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Question 01:
Jim the financial advisor is in partnership with his friend George. They own a small private practice. In 2019 their business made $360,000 in revenue from clients. Both partners have a secretary that was paid a salary of $55,000 including super. Rent and other business expenses for the shop premises were $60,000. Jim is also a qualified economist and could have earned $80,000 over the year working for the state government. Assume Jim and George split profit evenly.
Required:
i. What is Jim's accounting profit for 2019?
ii. What is Jim's economic profit for 2019?
Question 02:
Explain the relationship between economic growth, unemployment and inflation. When economic gorwth is strong what will usually happen to inflation and unemployment? Why? When economic growth is weak or negative, what typically happens to the unemployment and inflation rates? Why?
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