Thinking as a manager, do you think unemployment is good news or bad news? Defen

Question

Thinking as a manager, do you think unemployment is good news or bad news? Defend you answer.

The real rate of interest is the nominal or stated rate of interest less inflation. If inflation rises, what implications does this have for the real cost of borrowing? As a manager, how would your debt strategy change during periods of high inflation?

How closely should managers watch national economic indicators? Are there local economic indicators that you might use that would help you to better manage your day-to-day operations? What are these?

Explanation / Answer

As a manager,unemployment is good news.This is because unemployment means labor
supplied is exceeding labor demanded and therefore bargaining power of the workers would be
low.Lower bargaining power of workers means workers will not be able to demand higher
wages and as a result firms labor cost would be low.Also the manager would be able to hire
more labors at relatively low wages.
The real cost of borrowing is measured by real intereste .Since real interestrate is the
difference between nominal interestrate and inflation, so increase in the inflation would lead to
fall in the real interestrate and therefore would lead to fall in the real cost of borrowing.

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