Macroeconomics Problem Set 3 Assignment Example | Topics and Well Written Essays - 1250 words

Macroeconomics Problem Set 3 - Assignment Example d. What will the capital-output ratio be at the Golden Rule steady-state? (Hint: recall from Chapter 3 that for the Cobb-Douglas production function, the capital-output ratio is related to the marginal product of capital). 1. In this question, we examine how the goals of the Federal Reserve influence its response to shocks. Suppose that in scenario A, the Fed cares only about keeping the price level stable whereas in scenario B, the Fed cares only about keeping output and employment at their natural levels. Explain how in each scenario the Fed would respond to the following: A decrease in velocity causes a downward shift on the aggregate demand. Prices are fixed in the short run meaning only output decreases. To ensure output and unemployment are at their natural rates Fed B should increase the money supply to attain the initial equilibrium where prices and output will be constant. Fed, A should also increase the money supply to shift the aggregate demand curve upwards since this is the only way to ensure stable prices at their original equilibrium. This results to an upward shift of the supply curve. To ensure stable prices, Fed B should hold aggregate demand constant since prices will rise in the short run and then fall in the long run achieving the natural rate of unemployment. This might however result to a recession. To keep output and unemployment at their natural rate Fed B should increase the money supply hence shift the aggregate demand curve upwards. This results to a new equilibrium at higher prices, but there is no loss in output. Based on the quantity equation MV=PY, if Fed reduces the money supply by 5% the aggregate demand curve will shift downwards. A decrease in M will hence result in a decrease in PY provided V is constant. In the short run, the assumption is that the price levels are fixed meaning that that the aggregate

Case Study Example | Topics and Well Written Essays - 1000 words - 23

Case Study Example The company’s website offers customers a platform in which they can track their orders and make inquiries regarding their requests. Interestingly, the service is offered at very affordable rate. Therefore, it can be clearly stated that given UPS business strategy, the key success factors and risk that are responsible for the company’s fortune growth are, prompt response to customer needs. The success is also attributed to competition based pricing strategy and accuracy. The company’s ability to offer a service that enables customer track their order is a major milestone for the organization. In addition to the service, the UPS introduced another service that allows customers to change the destination of their orders before the order reaches its destination (Study mode, 2014). However, the company also faces when it comes to managing its fleet of cars and airplanes. Maintaining the huge number of vehicles and airplanes is very expensive for the company. The cars and planes require regular servicing because of the many trips that are made hence have to be in a good condition. Achieving the objective can be a daunting task to the management because it translates to more cash outflow. Conversely, the company also uses its staff to send orders to customer. Workers may fail to respond to customer’s orders promptly a situation that may extend the lead time for an order. Furthermore, they may fail to deliver according to the expectations of the customer, or even may not deliver. Moral issues put UPS operations at a risk (Study mode, 2014). The performance of UPS has been growing over the current years. In the year 2012 during the first month, the price of a share was $4.53 while the revenue stood at an estimated $5.4 billion. In the current financial year, the dividends of the company are expected to fall between $4.80 and $5.06. The fall represents a 6%-12% increase from the year 2012 which is a remarkable