Share
Explore BrainMass

Economics

1) Inflation is the general increase in prices with some prices rising faster than average and even some prices falling. Inflation attracts attention among policy makers and some of the remedies for it can have serious consequences in production and employment.

a) Why would you, as a business manager, care whether annual inflation is 2% or 20%?

b) How would the inflation in one country affect the trade with other countries?

2) Gross domestic product (GDP) includes four components:

1. Consumer spending.
2. Investment spending.
3. Government spending.
4. Net export spending (exports minus imports).

a). Discuss how one of these factors affects one of the four components of GDP shown above. Support your discussion with a real-world example of how your demand or your workplace's (or another business's or industry's) demand has been affected by a change in this factor. Would this change increase or decrease GDP?

b) Discuss how one of these factors affects one of the four components of GDP shown above. Support your discussion with a real-world example of how your workplace's (or another business's or industry's) supply has been affected by a change in this factor. Would this change increase or decrease GDP?

3. Analyze the causes and remedies of unemployment and inflation in a global environment. (Also, includes examples from your job).

4. What does the text mean by "monopoly power?" Is a supplier required to be a monopoly (the sole supplier of a good or service) to practice price discrimination and have monopoly power?

5. How else can sellers prevent buyers from reselling their products/services?

Solution Preview

1) Inflation is the general increase in prices with some prices rising faster than average and even some prices falling. Inflation attracts attention among policy makers and some of the remedies for it can have serious consequences in production and employment.

a) Why would you, as a business manager, care whether annual inflation is 2% or 20%?

As a business manager, inflation is important. A person has to remain competitive within their own industry as well as the macroeconomics of the country he or she resides in on a regular basis. For example, within my own business, I have to consider what is going on with the stock market daily. Are the Dow Jones and Nasdaq closing high, low or plateauing? When I consider this, I am able to make a sound decision on whether or not to raise my tutoring prices or for them to remain the same, along with the possibility of lowering them in the future. Regardless, a person cannot ignore inflation but has to stay current with it in order to keep their business afloat or risk having no customers at all.

b) How would the inflation in one country affect the trade with other countries?

The inflation of one country does affect the trade with other countries in a number of ways. For example, since the U.S. has a recession going on inflation is currently taking place, that means any imports or exports of goods are at a high price for any country wanting to trade or do business with us; however, we can risk having international business because many of them are poor, especially that of Haiti. The organization may have to downsize or no longer exist if no trade agreement is considered. Furthermore, bankruptcy could occur because of not keeping up with the market and having flexibility ...

Solution Summary

This solution discussed inflation, GDP and monopoly power.

$2.19