The LM Curve will see a shift to the left and decrease the value of "Y" if the IR is higher than the ER of the market. The GDP is increasing in value and there will be an increase of savings.. If the IR was below the equilibrium, the opposite of the previously stated would occur. The LM Curve would see a shift to the right, therefore increasing the value of "Y". The GDP value would then decrease, due to the move from Point A to C, and increase employment which would decrease savings.
Before we explore how a reduction in the interest rates leads to an increase in consumption we must first define what it exactly means to consume. Mainstream economists such as Tim Harford define consumption as the spending by house holds on consumer products and services. As the interest rate decreases it leads to consequential reactions on behalf of consumers, one of these actions is an increase in the level of goods consumed. This is a result of it being cheaper to borrow money from banks and other financial institutions, this meaning purchases which have been prolonged or “put off” by consumers can now be readily purchased. This is an effect of a lower opportunity cost as the overall cost associated with borrowing has decreased and the marginal benefit of saving has increased, meaning consumers will receive more of a benefit if they purchase goods on credit based agreements opposed to saving, leading to an increase in the amount of credit transactions.
WEEK 6 2014-02-20: Foreign exchange: competitive exposure Case summary: The GM treasure is concerned about the strength of Japanese Yen regard US dollar, because that would affect what Japanese Auto makers do in the U.S. a declining yen reduces the Japanese manufacturers’ $ cost, enabling them to pass on some of the benefit to US customers and thus taking some of GM’s market share. This will impact GM’s top and bottom line. 2.What competitive exposure affect? Competitive exposure is important for companies doing business internationally. Competitive exposure affect the company the ability to compete internationally.
1. ABC Passenger Service Airlines has determined the breakeven point, both in dollars and passengers, necessary to breakeven. Explain how an increase or decrease of passengers from the breakeven point would affect the profit or loss of the firm. As long as the fixed costs for the airline are truly fixed and not step fixed, the contribution margin of increased passengers should increase profits. Conversely, any reduction of in the number of passengers from the breakeven point will result in a loss for the firm.
However, exhibit 6 showed that there was a decline in market demand for conventional lenses, but an increase in both planned replacement and disposal lenses. B&L does not produce either of those products, yet the reports indicated a healthy growth in revenue. This increase was largely due to sales revenue recognized from the 1993 large volume shipment to the distributors, transferring inventories from B&L to various distributors and recognized as revenues to B&L. This strategy not only increased the revenue for the year significantly but also reduced the excess inventory held by B&L, and increased their AR significantly, thus portraying a positive outlook on the Balance Sheet. 2.Does the new distribution and sales strategy make sense from an operational standpoint? Why or why not?
Audi's global sales rose 8.3% to 1.58 million vehicles in 2013 however despite the increase in revenue, the net profit fell 7.7% ($5.57billion) and the operating profit margin fell to 10.1% from 11% the previous year. Based on this one could assume Audi is experiencing diseconomy of scale. But when you dig deeper into their situation the reasons for a lower net profit is not because of a “per-unit” cost of production which would truly mean they are operating as a diseconomies of scale. The true reasons appear to be because of their expansion investments. As per the article Audi “warned that profit would be hit by investment in new models and tougher climate regulation”.
It could therefore be said that an increase in the incomes of consumers could cause the bus operators revenue to decrease due to a fall in demand. This would indicate that the bus driver should close the service. Price elasticity of supply measures the proportionate response to changes in quantity supplied to a proportionate price change. A price elasticity of supply value of +1.15 means that the bus service has a more than proportionate response in supply to a change in price. The positive sign basically shows that higher prices will
(3) Price reduction of 20% -Pros: competitive the price with other company. Increase the sales in do-it-yourself market. -Cons: the quality will be questioned. Could decrease the sales. (4) Add additional sales reps at a direct cost of $60,000 each -Pros: could have professional motivation team could increase the sales.
A huge national debt has no effect on the money market. The fed has the ability to decrease interest rates, which could cause spending to increase. (Schiller) This ultimately increases the money supply and allows for more circulation in the economy, from which the economy can prosper. With a prospering market, taxes can be increased in order to stimulate the economy and prevent the money supply from surpassing equilibrium and reaching inflation. The revenue from these taxes can
C) no relationship between the elasticity of demand for Coca-Cola and the elasticity of demand for soft drinks in general. D) none of the above to hold true.Answer | | | | | Selected Answer: | 2. b | Correct Answer: | 2. b | | | | | * Question 2 10 out of 10 points | | | 2. When the percentage change in price is greater than the resulting percentage change in quantity demanded: . A. a decrease in price will increase total revenue. B. demand may be either elastic or inelastic.