Category Archives: MT445-Managerial economics

Exchange Rate Regimes

The exchange system in any country widely focuses on the exchange of one currency for another as well as the conversion of one currency into another currency. Moreover, the exchange system can also refer to the global market where currencies are traded virtually around the clock.

Question 1

Fixed exchange rate system

Often in the fixed exchange rate system, the government through the central bank has the power and the mandate to control the official exchange rate to another country’s currency. As a result, all other banks and agencies conducting the foreign exchange should follow the rules and regulations laid down by the central bank. The main purpose of this exchange rate system is to assist the country in maintaining the value of their currency.

Floating exchange rate system

Floating exchange rate system is a system where the value of a country’s currency value is determined by the forces of demand and supply in the market. As a result, the government has no power or ability to control the value of the currency of a country. An increase in demand and a fall in supply leads to an increase in the prices while falling in demand and an increase in supply can lead to fall in prices (Cavoli, 2014).

Pegged exchange rate system

In a pegged exchange rate system, the government stabilizes its currency by fixing the value of its currency to another separate country’s currency. As a result, investors buy underlying securities in bulk close to the expiration date of the derivative held by said, investor.

 

Question 2

Advantages of fixed exchange rates

  1. It helps to promote international trade as it ensures certainty about the foreign payment and inspires confidence among the importers and exporters.
  2. Helps in promoting international investment as lenders do not prepare to long for long-term investment if the cases of fluctuating exchange rates.
  3. Helps in stabilizing the economy of a country considering that the liquidity preferences are high since investors like to enjoy windfall gains from the fluctuating exchange rate

Disadvantages of fixed exchange rates

  1. Under this system, a country is usually deprived of its monetary independence
  2. Discourages foreign investment since they are not permanently fixed or rigid
  3. This system does not provide the expectations of permanently stable rates as well as continuous sensitive adjustment of a free exchange rate.

Advantages of Floating exchange rate system

  1. Floating exchange rate systems do not require an international manager to look over current account imbalances.
  2. There is no need for frequent central bank intervention in this system to protect the gold parity since there is no parity to uphold(Frenkel, 2013).

Disadvantages of Floating exchange rate system

  1. This system is highly volatile, and as a result, macroeconomic fundamentals cannot explain especially the short-term volatility.
  2. This system is also famous for its tendency to worsen existing problems such as higher inflation or unemployment.

Advantages of Pegged exchange rate system

  1. Pegged exchange rate system helps to keep a country’s exchange rate low by controlling its domestic currency.
  2. It helps to bridge the gap and improve trade relations between countries with low costs of production and those with stronger comparative currencies.

Disadvantages of Pegged exchange rate system

  1. It causes importing inflation considering that the country will have huge deposits which create unwanted side effects.

References

Cavoli, T. &. (2014). Intervention and Exchange Rate Regime Choice in Asia: Does the US                     Dollar Still Matter? (Doctoral dissertation, World Scientific Publishing).

Frenkel, J. A. (2013). The Economics of Exchange Rates (Collected Works of Harry Johnson):                 Selected Studies (Vol. 8). Routledge.

Related:

GDP and Economic Growth-MT445 

Assignment: Monetary Policy and Fiscal Policy-MT445

Assignment: Monetary Policy and Fiscal Policy

 

Student Name:

 

In this Assignment, you will compute the required reserves and excess reserves using bank deposit data. You will also analyze the impacts of fiscal policy and monetary policy on the economy.

Instructions: Answer all of the following questions. You are required to follow proper APA format. Read the Criteria section below for more information before you begin this Assignment.

In this Assignment, you will be assessed on the following outcome:

MT445-5: Examine how fiscal and monetary policies affect the U.S. economy.

 

  1. Determine whether each of the following is counted in the M1 measure of the money supply:
  2. The coins in your piggy bank.

Yes the coins in my piggy bank will definitely be counted in the M1 measure of the money supply.

 

  1. The funds in your checking account at First National Bank.

Yes, the funds in my checking account at first national bank will be part of the measure of money supply.

  • The funds in your savings account at Second National Bank.

No, my money in my saving accounts in the second national bank will not be included in the M1 measure of the money supply.

  1. The traveler’s check you have left over from your trip to Germany.

Yes, travelers check will be part and parcel of the M1 of the money supply.

 

  1. The available balance on your Citico Gold MasterCard.

No, the available balance in my master card will not be counted in the M1 of the money supply.

 

  1. Refer to the simplified balance sheet for a bank and answer the following questions.
Assets Liabilities
Reserves  $10,000 Deposits  $70,000
Loans  $66,000 Stockholder’s equity  $6,000

 

  1. If the required reserve ratio is 5%, how much in excess reserves does this bank hold?

Answer = excess reserves less required reserves

$ 10,000-(5%* $ 70,000)

Solution = $ 6,500

  1. What is the maximum amount this bank can expand on its loans?

The maximum amount that the bank can expand its loans is $ 6,500

 

  1. What will happen to the M1 money supply if it makes the loans under (b) above and those funds are deposited into another bank by the borrowers?

There will be no noticeable change in the M1 money supply regardless of the change primarily because the level of medium of exchange such as coins has no effect on M1 (Balatsky, 2012).

 

  1. Identify each of the following events as:
  2. a) Part of an expansionary fiscal policy
  3. b) Part of a contractionary fiscal policy
  4. c) Part of an expansionary monetary policy
  5. d) Part of a contractionary monetary policy

 

 

  1. The corporate income tax rate is increased.

Corporate tax is part of contractionary fiscal policy

  1. Defense spending is increased.

Part of an expansionary fiscal policy

  1. Families are allowed to deduct all daycare expenses from their federal income taxes.

Part of an expansionary fiscal policy

  1. The Federal Reserve Bank sells Treasury securities.

Part of an expansionary fiscal policy

  1. The Federal Reserve Bank buys Treasury securities.

Part of expansionary fiscal policy

4.  Assume the Federal government runs a budget deficit in the current fiscal year.

  1. How can the Federal government fund (finance) the budget deficit?

The federal government can finance the deficits through:

  1. By selling government securities and bonds
  2. By borrowing funds from the public and other sectors of the economy
  3. By borrowing from international bodies such as IMF

 

  1. If the Federal government decides to issue U.S. Treasury securities to fund the deficit, what will happen to the level of national debt, all other factor held constant?

Through the sale of government securities and bonds, the government increases the amount of money in circulation in the economy as compared to the number of goods and services thus, leading to inflation (Shaw, 2016).

  • Assuming the Federal government and firms compete for the same savers’ dollars in the loanable funds market, what will likely happen to interest rates?

There is a high probability that the interest rate will increase given the fact that most individuals would prefer to sell their bonds and securities to the government since there is a high probability that the interest rate will increase given the fact that most individuals would prefer to sell their bonds and securities to the government since they will enjoy a certain degree of certainty government will honor its promises.

  1. Given your answer under (ii & iii) above, is crowding out more or less likely to occur if the deficit is funded by Treasury securities?

In part (ii), the government will be increasing the amount of money in circulation thus increasing the crowding out effect unlike in part (iii) where it will be competing for the available money in the market with other players of the economy.

 

 

Criteria

  • This Assignment should be written in Standard English and demonstrate exceptional content, organization, style, and grammar and mechanics.
  • Respond to the questions in a thorough manner, providing specific examples where asked.
  • Your sources and content should follow proper APA format (A title page is not required). (Review the APA formats found in the Kaplan Writing Center. To access the Kaplan Writing Center, select this link.).
  • Review the grading Rubric to ensure all points have been captured in the paper.

 

References (add references in APA format below)

 

 

 

Directions for Submitting your Assignment

Complete your Assignment in this Word document. Submit your Assignment by the end of Unit 9 by clicking the Drop box tab and select Unit 9: Assignment from the dropdown menu, then attach your file. Make sure to save a copy of your work and be sure to confirm that your file uploaded correctly.

Unit 9 Assignment
Content and Analysis Points Possible Points Earned
Problem #1

Determine whether each of the following is counted in the M1 measure of the money supply. (i. – v.)

10  
Problem #2

Refer to the simplified balance sheet for a bank and answer the following questions. (a – c)

6  
Problem #3

Identify each of the following events as:  part of an expansionary fiscal policy, a contractionary fiscal policy, an expansionary monetary policy or a contractionary monetary policy. (i. – v.)

15  
Problem #4

Assume the Federal government runs a budget deficit in the current fiscal year. (i. – iv.)

8  
Writing style, grammar, and APA format. 6  
Total 45  

 

References

Balatsky, E. &. (2012). Fiscal Policy and Economic Growth. . Problems of Economic Transition, 54(12), ,             55-70.

Shaw, C. (2016). Fiscal Policy and Economic Growth.

 

 

GDP and Economic Growth-MT445 

Question

Assignment: GDP and Economic Growth

In this Assignment, you will evaluate the various components of the Gross Domestic Product (GDP) and factors that affect the GDP components. You will also compute the growth rate of U.S. real GDP and compare the average with the expected growth rate of U.S real GDP.

Instructions: Answer all of the following questions. You are required to follow proper APA format. Read the Criteria section below for more information before you begin this Assignment.

In this Assignment, you will be assessed on the following outcome:

MT445-6: Evaluate the effects of globalization and international trade on the U.S. economy.

Sample paper

 GDP and Economic Growth

Components of GDP and Growth Rates of Real GDP

  1. Why does inflation make nominal GDP a poor measure of the increase in total production?

Nominal GDP refers to the market value of all final goods and services produced in a country and considering the current-year market prices. The latter fact makes nominal GDP a poor measure of the increase in total production since part of the figure reflects price changes rather than actual increases in production levels (Goodwin, 2008).

 

  1. Which component of GDP will be affected by each of the following transactions involving FlyCheap Airlines? Briefly explain.

Hint: GDP = C + I + G + Nx

  1. You purchase a ticket on a FlyCheap Airlines to visit your niece.

The component of GDP affected is consumption (C). Purchasing an air ticket is part of consumption expenditure, since the consumption component includes purchase of durable and non-durable goods as well as expenditure on services such as education, transportation, and others.

  1. FlyCheap Airlines purchases a new jetliner from Boeing.

This transaction will affect investment (I) component of the GDP. Investments reflect capital additions to the available physical stock over time. FlyCheap added to its physical stock of capital by purchasing the jetliner, which is meant to create more goods or services.

iii. FlyCheap Airlines purchases new seats to be installed on a jetliner it already owns.

Purchase of new seats is an investment (I). This is because purchase of seats still reflects additions to the physical stock of capital. The new seats are a form of business fixed investments.

  1. FlyCheap Airlines purchases 200 million gallons of fuel.

This does not affect any component since this is only an operating expense.

  1. A French citizen purchases a ticket to fly on a FlyCheap flight from Paris to New York.

This represents the net exports (Nx) component. This is because in purchasing the FlyCheap ticket, the country is exporting services and receiving a price.

  1. The city of Nashville agrees to spend funds to extend one of the runways so that FlyCheap will be able to land larger jets.

This represents the government expenditure (G) component of the GDP. This is because the component represents the government spending on various goods and services.

  1. Use the table to answer the following questions.
Year Real GDP (Billions of 2000 Dollars)
1993 $7,113
1994 7,101
1995 7,337
1996 7,533
1997 7,836

 

  1. Calculate the growth rate of real GDP for each year from 1993-1994, 1994-1995, 1995-1996 and 1996-1997. Show your work.

1993 – 1994: (7,101 – 7,113)/7,113 = -0.2% growth rate.

1994 – 1995: (7337 – 7,101)/ 7,101 = 0.03 or 3.3% growth rate.

1995 – 1996: (7,533 – 7,337)/7,337 = 0.03 or 2.7% growth rate.

1996 – 1997: (7,836 – 7,533)/7,533 = 0.04 or 4% growth rate.

 

  1. Calculate the average annual growth rate of real GDP for the period from 1993 to 1997.

Hint: Compute the average for the growth you calculated under (i) above.

The average annual growth rate is: (-0.2 + 3.3 + 2.7 + 4)/4 = 2.5%.

iii. How does the average annual growth rate you calculated in (ii) above compare to the average GDP growth rate the U.S. normally expects?

The average annual growth rate calculated in (ii) is almost similar to the average GDP growth rate obtains. For instance, basing on data from The World Bank (2016), the U.S. had an average GDP of 2.2% from 2012 to 2015.

  1. In an open economy, trade is allowed between countries. Assume a consumer purchases $1,000 worth of furniture manufactured in China. Answer the following:
  2. Which component(s) of GDP are impacted by this purchase?

The component that changes is net exports (Nx), or the difference between spending on foreign goods and the value of exports.

  1. Does GDP increase, decrease or stay the same? Briefly explain.

The GDP decreases. This is because importing the furniture means taking money away from the domestic economy and to a foreign economy. Thus, the level of GDP decreases.

  1. Does your answer change if the company in China is a U.S. owned company? Why?

The answer would not change since calculation of GDP takes into consideration the value of goods and services produced within the borders of a country. As such, the furniture would still count as imports.

  1. Describe the relationship between labor productivity and long term economic growth. How do technological advancements impact labor productivity?

There exists a positive correlation between labor productivity and long-term economic growth. When labor productivity increases, long-term economic growth also increases (Cahuc, Carcillo, & Zylberberg, 2014). Labor productivity increases when workers are more efficient in what they do, basing efficiency purely on the value each worker produces per unit of input and as per the time they take. Technological advancements improve labor productivity. This is because through technological advancements, workers are able to produce more goods while using fewer resources and time.

 

References

Cahuc, P., Carcillo, S., & Zylberberg, A. (2014). Labor economics. Cambridge, MA: MIT Press.

Goodwin, N. (2008). Microeconomics in context. New York, NY: M.E. Sharpe.

The World Bank. (2016). Global economic prospects: divergences and risks. Retrieved from      http://www.worldbank.org/en/publication/global-economic-prospects#data

Related:

PPA605-Discussion on House for Rent

 

Assignment: Oligopoly and Monopolistically Competitive Firms -MT445  

Assignment: Oligopoly and Monopolistically Competitive Firms                                                                                          

Student Name:

In this Assignment, you will compute total cost, total revenue, and total profit/loss. Based on the computed results, you will determine the optimal quantity of output, which minimizes loss under a monopolistically competitive market. In addition, you will also evaluate the marketing strategies of oligopoly market firms.

Instructions: Answer all of the following questions. You are required to follow proper APA format. Read the Criteria section below for more information before you begin this Assignment.

  1. 1. Do the firms in an oligopoly act independently or interdependently? Explain your answer.
  2. A monopolistically competitive firm has the following demand and cost structure in the short run.

              Output          Price             FC               VC             TC               TR           Profit/Loss

                     0                $90             $90          $    0            ____           ____           ________

                     1                  80            ____             40            ____           ____           ________

                     2                  70            ____             80            ____           ____           ________

                     3                  60            ____           140            ____           ____           ________

                     4                  50            ____           220            ____           ____           ________

                     5                  40            ____           320            ____           ____           ________

                     6                  30            ____           440            ____           ____           ________

                     7                  20            ____           580            ____           ____           ________

                     

  1. Complete the table.

  2. What level of output maximizes profit or minimizes loss?

  3. Should this firm operate or shut down in the short run? Why?

  4. Suppose that Wal-World and Tarbo are independently deciding whether to implement a new bar code technology or use the existing bar code. It is less costly for their suppliers to use one system and the following payoff matrix shows the profits per year for each company resulting from the interaction of their strategies.

  5. Does Wal-World have a dominant strategy? Briefly explain.

  6. Does Tarbo have a dominant strategy? Briefly explain.

  7. Is there a Nash Equilibrium in this game? Briefly explain.

 

Assignment: Oligopoly and Monopolistically Competitive Firms -MT445

Related:  Assignment: Costs and Cost Minimizing Output-MT455

Elasticity and Labor Market Equilibrium-MT455

Assignment: Elasticity and Labor Market Equilibrium

Student Name:

In this Assignment, you will elaborate price elasticity of demand and supply in the short run and long run. You will evaluate factors that change equilibrium wage rate and employment level. Moreover, you will calculate total revenue product and marginal revenue product, and compare them with total cost and marginal cost in order to figure out optimal quantity of labor that should be hired to maximize profit.

Instructions: Answer all of the following questions. You are required to follow proper APA format. Read the Criteria section below for more information before you begin this Assignment.

  1. 1. Is the price elasticity of demand for gasoline more elastic over a shorter or a longer period of time? Explain.
  2. Is the price elasticity of supply, in general, more elastic over a shorter or a longer period of time? Explain.
  3. 3. Why is the supply curve for labor usually upward sloping? Explain.
  1. In the graph below, assume that the market demand curve for labor is initially D1. The market supply curve for labor is indicated with figure “S”. Wage rate is depicted on the other things held constant vertical axis (dollars per unit) ad employment level (quantity of labor) is depicted along the horizontal axis. Answer the following questions.

 

  1. What are the initial equilibrium wage rate and employment level?
  2. Other things held constant, assume that the price of a substitute resource decreases.

What will happen to demand for labor? Will it increase or decrease?

 

What are the new equilibrium wage rate and employment level?

 

  1. Other things held constant, suppose that demand for the final product increases. Using labor demand curve D1 as your starting point, what happens to the demand for labor?

 

What are the new equilibrium wage rate and employment level?

 

  1. Assume this industry is dominated by non-union workers. How would the equilibrium wage compare to that earned in a similar industry with similarly skilled union workers?

 

  1. 5. Use the following data to answer the questions below. Assume a perfectly competitive product market.

Units of LaborUnits of Output

0                                   0

1                                   8

2                                12

3                                17

4                                21

5                                23

  1. Calculate the total revenue product and marginal revenue product at each level of labor input if output sells for $4 per unit.

 

  1. If the wage rate is $15 per hour, how many units of labor will be hired?

Elasticity and Labor Market Equilibrium-MT455 paper

 

Related paper

Costs and Cost Minimizing Output-MT455

 

 

Costs and Cost Minimizing Output-MT455

Question

 Costs and Cost Minimizing Output

In this Assignment, you will analyze fixed and variable costs of a small business. You will also evaluate optimal quantity of output that minimizes costs and maximizes profits.

In this Assignment, you will be assessed on the following outcome:

GEL-1.1: Demonstrate college–level communication through the composition of original materials in Standard American English.

Assignment:

Before answering the following questions, review the Assignment Checklist. Then, in a separate Word document, write a 1–2 page expository research paper answer the following questions based on the rule for minimizing costs of production in regard to a small business plan to minimize costs in order to increase productivity and maximize profits:

  1. 1. Pat’s Pizza Restaurant owner incurs various economic costs of production. Explain whether each of the following is an explicit cost or an implicit cost. Which of the two costs should Pat minimize to maximize his account profit?
  2. Payments for rented manufacturing equipment.
  3. A firm’s use of a warehouse that it owns and could rent to another firm.
  4. Wages paid to the firm’s workers.
  5. The wages the firm’s owner could earn if he/she worked for another company.
  6. Consider the following information in the table for Pat’s Pizza Restaurant and answer the questions below by using the cost minimization rule that takes into account the marginal product per dollar of inputs of production.
Marginal Product of Capital 4,000
Marginal Produce of Labor 100
Wage Rate $10
Rental Price of Pizza Ovens $500

 

  1. Is the owner of Pat’s Pizza Restaurant minimizing costs? Explain using the data in the table.
  2. Should he rent more ovens and hire fewer workers or rent fewer ovens and hire more workers to increase productivity and lower costs of production?

 

  1. Consider Pat’s Pizza Restaurant’s production decision in both the short-run and long–run. Pat wants to improve the productivity of the firm in the long run. Explain the types of input costs that might be fixed in the short–run and types of costs that may be variable in the long–run.  Provide examples for fixed inputs and variable inputs as well as fixed costs and variable costs for the Restaurant in the short run. What long run economic decisions should Pat make to increase productivity, minimize costs, and maximize profit?

 

Costs and Cost Minimizing Output-MT455  paper

 

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Market Equilibrium and Taxes