Question

Purpose of Assignment

Students examine the long-run determinants of both the level and the growth rate of real GDP per person and the factors that determine the productivity of workers and what governments might do to improve the productivity of their citizens. Students will learn how saving and investment are coordinated by the loanable funds market and will see the effects of taxes and government deficits on saving, investment, the accumulation of capital, and ultimately, the growth rate of output. Students will be introduced to tools that people use when they participate in financial markets. Students will see how people compare different sums of money at different points in time, how they manage risk, and how these concepts combine to help determine the value of a financial asset, such as a share of stock. Students will be introduced to the labor market and how economists measure the performance of the labor market using unemployment statistics. Students will address a number of sources of unemployment and some policies that the government might use to lower certain types of unemployment.

Assignment Steps

Resources: National Bureau of Economic Research

Scenario: The organization's strategic plan calls for an aggressive growth plan, requiring investment in facilities and equipment, growth in productivity, and labor over the next five years. It is your team's task to determine where, outside the United States, your organization should locate its new manufacturing plant.

Write a 1,050-word report recommending an off-shore country and support your choice with the following data:

The factors determining the country's productivity

How the country's policies influence its productivity growth

How the country's financial system is related to key macroeconomic variables

How your organization can reduce the risk they would face in relocating

The current and projected unemployment over the next five years

Answer 1

The factors determining the country's productivity

Factors affecting production:

Return on investment - High returns from selling cocoa for little input will naturally cause more cocoa planting to take place. As a tree crop this affects long term production. In the short term higher returns encourage growers to apply more inputs such as fertilisers and pesticides which increases the yield. However, farmer prices are sometimes set by governments or can be influenced by internal market factors other than the world cocoa price.

Government schemes - The role of government in assisting growers is a leading factor in the grower's decision whether or not to plant cocoa. Assistance can take different forms, from assistance with setting up and rehabilitation to cheap loans. For example, in Indonesia in 1990 the government made available loans at low rates of interest for the establishment of plantations and many companies were tempted into cocoa growing. Extension services may also assist smallholders.

Alternative crops - Land suitable for cocoa is also able to support other crops. If cocoa has a low return for a long time, the farmer may switch to another commodity or food crop despite the costs of uprooting and replanting.

Pests, diseases, drought and floods - Pests and diseases, droughts and floods can destroy crops and make the decision to switch to another crop easier.

How the country's policies influence its productivity growth

Every country has its set of rules and policies. Rules and policies are in place in order to keep things going in a positive way. Companies and businesses have to abide by these rules. China has a large population and has been continuing to grow rapidly each year. The large population can be very beneficial to companies. All companies and businesses in the country have to follow the same set of policies and rules the country has in place. China has a strict policy against fraud. Companies are to have preventative measures in place internally. Detective controls are needed as well to find fraud as soon as possible within the company. Corrective measures are a must as well. Any fraud that is detected will be dealt with and handled with consequences. More ways to prevent such fraud will also be created. Following the policies and rules in place will allow production to continue to flow smoothly without any negative issues to throw things off track. It reduces any law breaking consequences and also saves the company money overall.

How the country's financial system is related to key macroeconomic variables

VariablesThe following four variables are considered to be the most important in gauging the state or health of an economy: aggregate output or income, the unemployment rate, the inflation rate, and the interest rate. According to Nielson (2014), “Apple is losing market share in China to Samsung and also to local rivals such as Lenovo and ZTE. With a subscriber base of almost 750 million, China Mobile is a huge opportunity for Apple.

How your organization can reduce the risk they would face in relocating

When a business expands into a new country, it faces regulatory, financial, and political risks. There are a few steps companies can take to mitigate risks and prevent the loss of profit or expansion failure. First, if the company intends to hire national locals, they should be aware of the labor laws. Although Mexico is America’s close neighbor, the labor laws are quite different. For example, there is only one required a day of rest as opposed to America’s normal two-day weekend (Zelek, 1992). Additionally, after one month employees are considered permanent and cannot be fired unless there is a breach of contract (Zelek, 1992). The American business should also know what taxes and regulations will be imposed on their company. Another consideration is the potential security risks a company will face in Mexico. Growing unrest, political corruption, and organized violence will require strong security measures to ensure the safety of employees, products, and physical assets

The current and projected unemployment over the next five years

Using an autoregressive integrative moving average (ARIMA) model, the unemploymentrate forecasts of the United States are projected using analyst expectations (Trading Economics, 2017). To determine the level of unemployment past behavior is modeled using historical data, adjusting the coefficients of the econometric model, and considering the assessments of analysts and their future expectations.In the previous five years, unemployment has decreased from 8.1 percent in 2012 to 4.7 percent as of March 12, 2017. Unfortunately, unlike the past five years of reduced rates, it is predicted the United States will start to see an increase. By the third quarter of 2017 unemployment is expected to rise to 4.8 percent. By the year 2020, it is projected to reach six percent. However, by 2022 the unemployment rate is projected to equal the nonaccelerating inflation rate of unemployment (NAIRU),