Okun’s Law is written as u – u(-1) = -0.4 (g_Y – 3%)

a. What is the sign of u – u(-1) in a recession? What is the sign of u – u(-1) in a recovery?

b. Explain where the 3% number comes from?

c. Explain why the coefficient on the term (g_Y – 3%) is -0.4 and not -1.

d. Suppose the number of immigrants per year allowed to enter the United States is sharply increased. How would Okun’s law change?

2. Use the IS-LM-PC model to illustrate how the economy adjusts to an increase in taxes both in the short run and in the medium run.

3. Explain why in the medium run an increase in the price of oil will cause an increase in the unemployment rate.

4. If the economy is initially operating at the natural level of output why an increase in the price of oil will cause an increase in the aggregate price level.

5. Explain why during the short run, an increase in the price of oil will cause an increase in the interest rate.

An industry is a group of companies producing similar products or services (e.g., fast food, higher education, automotive, etc.). An industry is not limited to a small geographic area. Your Industry Analysis should consider the entire industry within the United States in which your company belongs. Include additional information about regional factors if appropriate.

The following subheadings are suggestions for organization of your memo (followed by sufficient and well-cited analyses):

• Industry Size and Growth Trends
• Maturity of the Industry
• External Economic Factors and their Effect on the Industry
• Seasonality
• Technological Factors
• Regulatory, Political, and Legal Concerns
• Competitive Environment and Changes in the Competitive Environment
• Key Challenge(s) Facing the Industry
• Company’s Steps to Meet One Key Challenge

You must use information from at least five unique sources as part of your analysis. Published sources that you might consult include trade journals, industry publications, and U.S. Department of Commerce publications.

During the summer of 2017, fifteen former leaders of the White House Council of Economic Advisors signed a letter to President Trump urging him not to place tariffs on imports of steel into the United States. The letter notes that “Among us are Republicans and Democrats alike, and we have disagreements on a number of policy issues. But on some policies there is near universal agreement. One such issue is the harm of imposing tariffs on steel imports.” Tariffs are taxes imposed by government on imports. Those who endorse tariffs and other barriers to free international trade believe that such barriers protect domestic industries and the jobs of their employees.

Why do many economists, including those who have served for both Republican and Democratic administrations, support free trade policies and oppose tariffs and trade barriers even if these barriers are designed to protect domestic workers from losing their jobs? What types of jobs would be most vulnerable to job losses due to competition from imports?

The first transaction is for the import of good quality wines from Australia, since a retail liquor trading chain customer in the United States, for who you have been doing imports over the past five years has a very large order this time. The producer in Australia informed you that the current cost of the wine that you want to import is AUD$2,500,000. The wine in Australia can be shipped to the United States immediately but you have three months to conduct payment.

The second transaction is for the export of 3d printers manufactured in the U.S.A. The country where it will be exported to is Britain. The payment of £2,500,000 for the export to Britain will be received nine months from now.

You consider different transaction hedges, namely forwards, options and money market hedges.

You are provided with the following quotes from your bank, which is an international bank with branches in all the countries:

Forward rates:

Bank applies 360 day-count convention to all currencies (for this assignment apply 360 days in all calculations).

Annual borrowing and investment rates for your company:

Bank applies 360 day-count convention to all currencies. Explanation – e.g. 3 month borrowing rate on $ = 2.687%. This is the annual borrowing rate for 3 months. If you only borrow for 3 months the interest rate is actually 2.687%/4 = 0.67175% (always round to 7 decimals when you do calculations). Furthermore, note that these are the rates at which your company borrows and invests. The rates are not borrowing and investment rates from a bank perspective.

Option prices:

Bank applies 360 day-count convention to all currencies. (Students also have to apply 360 days in all calculations). Option premium calculations should include time value calculations based on US $ annual borrowing interest rates for applicable time periods e.g. 3 month $ option premium is subject to 2.687%/4 interest rate.)

a. Calculate the cost of money market hedges for the import from Australia (Complete Table 3 on the separate answer sheet).

Table 3: Australia import cost with money market hedge:

Considering the calculations you have done so far, you need to attend to a number of import transactions for goods that companies in the United States expressed interest in.

The first transaction is for the import of good quality wines from France, since a retail liquor trading chain customer in the United States, for who you have been doing imports over the past five years has a very large order this time. The producer in France informed you that the current cost of the wine that you want to import is and €2,500,000. The producer in France will only ship goods in three months’ time due to seasonal differences but payment will have to be conducted six months from now.

The second transaction is for the export of 3d printers manufactured in the U.S.A. The country where it will be exported to is Canada. The payment of CAD 2,500,000 for the export to Canada will be received twelve months from now.

You consider different transaction hedges, namely forwards, options and money market hedges.

You are provided with the following quotes from your bank, which is an international bank with branches in all the countries:

Forward rates:

Bank applies 360 day-count convention to all currencies (for this assignment apply 360 days in all calculations).

Annual borrowing and investment rates for your company:

Bank applies 360 day-count convention to all currencies. Explanation – e.g. 3 month borrowing rate on $ = 2.687%. This is the annual borrowing rate for 3 months. If you only borrow for 3 months the interest rate is actually 2.687%/4 = 0.67175% (always round to 5 decimals when you do calculations). Furthermore, note that these are the rates at which your company borrows and invests. The rates are not borrowing and investment rates from a bank perspective.

Option prices:

Bank applies 360 day-count convention to all currencies. (Students also have to apply 360 days in all calculations). Option premium calculations should include time value calculations based on US $ annual borrowing interest rates for applicable time periods e.g. 3 month $ option premium is subject to 2.687%/4 interest rate.)

Canada export with money market hedge:

Considering the calculations you have done so far, you need to attend to a number of import transactions for goods that companies in the United States expressed interest in.

The first transaction is for the import of good quality wines from France, since a retail liquor trading chain customer in the United States, for who you have been doing imports over the past five years has a very large order this time. The producer in France informed you that the current cost of the wine that you want to import is and €2,500,000. The producer in France will only ship goods in three months’ time due to seasonal differences but payment will have to be conducted six months from now.

The second transaction is for the export of 3d printers manufactured in the U.S.A. The country where it will be exported to is Canada. The payment of CAD 2,500,000 for the export to Canada will be received twelve months from now.

You consider different transaction hedges, namely forwards, options and money market hedges.

You are provided with the following quotes from your bank, which is an international bank with branches in all the countries:

Forward rates:

Bank applies 360 day-count convention to all currencies (for this assignment apply 360 days in all calculations).

Annual borrowing and investment rates for your company:

Bank applies 360 day-count convention to all currencies. Explanation – e.g. 3 month borrowing rate on $ = 2.687%. This is the annual borrowing rate for 3 months. If you only borrow for 3 months the interest rate is actually 2.687%/4 = 0.67175% (always round to 5 decimals when you do calculations). Furthermore, note that these are the rates at which your company borrows and invests. The rates are not borrowing and investment rates from a bank perspective.

Option prices:

Bank applies 360 day-count convention to all currencies. (Students also have to apply 360 days in all calculations). Option premium calculations should include time value calculations based on US $ annual borrowing interest rates for applicable time periods e.g. 3 month $ option premium is subject to 2.687%/4 interest rate.)

Table 7: Canada exchange rate hedges compared:

Which hedging technique should be applied? ____________________________________

What means of managing group conflicts, as discussed in Chapter 9(Conflict and Negotiation), are used in the Ford-Mazda partnership? Case Study - A Successful Partnership at Ford-Mazda. Please anwers the question in minimun 200 words.

Case for Analysis:

A Successful Partnership at Ford-Mazda

While international joint ventures among auto manufacturers make great sense, often they don’t make great profits. For example, for many years, auto giant General Motors bailed out loss-plagued Isuzu, in which at one point it owned a 49 percent stake. The list of cross cultural disappointments goes on: Chrysler-Mitsubishi, Daimler-Chrysler, and Fiat-Nissan have all produced as much rancor as rewards.

Ford-Mazda is the exception. Their marriage has weathered disagreements over specific projects, trade disputes between Japan and the United States, and even allegations by the Big Three that Mazda and other Japanese rivals were dumping minivans in the United States. The alliance, founded when Ford stepped in to rescue the struggling Japanese carmaker in 1979, has stood firm for over 30 years. With Ford owning 11 percent of Mazda, the two companies have cooperated on several new vehicles and exchanged valuable expertise—Ford in international marketing and finance, Mazda in manufacturing and product development.

Ford and Mazda have worked jointly on several auto models; usually Ford would do most of the styling and Mazda would make key engineering contributions. Jointly worked cars include the Ford Escort and Mercury Tracer models, the subcompact Festiva, the sporty Ford Probe and Mercury Capri, and the Tribute and Explorer SUVs. The Ford-aided Mazdas are the MX-6, 323, Protégé, and Navajo. In all, approximately one of every four Ford cars sold in the United States has benefitted from some degree of Mazda involvement everything from manufacturing methods to steering designs whereas two of every five Mazdas has some Ford influence. The Ford-Mazda relationship extends beyond U.S. borders. In 2010, a joint venture between Ford and Mazda in Thailand began producing passenger cars export to several Asian countries. Ford and Mazda can call on some hard-learned principles for managing a successful strategic alliance, many of which would apply to ties in any industry. The secrets to the Ford-Mazda success are

Keep top management involved. The boss must set a tone for the relationship. Otherwise, middle managers will resist ceding partial control of a project to a partner.

Meet often, and often informally. Meetings should be at all levels and should include time for socializing. Trust can’t be built solely around a boardroom table.

Use a matchmaker. A third party can mediate disputes, suggest new ways of approaching the partner, and offer an independent sounding board.

Maintain your independence. Independence helps both parties hone the areas of expertise that made them desirable partners in the first place.

Allow no “sacrifice deals.” Every project must be viable for each partner. Senior management must see that an overall balance is maintained.

Appoint a monitor. Someone must take primary responsibility for monitoring all aspects of the alliance.

Anticipate cultural differences. Differences may be corporate or national. Stay flexible and try to place culturally sensitive executives in key posts.

Underlying these principles is the idea that benign neglect is no basis for a partnership. Or, as Ford president Phillip E. Benton Jr. stated, “There’s a lot of hard work in making it work.”

It’s All in the Family

What company wouldn’t want a “leg up” in obtaining contracts for lucrative new business? Seeking to gain an advantage in the competitive world of investment banking led J.P. Morgan Chase & Company officials to seek out and hire the children of prominent Chinese officials. The individuals hired may have had the knowledge or skills needed to fulfill the jobs for which they were hired. But their most valuable qualification was something in their genes—being related to an influential member of the political or business elite in China. Having a connection to someone with decision-making authority to grant business opportunities to J.P. Morgan might have been the distinct factor that resulted in them getting the job.

The purposeful targeting of well-connected sons and daughters with the express purpose of driving business contracts might be considered bribery under federal law. The U.S. Justice Department has launched an investigation to determine if these hiring decisions violate the Foreign Corrupt Practices Act. In fact, the chief executive of J.P. Morgan’s China operations has voluntarily resigned. J.P. Morgan isn’t alone in using such a practice. Citigroup, Goldman Sachs, Morgan Stanley, UBS, and others are also said to have done so.

Company executives at J.P. Morgan were aware of the program as well as broad anticorruption measures several years before the Securities and Exchange Commission began its investigation. Claiming that this preferential hiring is “the norm of business” in China, J.P. Morgan’s top leaders believe they acted according to accepted standards. J.P. Morgan’s business acquisition in China did indeed improve after it launched the selective hiring program.

The bank developed a spreadsheet detailing potential recruits along with their “valued” connections or business-enhancing prospects. They also created a special internship to accommodate some applicants who were screened less stringently than other job applicants. So, the candidates were given particular attention and a smooth path to employment. Government officials aren’t stating that the employees are not qualified. They are more interested in the reason each was selected from the applicant pool. A finding that any of the banks involved intentionally hired the sons and daughters to win business might result in bribery charges.

The banks are scrutinizing their hiring practices as they respond to the government investigators’ inquiries. This practice highlights differences in cultures, norms, and laws among nations. What might be considered an expected and completely acceptable practice in China might be deemed illegal—or at very least, unethical—in the United States.

J.P. Morgan Chase & Company wanted to hire the children of prominent Chinese officials. Considering legal and ethical standards for hiring in the United States, which of the following questions would be most appropriate for an interviewer in the United States to ask during a structured interview to explore an applicant's family connections?

Which of the following selection factors for global employees did J.P. Morgan Chase & Company consider when hiring personnel with political connections in China?

Which of the following steps in the hiring process would most likely reveal an applicant's family political connections to J.P. Morgan Chase & Company?