Question

You are in charge of making recommendations based on economic forecasts to uppermanagement of your firm, which produces widgets and employs 2,500 workers. Uppermanagement has informed you that they are planning to build a new facility and hire 500 additional workers. They would like you to research leading indicators and produce a detailed analysis of where the economy is heading in the next 6 months. What would you look for in terms of leading indicators (discuss at least three indicators), and what recommendations would you make to uppermanagement based on your findings regarding leading indicators? Be sure to consider the macroeconomic nature of leading indicators, and the microeconomic nature of your firms’ decisions. (30 points)

Answer 1

The firm's employment of new facility with 500 workers would be concerned with the cost and the profits at the micro level.

1. The major concern of the firm, then, should be with the demand to their products. The demand of the products would get affected by the level of consumption expenditure. Disposable income affecting consumption could be affected by taxation policies.Hence, the level of personal income tax rate or the fiscal policies overall could be one indicator to look at to get an idea of the demand

2. Second indicator could be the current account deficit that the country is running. If the current account deficit if large, then the economy might not be favorable to firm 's production

3. The existence of financial deepening could be third indicator explaining how developed the financial markets are. Existence of credit market could ease the process of capitalising ffor the firm