ESmith Assignment 10: National and Global Finance sample essay

(16.0 points)

1. Choose an example of a type of new company you could start, and then use this company idea to answer the questions below. You might choose a pet store, a restaurant, a tutoring business, or something else. This can be the same type of company you chose in assignment 8 or 9, or it can be different.

a. Describe the type of business you chose. (1-2 sentences. 0.5 points) * The type of business I would start would be for family or friends gatherings. This business would be place people come to eat and social, a nice, warm environment.

b. Describe at least two ways in which the local, state, or federal government would have an impact on your business. (2-4 sentences. 1.0 points) * Whether businesses owners know it or not, but the government create laws and regulation to protect the business. Two ways the government would have an impact on my business is by setting a price ceiling and price floor. These both determines whether or not my items is too high or low for its’ good.

2. Describe at least one advantage and one disadvantage of price ceilings and price floors. Do you think price ceilings and floors are more helpful or more harmful to consumers and the economy? Explain. (2-4 sentences. 1.0 points) * One advantage of price ceilings is that it helps the consumers to have a chance to buy products, and stop producers of taking advantage of such a catastrophe. The disadvantage between this price ceiling and the common ones is that the price ceiling is set on the equilibrium before the catastrophe and not under the equilibrium.

3. Describe at least two negative outcomes of having too little money and credit in the economy. (2-4 sentences. 2.0 points) * It would cause a scarcity of currency, leading to rapid deflation, and also, overproduction of goods means major markets would plummet in value, outbalancing demand,
leading to major losses for the producers.

4. Describe at least two negative outcomes of having too much money and credit in the economy. (2-4 sentences. 2.0 points) * Negative effects of inflation include an increase in the opportunity cost of holding money, uncertainty over future inflation which may discourage investment and savings, and if inflation is rapid enough, shortages of goods as consumers begin hoarding out of concern that prices will increase in the future.

5. Which Fed tool do you think is most important, and why? (2-4 sentences. 1.0 points) * The most important job the Fed has is to manage the nation’s money and the overall economy. Controlling the inflation rate and maintaining employment and production aren’t easy tasks. The Fed has to have some pretty hefty tools up its sleeve in order to influence the economy of an entire country — especially one the size of the United States.

6. Choose one of the following government agencies or laws: FTC, EPA, FDA, CPSC, OSHA, FLSA, EEOC, ADA, SEC, or Affirmative Action. Search online to learn more about the agency or law, and then describe three specific things the law or agency accomplishes. Make sure the information comes from a trustworthy website. Include a link to the website in your answer. (3-6 sentences. 1.5 points) * The Food and Drug Administration (FDA) is a U.S. agency responsible for protecting the public health by assuring the safety, efficacy, and security of human and veterinary drugs, biological products, medical devices, our nation’s food supply, cosmetics, and products that emit radiation. www.fda.gov/Food/FoodSafety/FSMA/ucm247559.htm

7. Describe at least two products that are commonly imported into the United States. (1-2 sentences. 0.5 points) * Products that are commonly imported in the United States are oil, cars, and clothes. These products are very important to humanity.

8. Describe at least two products that are commonly exported from the United States to other countries. (1-2 sentences. 0.5 points) * Products that are commonly exported from the United States are things such as medicines, aircrafts, and cars. These are products are also important to humanity of different countries.

9. Why does the U.S. government encourage U.S. companies to sell their products in other countries? Explain how this helps the U.S. (2-4 sentences. 2.0 points) * So companies can increase company revenue and be able to dominate international markets in order to establish more stores and spread product around. A good example is McDonalds, they are everywhere. This helps the US because in revenue allows a company to keep its base in the US, increase the national gross product, drive consumer activity, keep jobs, and increase the export business, which goes along with jobs.

10. Find the value of one U.S. dollar in a foreign currency. You might choose the Euro, the Japanese Yen, the Canadian dollar, or another currency. List the type of currency and the current value of the U.S. dollar in that country. (1.0 points) TIP: http://www.google.com/finance/converter is a good resource for foreign currency information. * Here is a good resource for foreign currency information.. 1 USD = 0.7650 EURO ; 1 USD = 83.1800 JPY ; 1 USD = 0.9846 CAD

11. Describe at least three exchange rate factors that are likely to attract foreign investors to a country’s currency. Explain why these factors are attractive for foreign investors. (3-6 sentences. 3.0 points) * Exchange rates are prices that are determined by supply and demand. For some countries the exchange rate is the single most important price in the economy because it determines the international balance of payments.

Although no model has been consistent in predicting short-term foreign exchange rate behavior, there are several major concepts that play a role in determining the long-term behavior of foreign exchange rates. The first concept is based on the idea that the current price of an asset reflects all available information; and therefore, only unexpected events cause exchange rates.

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