I will then wrap up with an understanding of how foreign exchange rates are determined, and identify the reasons the U.S. does not restrict goods from China or minimize imports from other countries. Surplus Imports The U.S. imports goods from countries all around the world. The balance of imports to exports, as well as the trading policies in place plays an important role in the stability of the U.S. economy. If the U.S. has a surplus of imports it means there is an increase in the trade deficit, which is not good for the U.S. because trade deficits usually increase unemployment. An example of a product with an import surplus in the U.S. is cars imported from China.
As a result of these costs, firms become reluctant to change their prices as it will be costly to constantly change prices and hence rigidity in changing of prices. Also when firms reduce prices, that does not benefit it only but extend to the other firms. A reduction in prices of commodities increases the buying power of customers and increase demand for all firms. To this, firms escape the responsibility of incurring menu costs and instead they only produce more to increase revenue rather than reducing prices. This is known as aggregate demand externalities.
Macro environment Commercial Metals Company competes in the steel industry. Commercial metal is competing against other steel companies regionally and globally. The steel industry is highly cyclical and therefore, very susceptible to changes in the economic environment. Economic recessions lead to a large decline in business as their main buyers are also largely affected by recessions. In addition, the fact that the US government has recently open doors to Chinese steel companies to operate businesses in the US, this may start to influence the economic environment of the US steel industry as well.
Competitive exposure affect the company the ability to compete internationally. Frequently it 's do is to chase you to change foreign currency values. Why is GM worried about the yen? Answer 1: GM is worried about the level of the yen, because its Japanese competitors could gain a cost advantage in the event of a Yen depreciation. As these competitors derived roughly 50% of their revenues from the U.S. market, a depreciation of the Yen could allow for greater incentives and savings to be passed onto U.S. consumers.
An increase in the price of raw materials against a depreciating US dollar will severely cause costs to become inflated leaving less room for profit margins. Despite all these, the external markets did play a biggest major role in influencing the decision to restructure, and it turned
Identify two areas of government regulation and explain why this can be seen as a bad thing for businesses. Taxation may lead to businesses being driven out of the country due to high taxes and due to this businesses will move to countries with lower tax rates to maximise their profits. Building regulation stops the growth of businesses because without the approval of the government businesses’ cannot expand
Rising gas prices impact on products and services: It seems hard to think that rising gas prices can have an effect on anything other than our wallets but when it hits our pockets other things in our economy suffer as well. Many products are shipped and delivered all around the world by trucks and other service vans. With the increase in fuel prices the rates for such trips must rise and that can have a negative effect on the bottom line. Not accounting for the extra cost in fueling trucks and other vehicles could cause a business to fail as they not be able to hand out contracts to other companies.
On the other side, the United States government was complained by its domestic industry companies during its recession period since Japanese products was very competitive. The United States also wanted to change the situation of its self and broke the imbalance in the trading and also to recover its own economy. United States claimed that Japan should appreciate yen to change the imbalance and unstable currency status. After the Plaza Accord was signed, an extraordinary asset price boom happened with huge painful impact bust. Japan used to be one of the fastest-growing economies during 1960’s to 1980’s.
The profitability of companies is recurrent by nature. We expect to see fluctuations in profit according to what’s high in demand in the economy and the level of demand in particular industries. If the market price of a good is more than the opportunity cost of producing it, producers will increase supply in the long run. Profits and losses ensure that, in a market economy, resources are distributed to their highest-valued uses by rewarding those who create wealth and by punishing those who destroy it. So just as profits reward producers for making things people want to buy at prices they are willing to pay, losses punish producers for wasting resources and producing things people don’t want at a cost consumers are not willing to cover.
Merit 2 In this task I will be comparing the challenges the activities two businesses, from different economic environments, faced. The two businesses I choose are Barclay’s in the UK and in India Inflation rates within the UK alter a lot, and prices dramatically rise and fall. Whereas India prices have remained about the same, but at a high rate being roughly going from 8.98% to 11.71% in 17 years, although this may seem a huge difference India has always had high inflation rates. Barclays is influences the same way in both countries by inflation rates. Inflation affects how much UK branches have to raise or reduce the amount of pay each employee gets.