Category Archives: ECON 545 (Devry)

ECON 545 Week 6 Course Project 2 Macroeconomic Analysis (Situation A) updated

ECON 545 Week 6 Course Project 2 Macroeconomic Analysis (Situation A) updated

The Macroeconomic Paper tests your ability to apply economic principles to a business decision considering the impact of macroeconomic variables. Select one situation from the items outlined below: A to D. Complete the paper on the selected situation as specified below. The completed paper is a professional report and is due in Week 6 (260 Points). See the grading rubric at the end of this document. Be sure to use the DeVry library to find data, and avoid questionable sources, such as Wikipedia.

 

Each of the scenarios has a list of Macroeconomic areas you are to address, with sources, in your answer. Briefly you are to research and show how these apply to your scenario: GDP growth rate (20 points), the business cycle (30 points), fiscal policy and level of unemployment (50 points), monetary policy and interest rates (50 points), international trade (40 points), and demographics (20 points).

 

 

 

Situation A

 

Rick, your friend, runs a small manufacturing plant that produces parts for the auto industry. Rick is thinking of expanding his operations to meet the increasing demand from car manufacturers. Hearing of your taking this course in business economics, he asks you for advice on how to go about making the expansion decision.

 

At first you are reluctant to give investment advice, but then you happen to read the piece “U.S. Auto Sales Estimates Cut as Confidence Slows Rebound” on page 634 of the textbook. You suddenly realize that Rick needs to take a number of macroeconomic variables into consideration for the expansion decision. You decide to research the economy in terms of GDP growth rate, interest rates, level of unemployment, the business cycle, fiscal policy, monetary policy, international trade, and demographics. You want to provide Rick with the most informed advice possible.

 

 

Situation B

 

Your neighbor Cindy wants to start a contracting business for installing solar panels. She has heard of the cost savings that households and businesses can make each year by installing solar panels on their roofs. Cindy has also heard of government incentives for installing solar panels. Being concerned about the environment and wishing to reduce pollution, Cindy thinks installing solar panels also serves a good social purpose. But she does not want to risk her life savings on a venture that might not succeed or become profitable enough. After hearing from you about taking this course in business economics, she decides to ask you for advice.

 

At first you are hesitant to give investment advice. Then you read the piece “Postal Service Considering Cutting 120,000 Jobs” on page 668 of the textbook. You realize there are more pieces to the decision than Cindy is considering. You decide to research the economy in terms of GDP growth rate, interest rates, level of unemployment, the business cycle, fiscal policy, monetary policy, international trade, and demographics. You want to provide Cindy with the most informed advice possible.

 

 

Situation C

 

Cousin Edgar is always thinking of the next business idea. This time, he plans to invest in buying four gas stations. He reckons American consumers have come to accept the high gasoline prices, and estimates world prices for gasoline to increase even further with high demand from India and China. Besides, Cousin Edgar thinks he will make a good profit on the sale of convenience items at each station. But before buying the gas stations, he decides to ask for your advice because you are taking this course in business economics.

 

You happened to read the piece “Bank Lending Signals a Strengthening Economy” on page 856 of the textbook. Cousin Edgar needs financing for his updated business, but you realize there are more macroeconomic factors he needs to consider in timing his decision. You decide to research the economy in terms of GDP growth rate, interest rates, level of unemployment, the business cycle, fiscal policy, monetary policy, international trade, and demographics. You want to provide Cousin Edgar with the most informed advice possible.

 

 

Situation D

 

After hearing of your taking this course in business economics, Uncle Dan has e-mailed you asking for advice on his 100-acre corn farm. He mentioned how, after 30 years of growing corn, he wishes to leave that commodity’s market and enter a more profitable market instead. He is thinking of subdividing his land and building homes and shops. He reckons he could make a good profit by selling the homes and renting the shops.

 

Before you can find time to answer Uncle Dan’s e-mail, you read the piece “Will the Fed’s New Policies Revitalize the Housing Market?” on page 896 of the textbook. Recognizing the costs and risks for Uncle Dan in making the switch, you decide to research the economy in terms of GDP growth rate, interest rates, level of unemployment, the business cycle, fiscal policy, monetary policy, international trade, and demographics. You decide to educate yourself about macroeconomics so that you can provide Uncle Dan with the most informed advice possible.

 

 

 

Macroeconomic Paper as a Professional Report

Your paper should be organized into five parts as listed below.

 

  1. Title Page: Name, class, and date
  2. Introduction to situation but do NOT copy the scenario. Briefly summarize the situation and identify the macroeconomic issue(s) to be decided from the perspective of the organization.      

 

  1. Business Cycles, Unemployment, Inflation, International – Comparative Advantage, Exchange Rates, Trade, Etc., Monetary Policy and Interest Rates, and Fiscal Policy and Unemployment Identify the variables that are critical in addressing the issue(s). Gather and present the relevant data on the variables by searching the DeVry Online Library. Ask a librarian for help if needed. Use in-text citation to report the source(s) of the data. Graphs may be included here.

 

  1. Recommendations and Economic Justification

Formulate and present your recommendations for addressing the issue(s) based on the relevant data and economic principles identified above. Justify your recommendations in terms of the economic impact on those affected.

 

  1. References

List the full references for at least five sources alphabetically in APA format.

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ECON 545 Week 8 Final Exam

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1. 
Question : 
(TCO A) Suppose you are hired to manage a small manufacturing facility that produces Widgets. 
(a.) (15 points) You know from data collected on the Widget Market that market demand and market supply have both increased recently. As manager of the facility, what decisions should you make regarding production levels and pricing for your Widget facility?
Remember that supply and demand are about the market supply and market demand, which is bigger than your own company. You are being given data on supply and demand for the whole market and are being asked what effect that has on you as a small part of that market.
(b.) (15 points) Now, suppose that following the supply and demand changes in (a), a substitute good goes up in price, and your costs of production increase. What updated decisions will you make regarding production levels and pricing for your Widget facility? 
2. 
Question : 
(TCO B) Here is some data on the demand for marshmallows:
Price Quantity
$10 100
$ 8 300
$ 6 700
$ 4 1300
$ 2 2200
(a.) (15 points) Is demand elastic or inelastic in the $6-$8 price range? How do you know?
(b.) (15 points) If the table represents the demand faced by a monopoly firm, then what is that firm’s marginal revenue as it increases output from 1300 units to 2200 units? Show all work. (Be careful here!) 
3. 
Question : 
(TCO C) You have been hired to manage a small manufacturing facility whose cost and production data are given in the table below. 
Total Total
Workers Labor Cost Output Revenue
1 $500 100 $700
2 1000 280 1150
3 1500 440 1440
4 2000 540 1570
5 2500 600 1670
6 3000 630 1710
7 3500 640 1730
(a.) (6 points) What is the marginal product of the second worker? 
(b.) (6 points) What is the marginal revenue product of the fourth worker? 
(c.) (6 points) What is the marginal cost of the first worker? 
(d.) (12 points) Based on your knowledge of marginal analysis, how many workers should you hire? Explain you answer. 
4. 
Question : 
(TCO C) Answer the next questions on the basis of the following cost data for a firm in pure competition: 
OUTPUT —— TFC ———- TVC
0 $100.00 0.00 
1 100.00 70.00
2 100.00 120.00
3 100.00 150.00
4 100.00 200.00
5 100.00 270.00
6 100.00 360.00
(a.) (15 points) Refer to the above data. If the product price is $45 at its optimal output, will the firm realize an economic profit, break even, or incur an economic loss? How much will the profit or loss be? Show all calculations. 
(b.) (15 points) Refer to the above data. If the product price is $75 at its optimal output, will the firm realize an economic profit, break even, or incur an economic loss? How much will the profit or loss be? Show all calculations. 
5. 
Question : 
(TCO D) A software producer has fixed costs of $18,000 per month and her Total Variable Costs (TVC) as a function of output Q are given below:
Q TVC Price
1,000 $15,000 $25 
2,000 20,000 24 
3,000 30,000 23 
4,000 50,000 22 
5,000 80,000 20 
(a.) (15 points) If software can only be produced in the quantities above, what should be the production level if the producer operates in a monopolistic competitive market where the price of software at each possible quantity is also listed above? Why? (Show all work).
(b.) (15 points) What should be the production level if fixed costs rose to $48,000 per month? Explain. 
6. 
Question : 
(TCO F) 
(a.) (20 points) Suppose nominal GDP in 1999 was $200 billion, and in 2001, it was $270 billion. The general price index in 1999 was 100 and in 2001 it was 150. Between 1999 and 2001, the real GDP rose by what percent? 
(b.) Use the following scenario to answer questions (b1) and (b2).
In a given year in the United States, the total number of residents is 270 million, the number of residents under the age of 16 is 38 million, the number of institutionalized adults is 15 million, the number of adults who are not looking for work is 17 million, and the number of unemployed is 10 million.
(b1.) (5 points) Refer to the data in the above scenario. What is the size of the labor force in the United States for the given year? 
(b2.) (5 points) Refer to the data in the above scenario. What is the unemployment rate in the United States for the given year? 
7. 
Question : 
(TCO G and H) 
(a.) (15 points) Suppose your local Congress representative suggests that the federal government intervenes in the gasoline market to stop runaway price increases. Would you say that this view basically supports the Keynesian or the Monetarist school of thought? Why? What position would the opposing school of thought take on this issue? (Be brief — you can answer this in 2 or 3 brief paragraphs).
(b.) (10 points) Any change in the economy’s total expenditures would be expected to translate into a change in GDP that was larger than the initial change in spending. This phenomenon is known as the multiplier effect. Explain how the multiplier effect works. 
(c.) (15 points) You are told that 90 cents out of every extra dollar pumped into the economy goes toward consumption (as opposed to saving). Estimate the GDP impact of a positive change in government spending that equals $20 billion. 
8. 
Question : 
(TCO G) 
(a.) (20 points) Third National Bank is fully loaned up with reserves of $20,000 and demand deposits equal to $100,000. The reserve ratio is 20%. Households deposit $5,000 in currency into the bank. How much excess reserves does the bank now have, and what is the maximum amount of updated money that can be created in the banking system as a result of this deposit? Show all work. 
(b.) (20 points) What is the discount rate in the banking system? Explain how the Fed manipulates this rate to achieve macroeconomic objectives. 
9. 
Question : 
(TCO E and I) Let the exchange rate be defined as the number of dollars per British pound. Assume there is a decrease in U.S. interest rates relative to that of Britain.
(a.) (10 points) Would this event cause the demand for the dollar to increase or decrease relative to the demand for the pound? Why? 
(b.) (10 points) Has the dollar appreciated or depreciated in value relative to the pound? 
(c.) (10 points) Does this change in the value of the dollar make imports cheaper or more expensive for Americans? Are American exports cheaper or more expensive for importers of U.S. goods in Great Britain? Illustrate by showing the price of a U.S. cell phone in Britain before and after the change in the exchange rate. 
(d.) (10 points) If you had a business exporting goods to Britain, and U.S. interest rates fell as they have in this example, would you plan to expand production or cut back? Why? 

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ECON 545 Week 7 DQ 2 Forecasting

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Let’s discuss one of the most important areas of economics, namely the use of leading economic indicators to forecast the future direction of the macroeconomy.  What websites are helping you gain a better understanding of where the economy is heading in the next 12 months? 

 

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ECON 545 Week 7 DQ 1 The Public Sector

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What is the appropriate balance between private and public (i.e., government) activity? Think of a case where the government has intervened (or it was suggested that government intervene) in a previously private market (e.g. Chrysler, tariffs on Japanese luxury cars, the airline industry, etc). What other examples can you think of? Using a marginal benefit/marginal cost analysis, support or argue against the intervention. 

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ECON 545 Week 5 DQ 1 Trade Deficits

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What have been some major causes of the large U.S. trade deficits since 1992? What is a major benefit (you could address that issue) or a major cost (or you could address that issue) associated with trade deficits? 

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