Deck 4: The Macroeconomics of Strategy

Question 1

________________________ has increased the complexity of macro-economic influences on industry because economies are becoming more interdependent.

Answer 1

globalization

Question 2

Outline the elements that make up aggregate demand.

Answer 2

Aggregate demand is the total demand for goods and services in the national economy. It can be represented as C + I + G + (X - F) where C = consumer demand, I = investment demand, G = public sector demand, X = exports, F = imports.

Question 3

What can cause changes in aggregate demand?

Answer 3

This could include changes to the cost and availability of credit, changes in wealth (such as property values), changes in government spending and changes in tax rates and changes in the exchange rate.

Question 4

Why are economic forecasts seldom accurate?

Question 5

Give an example of an industry that is greatly affected by exchange rate fluctuations and explain the reasons why.

Question 6

Briefly explain the reasons for the Asian economic crisis in the late 1990s.

Question 7

A 'credit-crunch' arises because of a large reduction in GDP

Question 8

Growth in GDP is the result of which of the following?

A) growth of physical capital
B) growth in working hours
C) growth in birth rate
D) efficiency improvements

Question 9

A nation's organizations are most likely to gain global competitive advantage in their particular industry if there is an abundance of valuable natural resources in that nation.

Question 10

Italian firms have global competitive advantage in the leather goods industry because they have had to respond to the highly discerning Italian consumer.

Question 11

Porter (1980) argues that a nation is more likely to achieve global competitive advantage if the home industry comprises of lots of small firms rather than a few large firms. Porter is therefore arguing that global competitive advantage is more likely with a low degree of

A) foreign competition
B) domestic competition
C) customer diversity
D) horizontal integration

Question 12

Strategy is about the future, therefore some insight into future economic conditions is desirable. The most common method of gaining insight into the economic future is to model the ________

Question 13

Economic variables such as Gross Domestic Product, exchange rates and inflation rates are issues central to the study of which field of economics?

A) Industrial economics
B) Behavioural economics
C) Micro-economics
D) Macro-economics

Question 14

Strategic managers should not allow their judgement to be influenced greatly by macro-economic factors because the variables are uncontrollable by the individual firm.

Question 15

Forecasting the future of the economy is difficult partly because events may happen in the future that never happened in the past and therefore the quantitative models couldn't have taken that event into account.

Question 16

It is difficult to do economic modelling of _______________ economies because the historical time period of the data is too small.

Question 17

A solution for reducing ______________ in industries which are subject to exchange rate fluctuations is to 'buy forward'.

Question 18

Which of the following industries are most likely to be most affected by economic fluctuations?

A) Automobile industry
B) Food retailing industry
C) Beauty industry
D) Luxury coffee shop industry

Question 19

A methodology for producing alternative futures based on key economic variables produces a range of scenarios ranging from best case scenario to worst case scenario. What is the term for this method?

A) Continuum
B) Fan
C) Delphi technique
D) Blue sky thinking

Question 20

When constructing economic predictions, forecasters are able to model how key economic variables will behave together.

Question 21

If an economy faces a financial crisis, it is crucially important that;

A) banks are nationalized
B) liquidity of the banking system is maintained
C) government does not interfere with the banking system
D) tax rates are reduced

Question 22

When there are measures in place to rescue banks there is a danger of

A) moral hazard
B) moral bankruptsy
C) run away inflation
D) excessive bonuses

Question 23

Changes in GDP affects the metal producing industry and the food industry by roughly the same amount.

Question 24

The total demand for goods and services from all industries in a nation's economy is called________________ demand.

Question 25

Aggregate demand can be represented by the sum C+I+G+(X-F). What does the 'F' stand for?

A) imports from other economies
B) net exports
C) exports to other economies
D) net imports

Question 26

What is the most important factor influencing the level of aggregate demand in any national economy?

A) overseas economies' household income
B) taxes received by the government
C) aggregate income
D) balance of payments

Question 27

An _____________ economy is one which allows international trade.

Question 28

A weak £ to $ rate will encourage USA tourists to come to the UK.

Question 29

If a car is manufactured in the UK, the price of one of the cars will increase in USA when the £ becomes stronger.

Question 30

An economic boom will be characterized by

A) Pressure to increase production capacity
B) Pressure to reduce production capacity
C) Shortage of skilled labour
D) Wage increases

Question 31

A boom will come to an end when capacity shortages result in acceleration of___________

Question 32

The East Asian economies boomed in the 1990s but this boom came to and end by the late 1990s primarily because

A) there was a strong demand for imports and a slowdown in exports
B) there was a slow down in imports and a strong demand for exports
C) oil prices were increasing too quickly
D) there was a shortage of skilled labour