” Do you agree? Discuss fully.
> Technology Summary 9.1 seems to indicate that the business process and application control plans in this chapter cannot be relied on.” Do you agree? Discuss fully.
> Discuss why the control matrix is custom-tailored for each business process.
> Preventing the unauthorized disclosure and loss of data has become almost impossible. Employees and others can use iPods, flash drives, cameras, and PDAs, such as iPhones, to download data and remove it from an organization’s premises.” Do you agree? Des
> Contracting for a hot site is too cost-prohibitive except in the rarest of circumstances. Therefore, the vast majority of companies should think in terms of providing for a cold site at most.” Discuss fully.
> Debate the following point: “Business continuity planning is really an IT issue.”
> A key control concern described in Table 8.2 regarding the systems development manager is that “systems development can develop and implement systems without management approval.” Discuss a control described in this chapter that reduces the risk that una
> Monitoring must be performed by an independent function such as a CPA.” Do you agree? Discuss fully.
> If personnel hiring is done correctly, the other personnel control plans are not needed.” Do you agree? Discuss fully.
> No matter how sophisticated a system of internal control is, its success ultimately requires that you place your trust in certain key personnel.” Do you agree? Discuss fully.
> Examine Figure 1.9. Discuss the importance of horizontal information flows and vertical information flows to the daily operations of a manufacturing entity. FIGURE 1.9 Management Problem Structure and Infomation Requirements INFORMATION REQUIREMEN
> In small companies with few employees, it is virtually impossible to implement the segregation of duties control plan.” Do you agree? Discuss fully.
> For each of these control plans, suggest a monitoring activity: a. Credit approval b. Removal of terminated employee access to computer system c. New employee background check
> Your boss was heard to say, “If we implemented every control plan discussed in this chapter, we’d never get any work done around here.” Do you agree? Discuss fully.
> The Enterprise Risk Management (ERM) framework introduced in Chapter 7 can be used by management to make decisions on which controls in this chapter should be implemented.” Do you agree? Discuss fully.
