Scenario or background: Different macroeconomic indicators will affect different

Question

Scenario or background:

Different macroeconomic indicators will affect different industries in various ways. For example, lower interest rates will likely help the auto and housing industries, while higher unemployment could HURT those industries, yet HELP discount retailers like Wal-Mart.

Questions to answer:

1. For EACH of the macroeconomic indicators below, identify an industry that’s HELPED if the indicator increases…and an industry that’s HURT if the indicator increases. [do not use the industry examples in the “scenario” above]. In each case explain WHY do you think those industries will be helped or hurt

Federal deficit

Unemployment rate

Interest rates

Consumer confidence index

Producer price index

2. Without getting political, name at least two fiscal policy initiatives that helped most industries and two that hurt, under the Obama Administration. Why did you categorize them as helping or hurting?

3. Repeat #2 for the current Trump Administrations announced initiatives

Explanation / Answer

Federal deficit: Helps education and healthcare industry but makes defence and infrastructure set up industry worsen beacuse in fiscal deficit gvt. spending is more than its revenue and govt. generally spends more on merit goods and compromises defence sector and also pays less attention to infrastructure set up.

Unemployment rate: Makes electronics and FMCG goods worsen beacuse this takes away peoples income. Unskilled jobs like driving and cleaning industry is better off as people are ready there to work at lesser wages.

Interest rates: This makes export industry and products worse off as it makes products expensive but this helps banking and financial industry better off as it attracts more investments.

Consumer confidence index: This helps FMCG, Electronics and housing industry better off but makes insurance industry worse off as people are sure about their income.

Producer price index: This makes manufacturing industry worse off like cement, steel as costs of production arre increasing but this helps education industry better off as inflation may reduce demand in economy and people may lose jobs and people may like to increase skills through education to find jobs.

Fiscal initiatives by Obama govt.: Expansionary fiscal policy by cutting taxes on corporates. Also bailput package to many strugling banks and finance houses to make sure that liquidity and demand is maintained in the market. Data suggets that his efforts were quite successful as USA economy in 2016 was again had started to come on track.

Trump Govt.: New tax cuts policy : This is helping corporates to expand businesses but also reducing govt. provision for merit goods like healthcare.

Employment: To generate more domestic demand Trump govt is putting more restrictions on manpower coming fromm othe countries. This is having fiscal benefits as money outflow in the form of remittances will reduce and also through more dmestic jobs more tax can be collected. However, This may increase costs to the companies and profits may come down.

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