CHAPTER 17: MACROECONOMIC AND INDUSTRY ANALYSIS
PROBLEM SETS
1. Expansionary (loor) monetary policy to lower interest rates would stimulate both investment and expenditures on consumer durables. Expansionary fiscal policy (i.e., lower taxes, incread government spending, incread welfare transfers) would stimulate aggregate demand directly.
2. A depreciating dollar makes imported cars more expensive and American cars less expensive to foreign consumers. This should benefit the U.S. auto industry.
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3. This exerci is left to the student; answers will vary. Successful students will likely discuss an industry's profitability, leverage, and growth opportunities, especially in relation to general macroeconomic conditions.
4. A top-down approach to curity valuation begins with an analysis of the global and domestic economy. Analysts who follow a top-down approach then narrow their attention to 泉州攻略
an industry or ctor likely to perform well, given the expected performance of the broader economy. Finally, the analysis focus on specific companies within an industry or ctor that has been identified as likely to perform well. A bottom-up approach typically emphasizes fundamental analysis of individual company stocks and is largely bad on the belief that undervalued stocks will perform well regardless of the prospects for the industry or the broader economy. The major advantage of the top-down approach is that it provides a structured approach to incorporating the impact of economic and financial variables, at every level, into analysis of a company’s stock. One would expect, for example, that prospects for a particular industry are highly dependent on broader economic variables. Similarly, the performance of an individual company’s stock is likely to be greatly affected by the prospects for the industry in which the company operates.
什么异思迁5. Firms with greater nsitivity to business cycles are in industries that produce durable consumer goods or capital goods. Consumers of durable goods (e.g., automobiles, major appliances) are more likely to purcha the products during an economic expansion but can often postpone purchas during a recession. Business pur
chas of capital goods (e.g., purchas of manufacturing equipment by firms that produce their own products) decline during a recession becau demand for the firms’ end products declines during a recession.
6. a. 惆帐Gold Mining好玩的单机游戏电脑版. Gold traditionally is viewed as a hedge against inflation. Expansionary monetary policy may lead to incread inflation and thus could enhance the value of gold mining stocks.
b. Construction. Expansionary monetary policy will lead to lower interest rates which ought to stimulate housing demand. The construction industry should benefit.
7. Supply-side economists believe that a reduction in income tax rates will make workers more willing to work at current or even slightly lower (gross-of-tax) wages. Such an effect ought to mitigate cost pressures on the inflation rate.
魂飞天外8. a. When both fiscal and monetary policies are expansive, the yield curve is sharply upward sloping (i.e. short-term rates are lower than long-term rates) and the economy is likely to expand in the future.
姨妈能吃芒果吗9. a. When wealth is redistributed through the government’s tax policy, economic inefficiency is created. Tax policies should promote economic growth as much as possible.
10. a. The robotics process entails higher fixed costs and lower variable (labor) costs. Therefore, this firm will perform better in a boom and wor in a recession. For example, costs will ri less rapidly than revenue when sales volume expands during a boom.
b. Becau its profits are more nsitive to the business cycle, the robotics firm will have the higher beta.
11. a. Housing construction (cyclical but interest-rate nsitive): (iii) Healthy expansion
b. Health care (a noncyclical industry): (i) Deep recession
c. Gold mining (counter-cyclical): (iv) Stagflation
d. Steel production (cyclical industry): (ii) Superheated economy
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12. a. Oil well equipment: Relative decline (Environmental pressures, decline in easily developed new oil fields)
b. Computer hardware: Consolidation
c. Computer software: Consolidation
d. Genetic engineering: Start-up
e. Railroads: Relative decline
13. a. General Autos. Pharmaceuticals are less of a discretionary purcha than automobiles.
b. Friendly Airlines. Travel expenditure is more nsitive to the business cycle than movie consumption.
14. The index of consumer expectations is a uful leading economic indicator becau, if consumers are optimistic about the future, they will be more willing to spend
money, especially on consumer durables, which will increa aggregate demand and stimulate the economy.
15. Labor cost per unit is a uful lagging indicator becau wages typically start rising only well into an economic expansion. At the beginning of an expansion, there is considerable slack in the economy and output can expand without employers bidding up the price of inputs or the wages of employees. By the time wages start increasing due to high demand for labor, the boom period has already progresd considerably.
16. The expiration of the patent means that General Weedkillers will soon face considerably greater competition from its competitors. We would expect prices and profit margins to fall and total industry sales to increa somewhat as prices decline. The industry will probably enter the consolidation stage in which producers are forced to compete more extensively on the basis of price.
