Question

After hearing of you taking a course in business economics, Unc Dan has emailed you asking for advice on his 100 acre corn farm. He mentioned how after 30 hyears of growing corn, he wishes to leave that commodity's market and enter a more profitable market instead. He is thinking of subdiving his land and building homes and shops. He reckens he could make a good profit by selling the homes and renting the shops.

Recognizing the cost nd risks for Unc Dan in making the switch, you decide to research the economy in terms of GDP growth raate, interest rate, 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 Unc Dan with most informed advice possible. Macroeconomic paper as a professional report

Answer 1

The GDP growth rate has been increasing in US, and the unemployment rate has also been declining. The business cycle is currenlty in the boom phase. However, US is tighteninig immigration and the current workforce is ageing. Meaning thereby that the demand for housing is going to remain a bit subdued. The scard of sub prime crisis have still not entreily healed and therefore real estate investors are still a bit cautious. This is all in the background of a looming interest rate hike which would make it more difficult for home-buyers to finance their purchase.

On top of all this, the underlying land is a corn farm. Meaning thereby that in all probability it is located in the countryside. The real estate prices are dependent on location which does not seem to be a favourable factor here.

On the other hand, oil prices are again on a rise. This makes corn farming again lucrative as it provides a substitute in terms of bio-fuels. The advent of highly processed foods where more raw food is used to produce packaged foods continues to thrive in US and advanced economies. This means corn famring will continue to generate stable returns.

The only reason Dan should have to sell his farm is if he believes that he has aged and does not want to spare the labour of producing and harvesting corn.