Assignment 2: Final Report

Due Week 9, worth 175 points

This assignment is aligned to this course outcome:

• Apply macroeconomic concepts to current and personal economic events and decisions.

In addition to writing about macroeconomic concepts, it’s equally important to be able to convey your understanding of these concepts by communicating them to others. In the workplace you might do this by writing briefs (like you did for Assignment 1), creating presentations, or writing reports for your manager or team. An example final report and optional template are provided below.

For this Final Report assignment, you can build off your previous economic brief and selected industry from Assignment 1, or you can select another industry such as Finance and Insurance, Health Care, or Manufacturing, and examine one of the macroeconomic indicators or policies below:

• GDP growth
• Unemployment rates
• Inflation rates
• Interest rates
• Imports and exports
• Government fiscal policy and issues related to taxation, government spending, and budget deficits
• FED (central bank) monetary policy and issues related to the FED’s mission to stabilize the economy

Example Final Report, Assignment 2 Template, Strayer Writing Standards

1. Review an example final report.
2. Use the optional template to help you get started.
3. Review the Strayer Writing Standards. (See Instructions below.)

Instructions

Use Microsoft Word to prepare a Final Report that is a minimum of two to three (2-3) pages long in which you:

1. Introduce your selected industry with a brief one-paragraph introduction. Refer to the NAICS (North American Industry Classification System) to review the details about your industry.

2. Assess your selected industry’s relative size and growth rate in the economy.

These macroeconomic resources will help you find the size and growth rate of your industry in the U.S. economy and/or relative to GDP:

• Real GDP – Select Section 1, then table 1.1.6 (select MODIFY to change the year range and frequency). Data is from Bureau of Economic Analysis (bea.gov).

• % Change in Real GDP – Select Section 1, then table 1.1.1 (select MODIFY to change the year range and frequency). Data is from Bureau of Economic Analysis (bea.gov).

• GDP by Industry – Steps:

1. Select “Interactive Data.”
2. Select “Industry Data Tables.”
3. Select “Begin Using the Data.”
4. Select “Gross Output by Industry.”
5. Select “Real Gross Output by Industry (A) (Q).”
6. Select “Quarterly” or “Annual.”
7. Select “Next Step.” Data is from Bureau of Economic Analysis (bea.gov).

• % Change in GDP by Industry – Steps:

1. Select “Interactive Data.”
2. Select “Industry Data Tables.”
3. Select “Begin Using the Data.”
4. Select “Gross Output by Industry.”
5. Select “Percent Changes in Chain-Type Quantity Indexes for Gross Output by Industry (A) (Q).”
6. Select “Quarterly” or “Annual.”
7. Select “Next Step.” Data is from Bureau of Economic Analysis (bea.gov).

3. Identify one newsworthy macroeconomic indicator or policy (e.g., GDP, unemployment, inflation rates, interest rates, government taxation and spending decisions, and/or FED decisions) that the industry should monitor and explain why it’s important and how it might impact your selected industry.

These resources are available to help you measure and track macroeconomic indicators and outcomes of macroeconomic policies.You’ll use one or more depending on the macroeconomic indicator selected.

• Unemployment rates – Data is from Bureau of Labor Statistics (bls.gov).

• Inflation rates as measured by the Consumer Price Index (CPI). Data is from Bureau of Labor Statistics (bls.gov).

• % Change in Real Exports and Imports – Select Section 4, then table 4.2.1. (Select MODIFY to change the year range and frequency.) Data is from Bureau of Economic Analysis (bea.gov).

• Government receipts, expenditures, and savings – Select Section 3, then table 3.1 for total government and table for 3.2 for federal government. (Select MODIFY to change the year range and frequency.) Data is from the Bureau of Economic Analysis (bea.gov).

• FED Funds Interest Rates. Data is from Trading Economics (tradingeconomics.com).

4. Describe a recent trend in the macroeconomic indicator or policy. Include a graph, chart, or table that illustrates the observed trend.

5. Summarize how you think this industry will perform in the future. Provide support for your rationale.

6. This course requires use of Strayer Writing Standards (SWS). The format is different compared to other Strayer University courses. Please take a moment to review the SWS documentation for details. (Note: You’ll be prompted to enter your Blackboard login credentials to view these standards.)

• • Your brief should include a cover page.
  • Your brief should be a minimum of two to three (2-3) pages in length (not including the cover page), double-spaced, 12-point font.
  • Your report should include a minimum of two (2) references/citations in the text.

As always, make sure to thoroughly review the required background materials before starting the assignments. The assignment questions will require you to do some calculations and also apply the concepts from the module. Question 3 differs from previous assignments in that you have to use an online simulation tool; but this activity should be a fun break from the standard numerical problems you have been doing.

Case Assignment

1. 1. For this problem use the Herfindahl Index to compute market concentration:
      1. Suppose Apple has 45% of the U.S. market share for smartphones, followed by Samsung with 30%, LG with 9%, Motorola with 8%, HTC with 6%, and Nokia with 2%. What is the Herfindahl Index for the smartphone industry based on these numbers? Based on the Herfindahl Index, do you think the government would be willing to approve a merger between Apple and Samsung?
      2. Now suppose Nokia and Motorola come out with a new smartphone that takes away a huge chunk of market share from Apple and Samsung. The new market shares are 25% for Apple, 20% for Samsung, 20% for Motorola, 20% for Nokia, 10% for LG, and 5% for HTC.
   2. Use what you learned about perfect competition, monopoly, and oligopoly to answer these questions:
      1. In the table below is the quantity produced, the price, the fixed costs, and variable costs for a perfectly competitive firm that faces a constant price of $150 for its product regardless of the quantity it sells. Use the information in the first four columns to calculate the number for the last four columns. At what quantity should they produce based on what you find with your results?
      2. How do you think your answer might change if it became a monopolist with all of its competitors leaving the market? Or if it became an oligopoly with only one or two competitors?
         

Quantity	Price	Fixed Cost	Variable Cost	Total Cost	Marginal Cost	Total Revenue	Profit/ Loss
0	150	200	–		–
1	150	200	$140
2	150	200	$240
3	150	200	$320
4	150	200	$410
5	150	200	$520
6	150	200	$650
7	150	200	$810
8	150	200	$1,010
9	150	200	$1,310
10	150	200	$1,710

1. 1. You’ve read about the prisoner’s dilemma in the background readings. Suppose you are a business owner with just one main competitor. If neither you nor your competitor cut your prices, you will both be more profitable. However, if your competitor lowers its prices and you keep your prices high, then you will lose all of your sales to your competitor. Every month you and your competitor place advertisements in the local newspaper with your price – so you need to decide each month whether or not to keep prices high, or lower them based on what you think your competitor might do.

      Go to the following webpage and test out some of your potential price strategies:
      http://www.gametheory.net/Mike/applets/PDilemma/Pdilemma.html

      The strategy “defect” indicates lowering your prices. The strategy “cooperate” means keep prices the same. Try out different strategies, such as cooperating all the time or defecting sometimes. There are five different rounds of this game, each with a competitor with different personalities and different strategies. Play all five rounds and experiment with different strategic approaches. Report your scores for each round, and discuss which strategies seemed to work the best for you.

   Required Reading

   To start with, take a look at this short animated video that will introduce you to the basics of market structure:McGlasson, M. (2009). Episode 25: Market structures. https://www.youtube.com/watch?v=9Hxy-TuX9fs&list=PLr6g_xbkz_0u_cINHBVW1ZuEpozKk2XGxNow read Chapters 9 and 10 from the following book for more detail on these topics. In particular, pay attention to the numerical examples and the “Self-Check Questions” at the end of each section.Taylor, T. (2014) Microeconomics. OpenStax College. http://cnx.org/contents/6i8iXmBj@10.174:WXgRcPaN@10/Introduction-to-a-Monopoly
   Finally, read this slightly more advanced chapter. Pay special attention to the sections at the end on game theory and the “Policy Response to Oligopoly” section that covers the Herfindahl index: Beveridge, T. M. (2013). Chapter 8: Between perfect competition and monopoly. A Primer on Microeconomics. [New York, N.Y.] [222 East 46th Street, New York, NY 10017]: Business Expert Press.

We learned in this chapter that when an individual, firm, or country has the comparative advantage in producing a good or service, they can gain from trading that good or service with others. The American economy is based on this idea. Most people have 1 job which they can do at a lower opportunity cost than other people, which is why other people pay them to do it. For example, cooking is not very difficult, but it takes years of education and experience to do it at a high level. You could prepare a gourmet meal, but a professional chef can do it at a much lower opportunity cost, which is one reason you might pay a professional to cook for you –you give up less resources (time) earning money to pay for a meal than you would learning how to cook well, and then actually making a meal. The chef then takes the money they earned cooking, and uses it to pay other people to do services for them… for example, the chef could work on their own car, but the mechanic has a comparative advantage in automotive work, so it makes sense for the chef to pay the mechanic… and the mechanic takes the money and the cycle continues.

Most of my students are in college because they think they will be able to make more money with a college degree. But at the same time, we know that some college degrees really don’t help graduates make more money (art history, for example). The problem with degrees like this is that they don’t provide students with skills that give them a comparative advantage in doing something that pays well. An art history degree will allow graduates to compare and contrast historical art, but there is basically no market for these skills, which is why they make no money with this degree.

With all of this in mind, please respond to the following prompts:

1. What skills are you hoping to get in college that you will sell to employers later? What will you have a comparative advantage in?
2. If you don’t finish your degree, what will you have a comparative advantage in and what type of job will you do?
3. If you do finish your degree, but you do the minimum possible to get by and don’t really get the skills you need, how will this affect your ability to make money later in life?

If you don’t know what you want to do or what skills you want, then you can do this assignment from the perspective of someone you know. Imagine you are them, and answer accordingly.

Here is my personal example:

1. I went to college to learn economics, which is the study of resource allocation. I learned how to make optimal decisions using marginal analysis in many different settings. This gave me the ability to analyze business activities and to offer consulting services to businesses that need to make changes to maximize their profits. (I later went to graduate school to develop a comparative advantage in teaching college-level economics courses.)
2. If I didn’t finish my degree, I would probably be a manager at a pizza restaurant. I know the industry well, have experience, and there are many job openings for people with these skills.
3. If I was a lazy student, just doing the minimum to get by, I would not have actually learned what I needed to. I could probably still graduate -“C’s get degrees”- but the important thing is to get skills. The degree on my wall is just a receipt in a nice frame. If I had been a lazy student, I would not have a comparative advantage in anything, I would just be in debt due to student loans and would have been better off not going to college at all.

In the summer and fall of 2010, workers were rearranging the furniture in Boeing’s final assembly plant in Everett, Washington, in preparation for the production of the Boeing 767. It was a difficult and time-consuming process, however, because of the items of “furniture”—Boeing’s assembly equipment—weighed on the order of 200 tons each. It was a necessary part of setting up a production system based on “lean manufacturing,” also called “just-in-time” production. Lean manufacturing, pioneered by Toyota Motors of Japan, is based on the practice of having parts arrive on the factory floor just as they are needed for production. This reduces the amount of parts Boeing holds in inventory as well as the amount of the factory floor needed for production—in this case, reducing the square footage required for the manufacture of the 767 by 40%. Boeing had adopted lean manufacturing in 1999 in the manufacture of the 737, the most popular commercial aeroplane. By 2005, after constant refinement, Boeing had achieved a 50% reduction in the time it takes to produce a plane and a nearly 60% reduction in parts inventory. An important feature is a continuously moving assembly line, moving products from one assembly team to the next at a steady pace and eliminating the need for workers to wander across the factory floor from task to task or in search of tools and parts. Toyota’s lean production techniques have been the most widely adopted of all manufacturing techniques and have revolutionized manufacturing worldwide. In simple terms, lean production is focused on organization and communication. Workers and parts are organized so as to ensure a smooth and consistent workflow that minimizes wasted effort and materials. Lean production is also designed to be highly responsive to changes in the desired mix of output—for example, quickly producing more sedans and fewer minivans according to changes in customers’ demands. Toyota’s lean production methods were so successful that they transformed the global auto industry and severely threatened once-dominant American automakers. Until the 1980s, the “Big Three”—Chrysler, Ford, and General Motors— dominated the American auto industry, with virtually no foreign-made cars sold in the United States. In the 1980s, however, Toyotas became increasingly popular in the United States due to their high quality and relatively low price—so popular that the Big Three eventually prevailed upon the U.S. government to protect them by restricting the sale of Japanese autos in the U.S. Over time, Toyota responded by building assembly plants in the United States, bringing along its lean production techniques, which then spread throughout American manufacturing. Toyota’s growth continued, and by 2008 it had eclipsed General Motors as the largest automaker in the world.

1. What is the opportunity cost associated with having a worker wander across the factory floor from task to task or in search of tools and parts?

2. Explain how lean manufacturing improves the economy’s efficiency in allocation.

3. Before lean manufacturing innovations, Japan mostly sold consumer electronics to the United States. How did lean manufacturing innovations alter Japan’s comparative advantage vis-à-vis the United States?

4. Predict how the shift in the location of Toyota’s production from Japan to the United States is likely to alter the pattern of comparative advantage in automaking between the two countries.

Regulations

• Justify your answers with the help of course materials, Text Book, Online resources
• Answer for etch question should be in not less than 100 words. All students are encouraged to use their own words.
• Student must apply APA Style within their reports.
• mark of zero will be given for any submission with more then 10% plagiarism
• A mark of zero will be given for any submission that includes copying from other resource without referencing it.

Use attached Template.

Data Source: https://www.treasurydirect.gov/instit/instit.htm

This data source will cover all but CDs

Business-professional quality is expected. Prepare your report as if you are submitting to an upper-level business director/executive.
Case will require a qualitative analysis supported by quantitative data.

Prepare each case using Word, and embed your spreadsheet analysis into your case report.

You will submit two files for each case assignment:

• One Word file
• One Excel file (template attached)

Short-term investment returns: money market instruments Part of your responsibilities as a junior financial analyst is researching and identifying potential short-term liquid investment options for your firm. These investment vehicles are at times used by the firm during periods when their cash inflows exceed projections. The firm, at times, uses excess cash to purchase short-term debt instruments providing a low, but safe marginal return on invested capital. Your Director, who reports to the firm’s Chief Financial Officer (CFO) has come to you seeking your recommendation on short-term investment options for the upcoming year. The Director has asked for recommendations and a report illustrating your optimal analysis for investing $2.5m of excess cash. Current background info: We have a potential impending compound money market problem: The U.S. is issuing more debt, in part due to the recent tax cuts. Simultaneously, the Fed, China, Japan and to a lesser degree Russia have been reducing their holdings of U.S. Debt. Therefore, if the U.S. Treasury Department can’t get entities to their positions holding U.S. debt, then the pressure to increase interest rates to make newly issued securities attractive increases. Increased interest rates at the Treasury means securities prices fall with cascading impacts. Therefore, the current interest rate environment is one where rates are expected to increase. Parameters for the research and analysis report are as follows:

1.Investments selections are primarily short term (one year or less), but will consider U.S. TreasuryBills of shorter duration as well as TIPS.

2.A minimum of 3 short term debt money market security types are to be recommended. Theymay include Federal money market bills, U.S. Savings Bonds, CDs, U.S. Treasury Notes, TreasuryBills, and TIPS.

a.Note: money market investments of the range of two to five years are acceptable.

b.However, no more than 40% of the portfolio can be invested in a security of withduration of greater than 12 months.

3.A recommendation on the optimal allocation of $2.5 m across the investment portfolio isrequired.

4.Current (as of the date of this assignment) rates and investments are to be used.

The analysis report to be presented to the Director is to include:

1.Your concise statement and recommendation of the specific short-term investment options thatmeets the firm’s criteria.Followed by:

2.A detailed summary of the investment asset and the parameters you will use in which to baseyour recommendation.

3.A detailed description of the upside and downside risk of each investment. The latter is ofparticular importance as the firm may decide to manage excess cash in one or more vehicles forlonger than one year.

4.Source identifier for all investment selections

a. Example: website URL

5. A spreadsheet (embedded into the report) illustrating the following:

a. Asset category/classification

b. Specific money market instrument identifier

i. Example: U.S. Treasury CUSIP

6. EAR for each investment

7. YTM for each investment

a. If held to maturity

b. If sold at the end of 12 months

8. Total return for investment portfolio if held to maturity

9. Spreadsheet model is to include all cell-based formulas for all calculations

Your conclusion is to summarize the recommendation made in item #1 above

Format for report. Your report must:

1. Be presented in Word file format

2. Analysis must be between 3 to 5 pages maximum, including spreadsheet analysis

3. Excel spreadsheet is embedded into the Word file

4. Submit Excel file separately