The accounting records of Riffon, a limited liability company included the following balances at 30 June 20X2: $'000
Office buildings – cost 1,600
– accumulated depreciation (10 years at 2% per year) 320
Plant and machinery – cost (all purchased in 20X0 or later) 840
– accumulated depreciation
– (straight line basis at 25% per year) 306
During the year ended 30 June 20X3 the following events occurred:
20X2
1 July It was decided to revalue the office building to $2,000,000, with no change to the estimate of its remaining useful life.
1 October New plant costing $200,000 was purchased.
20X3
1 April Plant which had cost $240,000 and with accumulated depreciation at 30 June 20X2 of $180,000 was sold for $70,000.
It is the company's policy to charge a full year's depreciation on plant in the year of acquisition and none in the year of sale.
Required
Prepare the following ledger accounts to record the above balances and events:
(a) Office building: cost/valuation
accumulated depreciation revaluation reserve
(b) Plant and machinery: cost
accumulated depreciation disposal

C. decrease the money supply, increase the interest rate, thus lowering investment spending and GDP, and the AD curve will shift to the left.

Explanation:

Fiscal policy in economics refers to the use of government expenditures (spending) and revenues (taxation) in order to influence macroeconomic conditions such as Aggregate Demand (AD), inflation, and employment within a country. Fiscal policy is in relation to the Keynesian macroeconomic theory by John Maynard Keynes.

A fiscal policy affects combined demand through changes in government policies, spending and taxation which eventually impacts employment and standard of living plus consumer spending and investment.

An inflationary gap, also known as the expansionary gap in economics is used to measure the difference between the gross domestic product (GDP) and the current level of real Gross Domestic Products that exists when a country's economy is guaged at a full employment rate. This eventually causes the price of goods and services to go up with a low income level.

Basically, an expansionary fiscal policy will cause the total increase in aggregate demand to be greater than the initial increase in aggregate demand due to the multiplier process.

According to the Keynesian theory, government spending or expenditures should be increased and taxes should be lowered when faced with a recession, in order to create employment and boost the buying power of consumers.

Hence, if the Federal Reserve wants to close an inflationary gap, then it will decrease the money supply, increase the interest rate, thus lowering investment spending and gross domestic product (GDP), and the aggregate demand (AD) curve will shift to the left.