H.T.S. Crest Holy Trinity School

Grade 9 Business
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Frequently Asked Questions



Q: I was just wondering where the slide show about exchange rate, inflation, and interest you showed us in class yesterday is going to be on the website. Thanks!

A: Gee whiz, it would be easier for me to tell you where it ISN'T! I've linked it to the Economics Review Sheet, the Practice Exam Questions, and even the Lesson Plans regarding inflation and interest rates.

It's called "Exploring the Three Values of a Dollar," and the URL for this new resource is:

http://www.newlearner.com/courses/hts/bbi-bit/bibho51.htm

 

 


Q: If you wouldn't mind, I would like to schedule a time for us to look over my study notes to be sure that they are complete.

A: I will be happy to help you review for the business exam. I am available in room 31 Tuesdays and Thursdays between 3:00 and 4:00 PM. However, something I avoid doing is looking over any particular student's study notes in order to provide an assessment of their completeness. The reason for this is because if I provide a guarantee that a student's notes are complete, then that student's personal notes would become the official reference for determining what material is eligible for the exam. If something were missing from the student's notes, and I failed to notice it, then I would be accepting responsibility for the omission.

This is why I provide extremely comprehensive review sheets for every unit of study which is eligible for the exam. These review sheets serve as the official reference to which students should refer if they wish to determine what material is eligible for the exam.

I am glad to hear that you are studying well in advance of the business exam, and I am gratified to know that you are preparing study notes. However, if I were to assess any particular student's notes for completeness, then I would be distancing that student from the most reliable source of information regarding the exam - and that is the official compilation of review sheets posted on the course web site.

Thus, I would suggest that you check your notes against the review sheets and make sure that your notes address every point outlined on the review sheets. In addition, I will be quite willing to address any particular questions you may have regarding the material contained within your study notes. For example, I can tell you if a definition is acceptable, if a calculation is correct, or if a diagram is complete.

Once again, I am available in room 31 on Tuesday and Thursday afternoons, between 3:00 and 4:00 PM, and I look forward to assisting you in your exam preparations.

Best of luck with all of your exams,



Q: Hi. I am here along with ______ and we have a question to ask you about the Trade Show Project. Okay,we were wondering what we were supposed to do about the invoice for proof of our expenses. Are we expected to impose on companies and simply ask them for data for items we arent even purchasing? If you could please get back to us we would really appreciate it.

A: Yes - if need be, you are supposed to impose. Remember, sales personnel spend most of their time talking with people who don't actually end up buying their product - that just goes with the territory. Last year, the team that won the Trade Show gathered their information by arranging an interview with the manager of restaurant which was similar to the one they were proposing to establish! So there are all kinds of ways to gather information.

However, you often do not need to ask anybody anything! Companies often post prices for their services on the net. I'll give you an example:

Let's say I included web page hosting as one of my business expenses (which would be found... that's right, on the Income Statement!). Let's say I listed this expense as being $29.85 every quarter (i.e. every three months). How do I know this information? Not from phoning anyone, but simply by surfing to the following page:

http://www.icom.com/virtual/ecco.html

So then, I would simply print off that web page and include it within my binder of source documents. Voila - I have proof of my expense! (In this case the price given is in American dollars, so I would have to convert it to Canadian funds... but you get the idea, right?)

Good luck, I'm looking forward to seeing your entry at the big show! (So are all of these investors: http://www.newlearner.com/projects/tradeshow/tradsho6.htm)



Q: On our last Economics test we this question: "Describe the effect that inflation will have on ones savings. What should one do with their money at a timw of rapid inflation?" What would be the ideal answer to this question?

A: When we took this question up, the basic answer I was looking for was to SPEND the money fast - before it loses any more value. However, the two basic problems with this response are: 1) one will lose the security of having their savings once they spend their money, and 2) this is precisely the sort of reaction that will lead to more inflation. Thus, the ULTIMATE answer is to INVEST your money in some form of liquid asset that will appreciate along with the rate of inflation. Although this could be a house, a cottage, or some form of real estate, the commodity of choice is typically gold. None-the-less, any form of valuable commodity will suffice - even a currency from some other country! This protects you from losing the value of your savings to inflation, but it also maintains your savings within a liquid asset - which you will be able to convert back into cash at some later date. This gives you the best of both worlds - protection from inflation, along with the security of maintaining your savings.



Q: I was just wondering because I remember in class how you said that if a society falls into deflation it is really bad for the society. now i can't put my finger on it why it is bad if you could please contact me A.S.A.P thanks a lot

A: Deflation is defined as a general decrease in the price of goods and services. Falling prices must be widespread (across several categories of goods and services) and persistent (dropping over two or more quarters) to be considered deflation.

Deflation can actually be considered good or bad - depending on the situation that causes it.

If deflation is triggered by increased productivity, it can be beneficial. This would increase consumers' purchasing power and improve real incomes.

However, if deflation is caused by a decrease in demand, then this can be quite damaging to the economy, as this will reduce corporate profits, which will lead to layoffs, which will lead to reduced spending, which will lead to more deflation, and more layoffs!

In either case, deflation will lead to lower interest rates. This is because the demand for borrowed money will decrease, and the propensity (tendency) for people to save will increase. (Thus the banks won't need to encourage people to save by offering high interest.)

People and businesses will be less inclined to borrow money because they know that if they do, they will still need to pay back the original amount of money, even though the items they purchased with the money will have decreased in value. In addition, their ability to earn the money they need to pay back their debt will fall along with the falling prices of their goods or services. (Which need to fall in order to compete with the falling prices of everything else!)

Consumers and businesses will naturally be less inclined to spend their money at the present moment (knowing that if they wait, prices will fall and they will be able to buy for less). This will decrease demand, which will then decrease prices even more!

This represents the real danger of deflation. If deflation inspires people and businesses to both save their money AND stop borrowing money, then we can see a huge drop in demand, and this will lead to a major increase in unemployment.

Deflation can very difficult to fight, because the central bank's ability to increase the active money supply through decreasing the interest rate is limited... after all, you can't drop interest rates below zero percent! If interest rates are already quite low, then the only thing the central bank can do to try to reduce deflation is to print more money. This would increase the money supply, which would increase demand, and therefor increase the price of goods and services.

Truth be known, economists throughout the world are divided in their perspectives on deflation. Some feel it is the worst possible threat to an economy. Others feel that it provides a great opportunity for economic growth. Historical examples of both good and bad deflation can be cited, so it is difficult to say exactly how future periods of extended deflation might effect our economy.



Q: What element of the accounting equation would a telephone bill (already paid) and a hydro bill (already paid) go under??

A: Both of these bills would represent expenses. Expenses, as I'm sure you know, fall under the OWNER'S EQUITY section of the accounting equation.

I had to be clear about the fact that these bills were ALREADY PAID. Otherwise, one could also argue that they represent account payables, which would fall under LIABILITIES.

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