M.Sc Business Economics April 2023

Description

Business Economics

April 2023 Examination

 

 

1. Given that the USD-GBP sport rate is 0.82

Calculate:

1. The 90-day forward USD-GBP exchange rate, given that the

• 90-day risk free interest rate in the United States is 0.25%
• 90-day risk free interest rate in Great Britain is 0.1%

1. The 180-day forward USD-GBP exchange rate, given that the

• 180-day risk free interest rate in the United States is 0.25%
• 180-day risk free interest rate in Great Britain is 0.1%

1. If the risk free interest rate in the US remains the same, while the interest rate in Great Britain increases by 25 bps, how would the calculations in (a) and (b) change. (10 Marks)

Ans 1.

Introduction

The USD-GBP spot rate is the current exchange fee between us dollar (USD) and the   British pound (GBP) at a specific factor in time. It represents the amount of GBP that can be exchanged for 1 USD on the triumphing marketplace fee. The spot rate is determined through delivery and demand inside the foreign exchange marketplace. It can frequently fluctuate due to diverse financial, political, and social factors affecting the two countries. The spot rate is essential in determining global trade prices, investments, and transactions involving USD   and GBP.

(a) To calculate the 90-day forward change charge, we want to apply the interest charge

It is only half solved

 

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2. A representative economy is described by the following parameters.

C = C0 + bYd, T = T0, I = I0

C0 = 85, I0 = 30, T0 = 20, b = 0.75.

1. Find the equilibrium output for this economy, assuming it is a closed economy.
2. How would this equilibrium output change if the tax structure becomes a proportional

tax? New tax rule, T = 20 + 0.2Y

1. Find the level of

 Consumption

 Tax collection (proportional tax)

(10 Marks)

Ans 2.

Introduction

Equilibrium output refers to the level of authentic gross domestic product (GDP) at which the total amount of products and offerings demanded (mixture call for or ad) is equal to the total quantity of goods and services produced (aggregate supply or AS) in an economy. In other words,   equilibrium output is the output level in which there is no tendency for a change in both advert or   AS.

The idea of equilibrium output is crucial in macroeconomics because it allows an understanding of the connection between mixture demand and combination supply in the

 

3. Case Analysis:
4. Detroit Inc. is a company working in the area of automobiles in the USA. They are planning to enter the Indian automobile market. They would like to study the market structure before they are going to enter the market in India. They are undertaking this study to understand the pricing power they could have in the Indian automobiles industry. Assuming you are advising them on the same, what technique would you be employing to understand the market structure? Give rationale for your choice of technique. (5 Marks)

Ans 3a.

Introduction

To understand the market structure within the Indian vehicle industry, I would recommend employing the Porter& five Forces Framework. This well-established analytical tool allows companies to understand the aggressive dynamics of their industry and identify them as assets of competitive

 

1. Assuming Indian automobile industry follows an oligopoly market with price leadership, power vested in one dominant firm, how would you advise Detroit Inc. in terms of their product placement and pricing strategy? Give a brief summary of your advice to Detroit Inc.

Hint: Advice should focus on the cooperative or noncooperative model that should be adopted by Auto Inc. based on the existing scenario in Indian automobile industry, and the reasons supporting the choice of the model.  (5 Marks)

Ans 3b.

Introduction

Suppose the Indian automobile industry follows an oligopoly market shape with price management,   where one dominant company holds the maximum market share and sets the industry fee. In that case, Detroit Inc. has to consider several factors while growing its