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The effect of economic policies on sales

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Analysis of the effects of government economic policies could have on the sales of the Escalade. This document is designed to examine the effects of lowering taxes, increasing government spending, and lowering interest rates would have on sales of the escalade. This document will examine each of these variables seperately.

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Forecast for Sales of Escalade during Economic Expansion, Recession, Tax Hikes, Tax Cuts, and Fluctuating Government Spending

Economic expansion involves policies that are intended to stimulate economic activity. These policies could include lowering taxes, increasing government spending, and lowering the interest rate. Each of these stimuli to the economy could have a potential effect on the sale of the Escalade.
Lowering taxes can increase the disposable income a consumer has. Disposable income is personal income less taxes. Consumers can divide this income between consumption(C) and saving(S). Consumers in the United States have a marginal propensity to consume more than they have a marginal propensity to save. Lowering taxes for individuals will provide consumers with a greater ability to purchase the Escalade.
Lowering the interest rate will also have increase sales of the Escalade. Banks usually adjust the prime rate of interest according to the federal fund rate. If the federal fund rate were lowered, interest rates would be lowered, allowing consumers who need a loan to purchase the Escalade at a lower cost. Lowering the interest rate has ...

Solution Summary

Economic expansion involves policies that are intended to stimulate economic activity. These policies could include lowering taxes, increasing government spending, and lowering the interest rate. Each of these stimuli to the economy could have a potential effect on the sale of the Escalade.

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See Also This Related BrainMass Solution

Economic Indices used to Forecast Sales in the Power Tools Industry

Use these websites as a reference:
http://www.investopedia.com/university/releases/housingstarts.asp
http://www.census.gov/const/www/newresconstindex.html
http://search.census.gov/search?q=remodeling+&entqr=0&ud=1&sort=date%3AD%3AL%3Ad1&output=xml_no_dtd&oe=UTF-8&ie=UTF-8&client=default_frontend&proxystylesheet=default_frontend&site=default_collection

Task:
There are four direct general economic indices that are used to forecast the sales of the PEPT (Portable Electric Power Tools) Industry in which Able Corporation operates. These are housing starts, expenditures for residential construction, expenditures for commercial construction, and expenditures for home repairs and improvement. (Underlying these indices are more fundamental factors such interest rates, inflation rates, and foreign exchange rates.) The direct general economic factors can be counter-cyclical to each other, as when residential construction expenditures are down due to high interest rates, while home repairs and improvement expenditures are up as homeowners opt to improve their current dwellings rather than build new ones. The short and long-term forecasts for these indices can often vary significantly amongst the various forecast services

In Phase 1, the emphasis was primarily, though not exclusively, introspective. At this juncture, it is necessary to understand the external environment under which Able operates and the nature of its competition. In order to properly identify Able's potential, frame its mission statement, execute its value proposition, and set achievable strategic objectives, it is necessary to perform a rigorous analysis of available information resources. These include annual reports of the competitors, channel/distributor studies, predictions of economic forecast services, and industry reports.

Research the key general economic indices affecting the power tool market and list any available projections. If significant differences exist between the various forecast services, highlight them. Obtain and list the historical actuals for the past 5 years.

How does this information affect the power tool market?
Considering that forecasting services and other information agencies often differ in their prediction of the future state of the power tools industry and vital economic factors, how would you go about putting a forecast together given these disparities?

1. List the four economic indices and explain what they are?
2. Elaborate on how they affect the PEPT industry and Able Corporation in particular?
3. If significant differences exist between the various forecast services, highlight them.
4. Give an example of a company that used this information - from experience or from research and the results.

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