Transcript ECONOMIC GOALS

NATIONAL ECONOMIC
GOALS
• GROWTH OF OUTPUT
• PRICE STABILITY
• FULL EMPLOYMENT
COMPONENTS OF OUTPUT
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•
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HOUSEHOLD CONSUMPTION
BUSINESS INVESTMENT
GOVERNMENT EXPENDITURES
EXPORTS
PRICE STABILITY
• CPI
• PRODUCTIVITY GAINS
• INFLATION OVERSTATED
FULL EMPLOYMENT
• SET AT 5.75% UNEMPLOYMENT
• NAIRU RATE
• ACTUAL RATE IS ~ 4.25%
ECONOMIC POLICY
• FISCAL
– GOVERNMENT EXPENDITURES
– TAX POLICY
• MONETARY
– DISCOUNT RATE
– RESERVE REQUIREMENTS
– OPEN MARKET OPERATIONS
LINK TO FOREIGN
ECONOMIES
• GLOBALIZATION OF AMERICAN
INDUSTRY
• TECHNOLOGY
• EXCHANGE RATES
ECONOMIC EFFECT ON
VALUE CREATION
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RECESSION IN THE PACIFIC RIM
DECLINE IN EXPORTS
DECLINE IN EARNINGS
STOCK MARKET DEVALUATION
STRATEGY IN ACTION
THE EFFECT OF ASIA’S WOES ON
BOEING
ASIA’S TROUBLES
• MARKET DECLINES OF UP TO 80% WIPED OUT
BILLIONS IN ASSETS
• INDONESIAN ECONOMY DOWN BY 20% IN ONE
YEAR
• JAPAN- $600 BILLION IN BAD DEBTS, 70%
DECLINE IN PROPERTY VALUES
• CHINA- 75% OF BANK CREDIT IN STATE
ENTERPRISES, $240 BILLION IN BAD DEBTS
WEALTH LOSS DUE DROP IN
STOCK PRICES
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HONG KONG
KOREA
INDONESIA
THAILAND
-
$75 BILLION
$60 BILLION
$45 BILLION
$21 BILLION
• TOTAL IS $201 BILLION DOLLARS
EFFECT ON BOEING
• 30% OF BOEINGS BACKLOG INTENDED FOR
ASIAN CUSTOMERS
• ORDERS ARE DEFERRED OR CANCELLED
ALTOGETHER
• ASIAN WEAKNESS IS STRONGEST IN 747 AND 777
MODELS
• 48000 JOB LOSS
• 25% CUT IN PRODUCTION
• SHARE PRICE HAS FALLEN ABOUT 25%
BOEING’S PROJECTIONS
OPERATING REVENUE
TOTAL R&D SPENDING
DELIVERIES
EMPLOYMENT
PROFIT MARGINS
COMMERCIAL
SPACE & DEFENSE
1999
2000
$58 B
$1.7 B
620
200000
$50 B
$1.5 B
490
185000
.02
.08
.01
.09
CLASS EXERCISE
Assume that the federal reserve raises interest rates
again in October. (Third time this year ).
1. For your company, will there be any effect on
your business?
2. What, if any, functional area will be effected
most? Least?
3. If interest rates never fall again, what will be
the long term effect?