Mini Project
Instructions: Select one multi-national corporation (MNC) of interest to you. This can be a
company where you work, where you want to work or just of interest for research. At the end of
each Unit, prepare a report that answers the pertinent questions regarding the Unit content as it
pertains to this company.
a. What currency or currencies does your MNC work with? Discuss how exchange
rates impact your MNC.
b. How do each of the main economic agents in the macroeconomy (see Figure
11.1, page 246) impact your MNC?
c. Estimate how a severe financial crisis would affect your MNC? What type of
reform would need to be considered?
Write a 5 page paper (1500 or more words) in APA format.
Below is a recommended outline.
2. Cover Page (See APA Sample paper)
3. Introduction
a. A thesis statement
b. Purpose of paper
c. Overview of paper
4. Body
a. What currency or currencies does your MNC work with? Discuss how exchange rates
impact your MNC.
b. How do each of the main economic agents in the macroeconomy (see Figure 11.1, page
246) impact your MNC?
c. Estimate how a severe financial crisis would affect your MNC? What type of reform
would need to be considered?
5. Conclusion – Summary of main points
a. Lessons Learned and Recommendations
6. References – List the references you cited in the text of your paper according to APA format.
(Note: Do not include references that are not cited in the text of your paper)
Page 246 of textbook as referenced
The Main Economic Agents in the Macroeconomy
AgentFunction
Households ■ Supply factors (land,labor,capital) to business
■ Purchase consumer goods and services (C)
■ Save
■ Pay taxes
Businesses ■ Use the factors supplied by households to produce the nation’s output
■ Purchase investment goods (I)
Government ■ Purchase government goods and services (G)
■ Collect taxes (T)
Foreigners ■ Purchase exports (EX)
■ Supply imports (IM)
There are four main agents in the macroeconomy. Each one is a different source of demand for goods
and services.
earn when they sell their goods is used to pay for the factors supplied by house-
holds.Accordingly,all of the income generated in the economy accrues to house-
holds since they supply all of the factor inputs.This is a fundamental identity in
the macroeconomy:The income for the economy as a whole equals the value of
its output.
When we track income and output, it is important to understand the position
of intermediate inputs—goods purchased by one business from another to use in
production.For example,a car manufacturer hires not only labor,land,and capi-
tal (for which it pays wages and salaries,rents,interest,and dividends) but it also
purchases glass, tires, steel, and so on.The payment for auto glass is not directly
income to households because it is paid to another business, but if we trace it
back, it ultimately becomes income. For example, the glass manufacturer
receives payment from the car company and it uses the payment to pay wages,
rent, interest, and dividends, as well as its suppliers. We can keep following the
flow of payments,through the suppliers to the glass firms,or more simply,we can
recognize that all of the payments are incorporated into the value of the car.That
is, the purchase price of the car ultimately generates an equivalent amount of
income.As a result,the fundamental identity holds between income and output.
The identity between total expenditures on final goods and services and the
value of total output in an economy can be looked at in another way.Figure 11.1
is similar to a graph of supply and demand in a single market, except that the
demand curve is total demand for all final goods and services and the supply
curve is total output.In other words,the curve with a negative slope is aggregate
demand (AD),and the curve with a positive slope is aggregate supply (AS).In a
simple supply and demand graph, the horizontal axis measures quantity and the
vertical axis measures price, but in the AD/AS graph shown in Figure 11.1, all
final goods (GDP) are included on the horizontal axis and the price level, (P) is
shown on the vertical axis. The price level is equivalent to the consumer price
index or another measure of economywide prices. Points along the AD curve
show the equilibrium levels of output and prices that are consistent on the
demand side of the economy, while the AS curve shows the points that are con-
sistent from a supply-side point of view.Together,they show the levels of equilib-
rium output (Q1) and prices (P1) at a given point in time.
The shape of the aggregate supply curve is designed to call attention to three
regions of GDP. On the horizontal part of the AS curve, the economy is operat-
ing below full employment.Theoretically, the availability of unemployed work-
ers and other idle resources allows an increase in output to occur without putting
upward pressure on prices. Workers and the owners of other factors cannot
demand higher wages or other payments in return for more inputs of labor and
capital because there are plenty of idle workers and other resources willing and
able to contribute at the going rate.Hence, an increase in production can be rel-
atively easily achieved without causing shortages of inputs or increases in prices.
The middle, upward-sloping part of the AS curve symbolizes the range of GDP
where inputs begin to become scarce. Some wage increases or other factor price
increases are necessary in order to obtain more inputs and to produce more out-
put.
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