Eco550 Ch5 and 6

CH6

Q2. If a manufacturer like Cumming Engine Co. of Columbus, Indiana was expecting a future rise of the U.S dollar they can demand payment at the best fixed price quote in their domestic currency (U.S dollar) to avoid risk exposure and operating exposure due to the exchange rate fluctuations. Outside countries may scale back from purchasing U.S goods if they become more expensive to buy. They may also write out contracts for payments at a future currency value but it would be risky.

Q7. I Boeing’s dollar aircraft prices increase 20% and the yen/dollar exchange rate declines 15%, Japan airlines cost will rise 35% to buy a new Boeing 747. Boeing’s margin will only fall 20% to the extent of the price increase, the decline in currency won’t affect its margins as it will always get the dollar value of its planes.

Q9. If labor costs in Spain and Portugal rise, Germany’s labor declining cost in labor would help export to Spain and Portugal. Spain and Portugal would start importing goods from Germany due to the ease in trading with the same currency and lower cost of goods.

Q10. The three factors are intraregional trade, mobility of labor, and correlated macroeconomic shocks. Intraregional trade under nafta allows for lower cost of trading due no tariffs. Mobility of labor is harder because of immigration laws and blocked borders between U.S, Mexico, and Canada.

CH5 1,5,6,9

Q1. S=k*(YZ/P)

K=100 y=11,000 z=1200 p=20,000

S=100*(11,000*1200/20,000)= 66000

b. S=100*(11,000*1200/17,500)= 75,428

sales will increase by 9,428

c. To determine the value of K we must look at the past data and use a forecasting technique such as regression analysis. K will be the value with the minimum standard of error.

d. all independent variables will have an effect on sales, such as P had on sales increase. We must choose information that’s relevant to the sales.

Q5.

Year2000 | Actual Demand800 | 5 year | 3 year | Exp smooth .9925 | Exp smooth .3925 |

2001 | 925...