Macroeconomics
13th Edition
ISBN: 9780134744452
Author: PARKIN, Michael
Publisher: Pearson,
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Question
Chapter 7, Problem 1SPA
To determine
Identify the values of gross investment, depreciation, and net investment.
Expert Solution & Answer
Explanation of Solution
The total amount of money spent on the new capital is gross investment. During the period of 2018, M has purchased $500,000 of new servers. Thus, the gross investment in 2018 is $500,000. At the same time, the market value of older servers falls by $100,000. This means that the depreciation of the older servers is $100,000. Since the gross investment is $500,000 and the depreciation is $100,000, the net investment is $400,000
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Students have asked these similar questions
Michael is an Internet service provider. On December 31, 2009, he bought an existing business with servers and a building worth $400,000. During his first year of operation, his business grew and he bought new servers for $500,000. The market value of some of his older servers fell by $100,000.
What was Michael’s:
(i) gross investment during 2010
(ii) depreciation during 2010
(iii) net investment during 2010
(iv) capital at the end of 2010
Michael is an Internet service provider. On December 31, 2013, he bought an existing business with servers and a building worth $300,000.
During 2014, he bought new servers for $400,000.
The market value of his older servers fell by $100,000.
Michael's gross investment during 2014 was $2
Michael's depreciation during 2014 was $2.
Michael's net investment during 2014 was $2.
Michael's capital at the end of 2014 was $2.
4) Mitsven Surfboard Inc. is a company in San Diego that shapes and sells surfboards. In 2018 their accounts were as
follows: total revenues $150,000; cost of inputs $75,000; wages paid to employees $35,000; profits to owner
$25,000, taxes paid by company $5,000. The building and the equipment used for production are property of the
company, and no new building or new equipment was purchased in 2018. The value added produced by Mitsven
Surfboard Inc. in 2018 was
A. $150,000
B. $75,000
C. $65,000
D. $10,000
Answer:
5) Consider the accounts of Mitsven Surfboard Inc. described in question 4). Applying the income approach to GDP
that we have studied in class, the depreciation (or consumption) of fixed capital for the company in 2018 was
A. Zero.
B. $10,000
C. $65,000.
D. $75,000
Answer:
Chapter 7 Solutions
Macroeconomics
Ch. 7.1 - Prob. 1RQCh. 7.1 - Prob. 2RQCh. 7.1 - Prob. 3RQCh. 7.1 - Prob. 4RQCh. 7.2 - Prob. 1RQCh. 7.2 - Prob. 2RQCh. 7.2 - Prob. 3RQCh. 7.2 - Prob. 4RQCh. 7.2 - Prob. 5RQCh. 7.3 - Prob. 1RQ
Ch. 7.3 - Prob. 2RQCh. 7.3 - Prob. 3RQCh. 7.3 - Prob. 4RQCh. 7.3 - Prob. 5RQCh. 7.3 - Prob. 6RQCh. 7.4 - Prob. 1RQCh. 7.4 - Prob. 2RQCh. 7.4 - Prob. 3RQCh. 7 - Prob. 1SPACh. 7 - Prob. 2SPACh. 7 - Prob. 3SPACh. 7 - Prob. 4SPACh. 7 - Prob. 5SPACh. 7 - Prob. 6SPACh. 7 - Prob. 7SPACh. 7 - Prob. 8SPACh. 7 - Prob. 9SPACh. 7 - Prob. 10SPACh. 7 - Prob. 11SPACh. 7 - Prob. 12SPACh. 7 - Prob. 13APACh. 7 - Prob. 14APACh. 7 - Prob. 15APACh. 7 - Prob. 16APACh. 7 - Prob. 17APACh. 7 - Prob. 18APACh. 7 - Prob. 19APACh. 7 - Prob. 20APACh. 7 - Prob. 21APACh. 7 - Prob. 22APACh. 7 - Prob. 23APACh. 7 - Prob. 24APACh. 7 - Prob. 25APACh. 7 - Prob. 26APACh. 7 - Prob. 27APACh. 7 - Prob. 28APACh. 7 - Prob. 29APACh. 7 - Prob. 30APA
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