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Financial Accounting
Smith, Christine
Class Notes
notes, Math
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This 6 page Class Notes was uploaded by rob3meyer Notetaker on Tuesday August 16, 2016. The Class Notes belongs to ACCN-2010-02 at 1 MDSS-SGSLM-Langley AFB Advanced Education in General Dentistry 12 Months taught by Smith, Christine in Fall 2016. Since its upload, it has received 16 views. For similar materials see Financial Accounting in Business at 1 MDSS-SGSLM-Langley AFB Advanced Education in General Dentistry 12 Months.

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Date Created: 08/16/16
1/11/16 Economics­Study of Interaction of human beings, decisions made at individual level vs society’s level. Individual Decisions­ 1.  1    Basic Principle of Economics­ Resources Are Scarce If resources are scarce, what does that mean to the consumer? AKA we can’t always get what we want. Scarcity is a consequence of resources being scarce nd 2.  2    Basic Principle of Economics­There is an Opportunity Cost for every decision we  make. Highest Value what is forgone in making any choice. Same as Micro Two Types of Costs 3. Explicit VS. Implicit 4. Explicit­The price of gas, the amount of wages I sacrificed in order to come to this  class. Also called Accounting Costs  5. Implicit­Something you can’t put a price tag on.  AKA Time 6. Economic Profits=Total Revenue (Price times Quantity) Minus Total Cost.  Economic Profit=TR­TC 7. If Economic Profit equals 0, then it is a normal rate of return.  Covering Opportunity Cost 8. Accounting Profits= Total Revenue Minus Explicit Cost.  Economic Profit will always be  less than Accounting Profit 9.  3    Basic Principle of Economics­Decisions are made at the margin. You don’t spend  all of your money on one thing, you base it off of a cost­benefit situation. Marginal  Analysis 10. We as rational human beings, try to do what is best for all of us. Econ Majors are making a lot more money than finance majors, so people will become Econ majors.  There is a  really long line at the grocery store, a new line opens, people will leave the first line.   Rational.   11. We live in Society.  We have to interact with other people.  My decisions depend on  other people’s decisions. These principles sometimes collide with one another.   st 12. 1  principle regarding interaction.  The are gains from trades.  “if I were to ask you  what is the point of gains from trade you would tell me what” you get to do what you’re  best at. What do we do? We Specialize. Gains from trade are an essential part of  society.   13. 2  Principle regarding actions with individuals.  Markets tend to move towards  equilibrium 14. It is much easier to do this with graphs.  Check Notebook.   15. 3  principle regarding interaction. Resources should be utilized as efficiently as  possible.  An opportunity for exploiting the gap has appeared 16. Tulane vs Loyola­Competing for the same students. What would happen if Tulane had  big sized intro classes for the students?  In order to take Macro at Loyola you will have  classes with no more than 30 people. With Tulane you will take classes with 30 people.   Loyola is using resources efficiently. Your ability to learn Micro will be easier with the  Smaller Class. 17. Tulane university is very high Latino American students.  No Latin American restaurants, someone will open a restaurant. Tulane is not using them as efficiently as possible. 18. 4  Principle regarding Interaction­Markets usually lead to efficiency. If something  desired by us but is not provided, it will be provided because someone will exploit the  want/need for the item. th 19. 5  Principle regarding interaction­When markets don’t have an efficient outcome,  government intervention is justified.  This brings people to the type of things people  want in Microeconomics.  Shortages/Surplus’s. Pollution, contamination in Mississippi  River­Government needs to come in and put in regulations and make the companies  stop polluting the river.  Ensure that companies stop polluting.   Notes 1/13/16 20. Principle of Macroeconomics Every persons spending is another’s income.  21. Macroeconomics is study of the ups and downs of the economy.   nd 22. 2  principle of Macroeconomics.  Overall spending in the economy sometimes gets  out of line with the production capacity of the economy 23. Spending during the recession decreased drastically.  24. Why is it that government spending is needed to solve a particular problem? Why is  private spending insufficient in providing full employment in the economy? 25. 3  principle of Macroeconomics. Government has powerful tools to affect economy in  the country. 26. Government uses a lot of financial capital. Its actions have very powerful tools to affect  the economy. 27. Tools: Government expenditures, Taxation, and Monetary policy. 28. Fiscal Policy refers to affect behaviors of the economy 29. Monetary­Ability of Government to Create Money 30. Government thinks there is too much unemployment in the economy, Government will  do something to try to counteract this. Inject money into the economy, Decrease taxes,  government has a great deal of power in the economy.   31. Those are the 12 basic Principles of Economics. That is Chapter 1. Chapter 2 1. Economic Models­ We will talk about basic principles of economics.  2. Deals with economic models. Very important in economics, we use them over and over  again.  If we want to understand unemployment rate, we want to know what variables  affect all of that stuff.  Economic Models are simplification of reality.  3. We will focus on a set of variables to try to understand one particular thing.  4. What are the causes of poverty? Thousands of things. Make a model. We analyze the  most important factors and you ignore the others. 5. Economic Models are essential, in order not to get lost in reasons why countries are  poor. We focus on the most important variables and ignore the rest.  6. 2 Economic Models­ Production Possibilities Frontier, and Comparative Advantage  Model.   7. PPF­ Tradeoffs with any economic agent makes. Any person makes tradeoffs. 8. Simply a curve. Say it produces computers and wheat 9. Utilizing PPF we can understand tradeoffs.   10. If it wants to produce a mix of two things, there are tradeoffs.   11. They have to sacrifice some other good. Very useful thing was a PPF straight line,  doesn’t matter where you go on the line, the Opportunity cost is the same, because  opportunity cost is the slope of the PPF Notes 1/15/16 1. Opportunity Cost= What you give up/What you get 2. In real life, we think opportunity cost shows reality, why? 3. Because the resources and technology may be better for one product than another.   4. For wheat you need: Land, Workers.  5. Computers: Land, Workers. 6. Both require factors of production to create the products. However, the products are not  perfectly substitutable. We have to adjust factors of production to produce different  things. 7. This is why we use specialization.  8  Said he would ask on a test: What about at a straight line graph? Can be utilized in industries, completely unrealistic,  perfectly substitutable goods. 9. Point of PPF­Show tradeoffs with any decision. Costs of production are constant with a  straight line, but that’s not realistic.  10. Points that are on the exterior of the PPF­ Cannot be attained on this countries  current level of output/technology. However, if they change their technology or  economic growth. You need Capital and Labor to make things. Increased levels of  factors of production. 11. PPF will shift outwards. If 200,000 new workers come in, whole PPF will shift  outwards, but if 200,000 people who work on computers will come in, wheat will  stay at the same spot but Computers will shift outward. 12. What causes a country to experience negative growth? 13. A lot less Labor and a lot less Capital.  nd 14. 2  Model­Model of Comparative Advantage.  15. Comparative Advantage­ The ability of an economic agent to produce a good or  service at a lower opportunity cost than a different economic agent.  16. This example­2 Persons. 1. A dentist, also able to utilize a computer. 2. Not yet a  dentist, also can use a computer. 17. The dentist is better than the 2  person. Dentist is more proficient with the computer  than the lady. 18. For the Lady­Worse dentist and worse with computers. Should the dentist hire this  person? 19. In absolute Terms­Dentist should not because he is better at both. In Comparative  Terms­ He is a dentist, but he is better at being a dentist than computers, so he should  hire her. 20. Let’s Assume we have two countries. Mexico and US. One has a comparative  advantage in Wheat one has a comparative advantage in Computers. They will  Specialize. Where will Specialization stop? If they were increasing costs PFF.  Opportunity costs will rescind, making them lose the comparative advantage. With  straight line­Comparative advantage doesn’t die out with increasing costs, so that  complete specialization is 100% possible and feasible.  21. US will ONLY produce computers. Mexico is ONLY producing Wheat. Demands that the US and Mexico trade. 22. They have to trade with one another, at what price should they trade? 23. Terms of Trade­For both goods and both countries they must be mutually beneficial. In  other words, for trade to happen, One computer must be traded between .75 and 2  Wheat. 1 Wheat must be traded between 0.5 Comp and 1.3 Comp Notes 1/20/16 1. In order to determine comparative advantage, we have to determine opportunity cost.  2. Specialization is good. These notes are going to be shit today. I’m sorry whoever sees  this I’m really fucked up. 3. We need to establish comparative advantage. Everything has a comparative advantage. 4. If Mexico wants to utilize computers, it has to trade some of its food.  The following  question is at what price? If it is between the opportunity cost of each other. Otherwise  they could make it by themselves for cheaper.  5. Opportunity cost is the slope of the PPF. Easy to tell if it a straight line. 6. From the perspective from the US, it’ll be the triangle for specialization. 7. There are gains from trade, if every economic agent, specializes, and then trades with  another, then both economic agents will be benefitted from that transaction. There are  gains from trade.  8. Circular Flow Diagram Notes 1/22/16 1. Next Week He will make our first homework visible. Need to buy access for Launchpad.  2. Supply and Demand 3. Why is it that markets are so efficient? 4. One of the most important lessons of analyzing supply and demand, for the most part  markets are able to achieve very specific outcomes.  5. Law of Demand: Reflected on typical Demand Curve. Notes 1/25/16  If a government wants to fight inflation, you extract circulation, you have to  withdraw money from circulation.  Money is reduced in that country, less  economic activity, unemployment will increase because there is less money in  that country.  In order to express inverse relationship between unemployment and inflation.  Low unemployment= High inflation.  High unemployment= Low inflation. Phillips  curve­ reflects relationship between inflation rate and unemployment rate.   Vertical Axis­ Nominal Interest Rate, Horizontal for Quantity for loanable funds.  Demand Curve for loanable funds. Also supply for loanable funds.  Demand Decreases, At B (new equilibrium) Quantity   Borrowers want to Borrow more, lenders want to lend less.  Basic Idea is that can we understand/explain rationally that the price of financial  assets change over time.  Some say yes some say no.  Efficient Market Process.  Not as much as an extreme view   Define what an account is. Serving as a unit of accounting. Coffee costs $2.   Blackboard costs $10. Expressing the value of goods and services   Does that make sense?  I= r+Expected Inflation  R= i­expected inflation  R= 10% ­ 5%  R= 5%  Are we as borrowers happy with this? No we are not happy, we wanted to pay 2%,  but we have to pay 5%.    R= 10%­8%. R= 2%.  We see that instead of 2%, it is lower.  We end up paying 5%.   Bank of America is earning more than what they were hoping to earn.   Notes  AE planned= Consumption + I planned (Planned Investment Spending) Consumption= 300 + .6 x Different levels of disposable Income  GDP= Disposable Income.  Where did the 300 Come from? Need to know how this economy we’re describing reaches  equilibrium. There are 2 Sectors­ Households and businesses...  GDP Disposable Income Consumer Spending Planned Investment AE Planned 1 500 300 500 800 500 500 600 500 1100 1000 same 900 500 1400 1500 same 1200 500 2000  same 1500 500 2500  same 1800 500 3000  Same 2100 500 3500  Same 2400 500 2900 Graph GDP on X Axis AE planned on Y Axis C= 300 + 0.6 x Disposable income 


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