Question 1. Draw a demand curve. What is the relationship of price to demand?
Draw a supply curve. What is the relationship of price to supply?
Illustrate equilibrium of supply and demand with a graph. What is equilibrium?
Show a shift in demand on your graph.
What causes a change in demand?
What causes a shift in demand?
Provide two uses that the S/D/P model provides to a business.
Question 2. Define Fiscal policy.
What are the two components of fiscal policy?
What actions would the government take with these two components to expand the economy?
What would be the most likely affect on your business with these actions?
Question 3. Define Monetary policy.
What are the three components of monetary policy?
What actions would the government take with these three components to contract the economy?
What would be the most likely affect on your business with these actions?
Question 4. Would you buy or sell the US dollar based on the following news.
Expectations of higher interest rates B S
A loosening of US Monetary Policy B S
Lower inflation predictions B S
An increase in US income B S
A reduction in US prices B S
You are CEO of a medical company in the US. You sell 2 machines to France, at $100,000 per unit.
At the time of the sale the dollar to Euro is $1.00 = 1.05 Euros or 1 Euro = .95. By the time the machines are delivered the values have changed to $1.00 to $1.20 or .80
Did you make money on this transaction? If so, how much? Company does not hedge.
Show work.
Question 5. A budget deficit would most likely indicate a growing/contracting economy. A budget surplus would most likely indicate a growing/contracting economy.
Explain your choice for each answer. Twenty-five or less words each.