...MRC 1513 ECONOMIC ANALYSIS WORKSHOP 1A Question 1: Although managerial economics is based primarily on microeconomics, explain why it is also important for managers to understand macroeconomics. Answer: Felda Technoplant Sdn Bhd is a subsidiary of Felda Holdings Berhad and was established on 22 June 2005 as a management agency for FELDA settler plantations. Among its main activities is replanting estates, managing immature and mature plantations as well as providing oil palm planting materials for estate replanting purposes. Almost 90% of the replanting area is planted with oil palm and the remaining planted with rubber. Thus we are subject to risks inherent to the plantation industry. These include damage from pests, outbreak of diseases such as ganoderma, fire or natural disasters, unscheduled interruption in palm oil milling and rubber tapping operation, climate condition, downturns in the global, regional and national economies, changes in law and tax regulations affecting palm oil and rubber and the competitive needs of labour with other industry. Movement of commodity price in local and international market influence the price of Fresh Fruit Bunch (FFB) and rubber. This will affect managerial decision whether continuing the normal field operations or take certain mitigation action focusing only to harvesting work while other work activities such weeding and fertilizing being stop until the operational cost becomes more viable. As an example, in 2008 the FFB selling...
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...Question 1 1. In the dynamic model, the demand for goods and services will ______ as the natural level of output increases and ______ as the real interest rate increases. Answer | A. | increase; increase | | B. | decrease; decrease | | C. | decrease; increase | | D. | increase; decrease | 1 points Question 2 1. In the dynamic model, changes in fiscal policy are captured in changes in the: Answer | A. | natural rate of interest. | | B. | random demand shock. | | C. | natural level of output. | | D. | expected rate of inflation. | 1 points Question 3 1. A higher real interest rate (r↑) reduces the demand for goods and services by: Answer | A. | decreasing the natural level of output. | | B. | shifting the dynamic aggregate supply curve. | | C. | reducing investment and consumption spending. | | D. | increasing inflation expectations. | 1 points Question 4 1. Which of the following would be represented by a positive value of the random demand shock (εt > 0)? Answer | A. | a decrease in government spending | | B. | an increase in the central bank's inflation target | | C. | an aggressive increase in oil prices by a cartel | | D. | an irrational wave of optimism among investors | 1 points Question 5 1. Which of the following would be represented by a negative value of the random demand shock (εt < 0)? Answer | A. | an irrational wave of optimism among investors | ...
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...TEPAV – Economic Policy Research Foundation of Turkey The first company that we visited in Ankara was the Economic Policy Research Foundation of Turkey. There they presented to us the Turkish economic background, the actual economic position regarding European Union and Middle East and what are their challenges to keep the long-term competitiveness. Turkey is strategically located between Europe and Middle East and this advantage, after the policy reforms, made the country boost their economy by attracting companies that operates in both markets. The country is so well geographically located that we in a 3 hours flight you have an economic potential of 8,7 Trillions of dollars. The ground for this economic boom was the first generation reforms starting in 1980 with Price reforms and Trade and Financial liberalization. After that in 2001 they had the Banking reform, Privatized state owned companies, created Independent authorities to regulate the markets and they also adopted Fiscal and Monetary discipline. Nowadays, they are trying to move from an Efficiency-driven economy to an Innovation-driven economy, which means that they need to not only build or make goods in the country but also aggregate value to the goods produced. Investing in education is the only and long way to shift the economy from large scale transformation to high-tech. On the other hand, Turkey has a current account deficit and it is at historic high, it corresponds as 10% of GDP. The majority of the...
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...political systems. The ingredients contributing to China's high exports growth rate over the past two decades have, for example, been very different from those that have contributed to high growth in countries as varied as Malaysia and Malta. Nonetheless, the bottom line has been their ability to take into advantage the current economic challenges. This paper explores approaches to overcoming the current global economic challenges and or opportunities to attain desired export targets. Yet, based on experiences throughout the world, several basic principles seem to underpin greater exportation prosperity. These include investment (particularly foreign direct investment), the adoption of modern technology, strong governance culture, sound macroeconomic policies, an educated workforce, and research and investment into emerging market economies. Furthermore, a common denominator which appears to link nearly all high-growth in exports countries together is their participation in, and integration with, the international economy. There is substantial evidence, from countries of different sizes and different regions, that as countries "globalize" an onus of gains to the firms and the citizens accrue. For instance, in the form of access to a wider population, market...
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...Subject: ECO 550 Professor Name: DR. Yasmeen Student Name: Sayed Rohullah Week 3: Check your understanding 1. The forecasting staff for the Prizer Corporation has developed a model to predict sales of its air-cushioned ride snowmobiles. The model specifies that the S vary jointly with disposable personal income Y and the population between ages 15 and 40,Z, and inversely with the price of the snowmobiles P. Based on the past data, the best estimate of this relationship is S= K *YZ/P Where k has been estimated (with the pst data) to equal 100. If Y=$11,000, Z= $1,200, and P=$20,000 a. What value would you predict for S? Answer: The given function is S=K*YZ/P k=100 Y=$11,000 Z=$1,200 P=$20,000 S=100(11000*1200)/20000= $66,000 Problem 5 5. A firm experienced the demand shown in the following table. a. Fill in the table by preparing forecasts based on a five-year moving average, a three-year moving average, and exponential smoothing (with a w = 0.9 and a w = 0.3). The exponential smoothing forecasts may be begun by assuming Ŷt+1 = Yt. b. Using the forecasts from 2005 through 2009, compare the accuracy of each of the forecasting methods based on the RMSE criterion. c. Which forecast would you have used for 2010? Why? 5- year 3-Year Exponential Exponential Actual Moving Moving Smoothing Smoothing Year Demand Average Acverage (W= 0.9) 2000 800 xxxx xxxx xxxx Xxxx 2001 925 xxxx xxxx 687.5 762.5 2002 900 xxxx Xxxx 947.5 932.5 2003 1025...
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...1. INTRODUCTION 2.1. COUNTRY OF JAPAN Japan is an island nation in East Asia. Located in the Pacific Ocean, it borders China, North Korea, South Korea, Russia, Taiwan, the Sea of Japan, the Sea of Okhotsk, and the East China Sea. It is an archipelago of 6,852 islands, most of which are mountainous and many are volcanic. The government system is a parliamentary government with a constitutional monarchy. The chief of state is the Emperor and the head of government is the Prime Minister. Japan has a market economy in which the prices of goods and services are determined in a free price system. Japan is a member of the Asian Pacific Economic Cooperation (APEC). Japan's main export goods are cars, electronic devices and computers. Most important trade partners are China and the USA, followed by South Korea, Taiwan, Hong Kong, Singapore, Thailand and Germany. Japan has a surplus in its export or import balance. The most important import goods are raw materials such as oil, foodstuffs and wood. The industries of Japan are manufacturing, construction, distribution, real estate, services, and communication are Japan's major industries today. Agriculture makes up only about two percent of the GNP. Most important agricultural product is rice. Resources of raw materials are very limited and the mining industry rather small. Japan's service sector accounts for about three-quarters of its total economic output. Banking, insurance, real estate, retailing, transportation, and telecommunications...
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...1. What would happen if Brazil allowed the real to float freely in FX markets: a. Immediately If the government did not intervene to weaken the real to around R$2, I suspect the real would be much stronger. This would propel imports and also capital inflow into the country due to the high interest rates. Since the government wanted to make Brazil competitive for exports, a weak currency would dissuade companies from exporting since they would earn less in revenue for every $ exported. Further with a free currency and no capital controls, the ease of investing and removing capital would make the Brazilian stock market (which as it is, is very small) more susceptible to foreign capital. b. Medium term (1-2 years)? In the medium term, the movement in the real would dependent on several factors such as: global sentiments, status of the euro crisis, relative attractiveness of other market (such as Mexico, Africa, South East Asia) etc., However it would be ideal if the real was stable in the range of R$2 +/- 10% This would ensure stability in the economy and capital markets. A strong currency would encourage imports while a weak currency would discourage investments. Further a weak currency would also make the corporates in Brazil nervous as they will need to pay more reals for every $ of debt on their books. Would these be adverse developments for Brazil? Why? I think it is important to have stability in the currency before allowing it to float freely. Brasil is still...
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...Evaluate the UK’s economic performance in recent decades from both an historical and international perspective. The UK has one of the largest and most globalised economies in the world. The UK was also the very first country to industrialise and historically for many decades was the leader of the global economy, however with the rises of China, United States, Germany and many others the UK has much less of a dominant role. Within recent decades the UK economy has faced many serious challenges, including three recessions in the early 80’s, early 90’s and late 00’s. Up until the onset of the recent financial crisis, output growth in the UK exceeded that in many other European countries. The UK’s economic performance remains one of the highest in Europe and it is still one of the most globalized countries in the world. Using 1980 as a base, in recent decades the economic output per head of population in Britain has risen giving significantly higher standards of living however the UK economy has been scarred by recession. The 80’s period saw great social, economic, and general change. Wealth and production progressively migrated to more newly industrialising economies. The early 1980s marked a severe global economic recession that affected much of the developed world. In the UK, the 1980s was a period of economic volatility. At the start of 1980, the biggest problem facing the UK was cost push inflation. In the late 1970s, UK inflation reached over 20%. This was caused by rising...
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...In this diagram we can see that an increase in China’s demand for our exports causes a rise in aggregate demand, shown by the lines AD0 to AD1. The short run effect of this is shown by the new equilibrium found where the new aggregate demand meets the short term aggregate supply. This new equilibrium causes a rise in the price level as well as a rise in the GDP. The points Yf and Yf1 show that our economy goes past full employment which will create a shortage in labour, meaning wages will rise and we will be hit with inflation. The shaded blue area shows the inflationary gap caused by the sudden rise in aggregate demand. In the long term Australia’s employment will fall back to its natural rate of employment (Yf) and the price level will soar even higher. b) To have an output above potential GDP is to be outside of the production possibility curve. When our economy is at full employment potential GDP equals real GDP. But to have an output above potential GDP our unemployment rate must be below the NRU or full employment. With a huge demand in exports there will be a sudden rise in demand for labour, meaning lots more people will have jobs, this will cause the unemployment rate to drop below the natural rate of unemployment. This cannot be sustained over a long period of time though, as it will lead to skills shortages and bottlenecks in labour. It will cause wages to rise and lead to high inflation. c) Having more GDP is a good thing, but its needs to be achieved...
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...I. The Country South Korea is situated in South East Asia. It consists of roughly 49 million people and has an annual population growth rate of 0.23%. (CIA, 2011) South Korea is a high-income developed country with a very high standard of living. It has a market economy and is one of the fastest growing and is among the 20 biggest economics in the world making it a member of the G-20 major economies. But it wasn’t always that way, for the past four decades South Korea has displayed diligence in its strength to become a high-tech industrialised economy. During the Asian financial crisis of 1997, South Korea’s GDP plunged by 6.9% due to the country’s high debt and abundance of short-term foreign money borrowing. The government then established numerous economic reforms, one being increasing the amount of foreign investment and imports. This saw the GDP to rise by 9%. (CIA, 2011) Their economy is highly dependent on international trade and is currently the tenth largest importer and the sixth largest exporter on the world scale. South Korea is also one of the few developed countries that have avoided the harsh global depression in 2008. South Korea in the year 2010; had a GDP of approximately USD$990 billion with a growth rate of 6.1%. Their GDP per capita totalled USD$30,200. (CIA, 2011) II. The Theoretical Basis For South Korea, I have chosen to use the Keynesian system rather than the Classical system to analyse their economy. Classical economists argue that the economy...
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...The Multiplier with imports We assume that countries are spending fixed % of their GDP on buying goods in other countries, e.g. on imports. Example. Suppose C = 200 + 0.5DI T = 100 Tr = 0 G = 100 I = 200 IM = 0.2Y X =300 Here IM = 0.2Y, which implies that 20% of GDP are spent on imports. Remember that DI = Y – T + Tr = Y – 100. Equilibrium on the demand side Y* solves the following equation Y = C + I + G + X – IM = 200 + 0.5(Y - 100) + 200 + 100 + 300 – 0.2Y Rearranging, we find Y* = (200 – 50 + 200 + 100 + 300) / (1 – (0.5 - 0.2)) = 1071 In general, Marginal Propensity to Import (MPI) is % of extra $1 of income that is spent on imports, e.g. suppose MPC = 0.9 and MPI = 0.1. This implies that C = 0.9DI + some constant and IM = 0.1Y. Out of each new dollar of income, $0.90 is spent, but of that $0.90, $0.10 is spent on foreign goods. So, Marginal Propensity to Consume Domestic Products MPC domestic = MPC - MPI = 0.90 - 0.10 = 0.8 only $ .80 of an extra $1 in income is spent on domestic goods. MPC domestic is the number we need to accurately calculate the multiplier Multiplier with imports = 1 / (1 – MPC domestic) = 1 / (1 - (MPC – MPI)) in our example, with MPI = .1: Multiplier with imports = 1 / ( 1- ( .9 - .1)) = 1 / (1- .8) = 1 / 0.2 = 5 Example from hw3 Suppose there are only two countries: the US and Mexico. Consider the following data: MPCMX = 0.4 (MPC in Mexico) MPIMX = 0.03 (so 3% of an additional $1 of income in Mexico is spent on the American goods) 1 MPCUS = 0...
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...Introduction: This paper reviews macroeconomic causes of financial crisis in 2008. The economist had difficulty for seeing the systematic risk because of the unregulated new financial instruments such as credit default swap and derivatives securities. The Federal Reserve Bank was responsible for the financial crisis due to large amount of money flow in the United States. Thus, US needed to implement the monetary policy in order to overcome from the financial crisis. This paper drafted the causes of financial crisis analyzed by the macroeconomist and drafted by the American Bar Association. The Federal Reserve Bank kept the interest rates historic lows due to recession in 2000-2002. The low interest rates causes the unwanted money supply and this excess credit was invested heavily in the United States in the form of treasury securities and financial derivatives that leaded to bubble in commodities and houses prices. This paper examines the Federal Reserve monetary and fiscal policy during and prior to course of recession in 2008. The economy had faced at least three crises since 2008, fiscal crisis, financial crisis and unemployment crisis. These crises are interrelated. The unemployment crisis during 2008 has causes the fiscal deficit at the frightening level. The economy is still facing the unemployment and fiscal crises. The unemployment rate remains high in the world and the fiscal problem in Europe has not been fully resolved. The Fiscal Policy: The fiscal policy played...
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...The Business Environment Tony Burchfield Dr. Nicole Ortloff BUS100 – Intro to Business In a world of high demand, many businesses have many different roles throughout the world, but ultimately are the drive and fuel for our economy that we live in. Through the course of time we’ve come to realize as a civilization that it was more practical in some cases to produce certain products, and trade for others. At the time this probably not considered to be a business transaction, but that was precisely what was shaping our future for decades to come. For example, not everyone knows how to grow, or has the means to grow, certain crops but they might have a different skill set that they can provide services for in return for crops from a local farmer. If the farmer grew corn and a hunter had fur and meat, then a trade could be made. They barter with each other in order to acquire things that they don’t have specific skills/equipment to produce. This is a practical business transaction on a very basic level. If we were not to adapt this logical way of thinking, we would be able to live, but not very practically and efficiently. We would have to figure out ways to clothe, feed, and shelter ourselves on a daily basis with no shops of any kind to help. To live in this kind of society seems very primitive and irrational. Trade was created to better an economies sense of lifestyle and make goods and opportunities accessible all over the world, thus raising the standard...
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...Impact of globalization on Indian economy- An overview By: Tanveer Malik Introduction Indian economy had experienced major policy changes in early 1990s. The new economic reform, popularly known as, Liberalization, Privatization and Globalization (LPG model) aimed at making the Indian economy as fastest growing economy and globally competitive. The series of reforms undertaken with respect to industrial sector, trade as well as financial sector aimed at making the economy more efficient. With the onset of reforms to liberalize the Indian economy in July of 1991, a new chapter has dawned for India and her billion plus population. This period of economic transition has had a tremendous impact on the overall economic development of almost all major sectors of the economy, and its effects over the last decade can hardly be overlooked. Besides, it also marks the advent of the real integration of the Indian economy into the global economy. This era of reforms has also ushered in a remarkable change in the Indian mindset, as it deviates from the traditional values held since Independence in 1947, such as „self reliance” and socialistic policies of economic development, which mainly due to the inward looking restrictive form of governance, resulted in the isolation, overall backwardness and inefficiency of the economy, amongst a host of other problems. This, despite the fact that India has always had the potential to be on the fast track to prosperity. Now that India is in the process...
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