Question

1. The United States uses a set of three “key economic indicators” to measure the health of the U.S. economy. What are these three key economic indicators, and what does each indicator tell us about the health of our economy? What are the advantages or disadvantages of looking at just one of these indicators without considering the others?
2. There is a variety of strategies that a business can use in order to reach global markets. For each of the following businesses, which strategy would be appropriate? Once you have selected an appropriate strategy, provide one advantage and one disadvantage the business may encounter when employing the strategy.
   1. A manufacturer of high-tech drones used to map the surface of the planet Mercury
   2. A clothing company that specializes in designer clothing for children under the age of ten
   3. A doughnut shop that has locations in thirty-two states but now wants to take its “bake-and-take” doughnuts to the global market
3. 3.Identify and explain the three ways that the Federal Reserve controls the money supply. What is the impact on business when the money supply is increased? What is the impact on business when the money supply is decreased

Answer 1

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Question:

Answer:

1. Answer:

Economic indicators are a tool by which the health of a economy is measured globally. There are number of economic indicators like, GDP, employment Figure, inflation, trade balance, industrial production growth, public debt, fiscal deficit etc.

But if we talk about the USA then the United States uses a set of three “key economic indicators” to measure the health of the U.S are: GDP, Employment Figure and Inflation.

GDP- It is the value of all the finished goods and services made within a country during a period.There are number of methods to measure the GDP.

Employment Figure: Its indicate the number of jobs created within the economy during a specific period. Low unemployment show a strong economy and vice-versa.

Inflation: It shows the general price level rise of goods and services in an economy. A low, reasonable and stable inflation rate is good for a economy and a high and unstable is not.

These three indicators show the whole and a real picture of a economy. If GDP is high, Inflation is low and stable, Unemployment rate is low it means economy is a good shape and strong and vice versa. GDP grow because of higher and increasing aggregate demand in the economy. Aggregate demand is affected by consumption, investment, government spending and net export. It means if aggregate demand is strong and increasing means consumption, investment, government spending and net export is in a good shape and growing. A increasing aggregate demand increase GDP and price level. So, a strong consumption and investment level also increase the production that boost employment growth rate and income level. So, finally, If GDP, employment figure and inflation is in a good shape and favorable then a economy is definitely strong.

But there is some drawback of it. This figure or indicators don't talking about the fiscal deficit, public debt, exchange rate, interest rate etc. You can see that in last 5 years US economy has grown, unemployment rate reduced and inflation was unemployment ok but fiscal deficit, trade balance, public debt increased rapidly and it is not good for economic heath of US. So, these three indicators don't show the whole picture.

2. Answer:

According to there is no a perfect strategy. It is very dynamic in nature and need to change and modified according to demand of time. Every strategy has some advantages and disadvantages. But a firm want to globalized itself then according to me the an appropriate strategy for the following businesses is following as:

A manufacturer of high-tech drones used to map the surface of the planet Mercury:

Company should go through the joint venture or collaboration strategy with relevant company in the target market.

It will help the company in cost control and easy market penetration (relevant consumers segment) in the target market/country.Other side the company will get the advantage of experience and technology of new business partner.

But there is some disadvantages of this strategy are: Company can do better if its go the 100% FDI if, have potential. The success of JV and collaboration is depend upon the freedom of decision making, good communication between partners, image of partners and customer base etc. But if the share holding or ownership is limited for the foreign company then the decision making capacity will be in the hand of new partner/foreign company and company can face the problem in respect of freedom of decision making and it can creat a dispute between them.

A clothing company that specializes in designer clothing for children under the age of ten.

A clothing can enter through franchisee model. Company can give the franchisee to local in the foreign country it will be cost effective and easy to expand its business in the foreign company. A local more know about its market and consumer behaviors it its local market. So, company can generate a good profit through this model. Local will open the outlet or showroom in the potential market and company will not need to spend more time and money to understand the local market in foreign market.

But there is few demerits of this model like a company or brand is not popular in domestic market and enter through a franchisee model then it can negatively affect the company's profit because franchisees has no money or budget to promote the brand like a parent company. The expansion of business will depend upon the aggressiveness, marketing and sales skills, dedication, interpersonal skills etc of the owner (franchisee).

A doughnut shop that has locations in thirty-two states but now wants to take its “bake-and-take” doughnuts to the global market:

The appropriate strategy will be 100% FDI and start its own manufacturing and selling through a complete channels (distribution channels). It will be helpful to the company to establish in the foreign country and a company can aslo sell its product into the near by nation or markets. Because there is no need of more fund to open a manufacturing unit in this area.

But it has also some demerits like cost of manufacturing, search a right distribution channel, increasing penetration in the new market, searching potential segment and market in the new location and market competition etc.

3. Answer:

Three ways that the Federal Reserve controls the money supply are: Discount rate, OMO, Reserve requirement.

Impact on business when the money supply is increased:

Discount Rate: When a central bank (Fed) want to increase money supply then its decrease the discount rate that decrease the interest rate and money become more cheaper that increase the demand of money for investment and consumption. It positively impact the business and helping to expansion.

OMO : OMO (Open Market Operation) is a tool of monetary policy by which Fed control money supply. When central bank want to increase the money supply then Fed buy government bonds/securities that decrease the interest rate and money become more cheaper that increase the demand of money for investment and consumption. It positively impact the business and helping to expansion.

Reserve Requirement: When central bank want to increase the money supply then its reduce the reserve requirement that increase the loanable fund of bank that decrease the interest rate and money become more cheaper that increase the demand of money for investment and consumption. It positively impact the business and helping to expansion.

Impact on business when the money supply is decreased:

Discount Rate: When a central bank (Fed) want to decrease money supply then its increase the discount rate that increase the interest rate and money become more costly that decrease the demand of money for investment and consumption. It negatively affect the business and reduce the production and profit.

OMO : OMO (Open Market Operation) is a tool of monetary policy by which Fed control money supply. When central bank want to decrease the money supply then Fed sell government bonds/securities that increase the interest rate and money become more cheaper that increase the demand of money for investment and consumption. It negatively affect the business and reduce the production and profit.

Reserve Requirement: When central bank want to decrease the money supply then its increase the reserve requirement that decrease the loanable fund of bank that increase the interest rate and money become more cheaper that increase the demand of money for investment and consumption.It negatively affect the business and reduce the production and profit.

Thank You