The Macroeconomic Theory Of The Economy Finance Essay - Free Essay Example

As we are discussing the macroeconomic theory of the open economy, it is important to look at the individual governments macroeconomic policies, which are monetary and fiscal policy. In the United States, the monetary policy that is put in place, affects an organizations economic and financial decisions, such as loans and purchases. This macroeconomic policy influences the operations of the organizations economic activity (Business Financial Systems, 2009). Macroeconomic factors that influence the operations of the company This paper is written for XYZ Construction, Inc, as the organization transitions from being privately owned to public ownership with their IPO in a few months. In order to adequately discuss the essential economic factors for XYZ horizontal construction company, the two macroeconomic policies have to be defined: Monetary policy is the regulation of the money supply and interest rates by the United States Federal Reserve for the purpose of controlling inflation and stabilizing the currency (Hayat  Ãƒâ€šÃ‚  Mishra,  2010). Fiscal policy this is the regulation by the government to that affect tax rates, interest rates and spending to control the economy. Like the monetary policy, it uses to stabilize the economy (Hayat  Ãƒâ€šÃ‚  Mishra,  2010). For XYZ management to have a full understanding of the macroeconomic of open economy, it crucial that we mention the market for loanable funds and the market for foreign exchange in the analysis. In the ma rket for loanable funds, the interest rate adjusts to balance supply for loanable funds from national saving and demand for loanable funds from domestic investment and net capital outflow (Business Financial Systems, 2009). This is represented by the following computation: S = I + NCO S represents Saving = Domestic investment + Net capital outflow Since XYZ intent is to go global, it is therefore important explained foreign exchange in my discussion. In the market for foreign exchange, the real exchange rate adjusts to balance the supply of dollars (for net capital outflow) and the demand for dollars (for net exports). Net capital outflow is the variable that connects the two markets (Business Financial Systems, 2009). This is computed in the following: NCO = NX Net capital outflow = Net exports The computation shows that the imbalance between the purchase and sale of capital assets abroad (NCO) equals the imbalance between exports and imports of goods and services (NX). The supply and demand in the foreign exchange market determines the real interest exchange rate and in an open economy (NX=NCO), it allowed for trade and borrowing and lending from the global markets. In some cases, a trade restriction can be imposed to increase the net exports and increases the demand for dollars in the market for foreign exchange. This will result in the dollar appreciating in value, making domestic goods more expensive relative to foreign goods and this increase will balance the net exports (Bergstrand, 1992). Microeconomic considerations relative to the company As the XYZ Construction, Inc., transitions from being privately owned to public ownership with their IPO in a few months, it is important to discuss the global business market and the importance of customer retention and market economies. To further the discussion, microeconomic has to be defined. Microeconomics is the study of how individual firms or consumers do and/or should make economic decisions taking into account such things as: their goals, incentives, objectives; their choices, alternatives, problems; constraints such as inputs, resources, money, time, technology, competition, supply demand factors and All (cash noncash) incremental or marginal benefits and costs (Breser-Pereira, 2009). Countries such as the United States uses microeconomic policies to target cost inflation pressures which cannot be contained effectively by using macroeconomic measures. The organization (XYZ) has to understand that microeconomics is about how supply and demand interacts in markets. A t this level, participation in global business can help XYZ to achieve economies of scale that cannot be achieved in domestic markets (Breser-Pereira, 2009). Legal considerations relative to equipment leases and e-contracts A contract is a binding agreement made between two competent parties that can be written, verbal or implied. To qualify as a contract, a set of promises must be based on a voluntary agreement, which is made up of an offer and an acceptance of that offer (Miller, Barnes, Bowers, Langvardt, 2007).   The purpose of a contract is to create an agreement that can be supported by the law (Miller, Barnes, Bowers, Langvardt, 2007).   In todays business world of promises and actions, contracts must be made in order to deem those promises legally binding. The essential elements of a contract are: binding agreement, competent parties, form required by law, legal in purpose, consideration, and genuine assent (Koff, 1994). Consideration must be present in a contract in order for the contract to be enforceable. As the XYZ Construction, Inc., transitions from being privately owned to public ownership with their IPO in a few months, it is important for the organization to underst and the legal considerations relative to equipment leases and e-contracts. Organizations are affected by laws and regulations in all their business activities, such as hiring and firing decisions, workplace safety, the manufacturing and marketing of products, and business financing (Business Financial Systems, 2009, p.338). For XYZ management to have good business etiquette, their knowledge of the laws and regulations will be essential and beneficial to the organization (Business Financial Systems, 2009). This knowledge of the laws and regulations will help the organization to prevent legal disputes. The assumption is that since XYZ is a construction company, that equipment will be leased. The common law rule that a contract requires consideration also applies to sales and lease contracts (Business Financial Systems, 2009, p. 379). Compared with the common law of contracts, the UCC places more emphasis on intent, if the parties intended to make a contract. Under the UCC, modifica tions to sales and lease contracts require no consideration. Under the UCC, an organization transfer of the right to possess and use goods for a period in exchange for payment (Business Financial Systems, 2009, p.374). What is this UCC? Uniform Commercial Code is the law that encourages commences (Business Financial Systems, 2009, p.370). The original purpose of UCC was to make different transactions uniform throughout the 50 states of the United States, so businesses and people should not have to worry about understanding the different laws governing financial transactions as they conduct business within the continental U.S.A. This law facilitates commercial transactions by making the laws governing sales and lease contracts uniform, clearer, simpler, and more readily applicable to the numerous difficulties that can arise during such transactions (Business Financial Systems, 2009, p. 370). In order words, it is the streamline processes of handling financial transactions. E-Contracts These are contracts entered into electronically. For XYZ to do business via the internet the organization has to protect itself against contract disputes and legal liability by creating offers that clearly spell out the terms that will govern the transactions if the offers are accepted or clearly understands the offers made to them (Business Financial Systems, 2009, p.396). The acceptance can be done in several ways, such as the e-signature, click-on agreement and browse-wrap terms (Business Financial Systems, 2009, p.399). Employment and labor law influences as the company grows As the XYZ Construction, Inc., transitions from being privately owned to public ownership with their IPO in a few months, it is important that the management pay attention to employment and labor laws. XYZ management goals are to increase the organizations profits through improved working conditions, salaries, and benefits (Business Financial Systems, 2009, p.409). This discussion will deal with certain laws and regulations that will be beneficial to the management of XYZ Construction, Inc. The organization must comply with laws and regulations to ensure that employee rights are protected (Business Financial Systems, 2009, p. 409). The following laws and regulations are some that the organization has to comply: Employee Retirement Income Security Act (ERISA) Prevents fraud and other abuses associated with private pension plans. Consolidated Omnibus Budget Reconciliation Act (COBRA) Permits employees and their beneficiaries to continue their group health insurance after a n employees employment has ended. Family and Medical Leave Act (FMLA) Guarantees workers up to twelve weeks of unpaid leave in a twelve-month period to attend to family and medical emergencies Immigration Reform and Control Act (IRCA) Makes it unlawful for employers to hire illegal immigrants. Employers are required to complete INS Form I-9 attesting legal U.S. citizenship or legal alien status of each employee. Minimum Wage and Overtime Pay Employers are required to pay covered (non-exempt) workers at least the minimum wage for their regular work hours. Overtime pay is also mandated. Worker Health and Safety Under the common law, employees injured on the job had to rely on tort law or contract law theories in suits they brought against their employers (Business Financial Systems, 2009, p.415). Worker safety and health should be a primary concern to XYZ management. The benefits of the use safety and health system in the workplace are: it will cause the reduction of work related injuries and illnesses; will improve morale and productivity and reduce workers compensation costs, whereby making the organization profitable (Business Financial Systems, 2009). Conclusion In order for XYZ Construction, Inc., to function properly in the domestic and global market, safety and health, economic, employment and labor laws forces must be clearly understood.