Question

Suppose United Sates is a large open economy which can influence the world capital market. During the past decade, the US cut tax rates and increased defense spending, resulting in record budget deficits. Using diagrams state and explain what the effects were on: the levels of investment, the level of net capital outflow, the level of trade balance in and the real exchange rate in Japan assuming it is a small open economy.

Answer 1

In November 2007, Southwest introduced a innovative Business Select fare to appeal to economy-minded business trav­elers. Business Select customers get early boarding privileges, earn extra Rapid Rewards (frequent flyer credits), and a free alcoholic beverage. The collective consequence of Southwest’s “Bags Fly Free” campaign and strategic fare deals resulted in record load factors for the second half of 2009. (A load factor is the percentage of all available seats on all flights occupied by fare-paying passengers.) The difference, for SWA, is it simply does things differently. The nation's largest domestic carrier just marked its 40th straight profitable year (2013), an unmatched feat in a time of economic turbulence, fluctuating fuel prices and airline bankruptcies. It did so by undercutting the competition with no-frills flights and, in the process, building an army of budget-minded fans. SWA's new profit-boosting attitude: It cut the legroom on many planes to fit more seats, retooled its frequent flier program to make passengers spend more money to collect points and adopted new fees to board early.

Problematic situations that have occurred for SWA since the Air Trans takeover which was to some extent associated to the new leadership management appointed in 2001. These dramatic changes have created difficulties in the SWA’s culture, along with the increasing costs in fuel and wages. They remain committed to the pillars of their success—outstanding Customer Service; safe, reliable, and efficient operations; and low costs.

Since the leadership change the company has engaged in a path of actions that have produced radical change in the organizational cultural and the company’s operational methodology. Instead of working at teamwork, there has been increasing distance between employees, managers and top management. SWA Airlines tries to save money by simplifying its operating process by utilizing strategies such as having one type of aircraft which allows its mechanics to be experts on that one airplane model saving maintenance time, parts thus lowering costs. SWA utilizes a point-to-point strategy (fly customers direct from point to point) as opposed to the hub and spoke system (fly customer to a gathering airport {hub}) competitors operate with in their systems. This is the most efficient way of adopting the concept of high average velocity and maximizes passengers per miles revenue mile. The booking cost per passenger online is "well under $1," said Kelly, and is scaling down even further. SWA uses the Market-Focused Management Model. It believes the company should trust and stand on its employees’ side because sometimes customers might be wrong. SWA claims, “Ownership is the result of believing you can make a difference, then acting on that belief in everything you do.”