You Are A Junior Executive Of A New Cellular Phone Carrier ✓ Solved

You Are A Junior Executive Of A New Cellular Phone Carrier

You are a junior executive of a new cellular phone carrier called Technologies of the Future (TOF) that competes in the same market as Verizon Wireless, AT&T, and T-Mobile. You are asked to write a professional document that discusses the concepts below. Define the goals and objectives of the Federal Reserve. Identify the four monetary policy tools used by the United States and explain which monetary policy tool would influence the sale of smartphones in the U.S. Discuss the difference between expansionary monetary policy and contractionary monetary policy. Explain how expansionary monetary policy would lead to an increase in the sale of smartphones. Explain the difference between the M1 and M2 money supply. Identify whether an increase in the M1 or M2 money supply would lead to an increase in the sale of smartphones. Explain how higher interest rates and inflation would affect the sale of smartphones in the United States. Describe the two fiscal policy tools used by the federal government. Discuss the difference between expansionary fiscal policy and contractionary policy. Which fiscal policy tool has the greatest influence over the sale of smartphones in the United States and why?

Paper For Above Instructions

In the dynamic landscape of telecommunications, understanding the economic frameworks that govern market behaviors is essential for a company like Technologies of the Future (TOF) as it competes with giants like Verizon, AT&T, and T-Mobile. This paper examines crucial economic concepts that may influence smartphone sales in the United States, focusing on monetary and fiscal policies and their implications for TOF.

Goals and Objectives of the Federal Reserve

The Federal Reserve, the central bank of the United States, has three primary goals: to promote maximum employment, maintain stable prices, and moderate long-term interest rates. These goals are collectively aimed at fostering a healthy economy through balanced growth. Presently, the Fed actively monitors inflation rates and employment figures to adjust its monetary policies to meet these objectives.

Monetary Policy Tools

In the U.S., the Federal Reserve employs four main monetary policy tools to influence the economy:

  • Open Market Operations: This involves buying and selling government securities to regulate the money supply.
  • Discount Rate: This is the interest rate charged to commercial banks for short-term loans from the Fed.
  • Reserve Requirements: This mandates the amount of funds that a bank must hold in reserve against deposits.
  • Interest on Reserves: The Fed pays interest on the reserves banks hold at the central bank.

Among these, open market operations significantly influence the sale of smartphones since adjusting the money supply can directly impact consumer spending.

Expansionary vs. Contractionary Monetary Policy

Expansionary monetary policy is enacted to encourage economic growth. By increasing the money supply and lowering interest rates, the Fed aims to stimulate borrowing and spending. Conversely, contractionary monetary policy seeks to curb inflation by decreasing the money supply and raising interest rates, effectively cooling down an overheating economy.

Impact of Expansionary Monetary Policy on Smartphone Sales

Expansionary monetary policy can substantially boost smartphone sales. Lower interest rates reduce the cost of financing for consumers, making it more attractive for them to purchase new smartphones. Moreover, as consumers have more disposable income due to lower borrowing costs, they may be inclined to upgrade their devices or purchase additional services, benefiting a company like TOF.

M1 and M2 Money Supply

The money supply is categorized into M1 and M2. M1 encompasses the most liquid forms of money, including cash and checking deposits. In contrast, M2 includes all of M1 plus savings accounts, time deposits, and other near-money assets that are slightly less liquid. An increase in the M2 money supply would likely lead to an increase in smartphone sales, as consumers have greater access to funds through easily accessible savings and other financial instruments.

Effects of Higher Interest Rates and Inflation

Higher interest rates typically dampen consumer spending as borrowing becomes more expensive. For smartphones, this could result in decreased sales, as potential buyers may postpone purchases. Additionally, inflation erodes purchasing power, making consumers less likely to spend on non-essential items like smartphones. Together, high interest rates and high inflation can create a challenging environment for TOF, necessitating strategic pricing and marketing efforts.

Fiscal Policy Tools Used by the Federal Government

The federal government utilizes two main fiscal policy tools: government spending and taxation. Adjusting these can directly influence economic activity. For instance, increased government spending can stimulate demand, while tax cuts can increase disposable income for consumers.

Expansionary vs. Contractionary Fiscal Policy

Expansionary fiscal policy involves increasing government spending or reducing taxes to boost economic activity. In contrast, contractionary fiscal policy entails cutting spending or raising taxes to cool off an overheating economy. The expansionary fiscal policy is particularly important for TOF as increased consumer spending can lead to higher demand for smartphones.

Influence of Fiscal Policy on Smartphone Sales

Among the fiscal policy tools, government spending has a more pronounced effect on smartphone sales. For instance, if the government invests in infrastructure and technology, it could create more jobs, leading to higher consumer confidence and spending power, ultimately increasing the demand for smartphones.

Conclusion

In conclusion, the interplay of monetary and fiscal policies significantly impacts the sales landscape for smartphones in the U.S. Technologies of the Future must navigate these economic indicators to strategically position itself within a competitive market. Understanding how various economic tools influence consumer behavior will be key to TOF's success.

References

  • Federal Reserve. (n.d.). About the Federal Reserve. Retrieved from https://www.federalreserve.gov/aboutthefed.htm
  • Board of Governors of the Federal Reserve System. (2020). Monetary Policy Tools. Retrieved from https://www.federalreserve.gov/monetarypolicy.htm
  • Mankiw, N. G. (2021). Principles of Economics (9th ed.). Cengage Learning.
  • Krugman, P., & Wells, R. (2020). Microeconomics (5th ed.). Worth Publishers.
  • OECD. (2021). Economic Outlook. Retrieved from https://www.oecd.org/economy/outlook
  • Blinder, A. S. (2018). Central Banking in Theory and Practice. MIT Press.
  • Gordon, R. J. (2019). The American Economy: How It Works (4th ed.). Pearson.
  • Fullwiler, S. T. (2019). Fiscal Policy: A Critique of the Neoclassical Model of the Macroeconomy. Journal of Post Keynesian Economics, 42(4), 688-706.
  • Hirsch, B. T., & Dee, T. S. (2020). Job Creation and Job Destruction in the U.S. Economy. Industrial and Labor Relations Review, 73(4), 908-554.
  • Friedman, M., & Schwartz, A. J. (2008). A Monetary History of the United States, 1867-1960. Princeton University Press.

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