PRINCIPLES OF MACRO

WEEK 1

Start by reading and following these instructions:

  1. Quickly skim the questions or assignment below and the assignment rubric to help you focus.
  2. Read the required chapter(s) of the textbook and any additional recommended resources. Some answers may require you to do additional research on the Internet or in other reference sources. Choose your sources carefully.
  3. Consider the discussion and the any insights you gained from it.
  4. Create your Assignment submission and be sure to cite your sources, use APA style as required, check your spelling.

Assignment:

  1. Willard Taylor, a tax attorney with Sullivan & Cromwell LLP, is contemplating the latest trend among U.S. firms that have been opting to become corporations. Until recently, it was unusual for U.S. family owned companies or partnerships to “go public” by incorporating in another nation and selling shares of stock to residents of other nations. A decade ago, only about 1 percent of U.S. companies that became corporations did so outside the United States. During each of the past three years, however, more than 20 percent of U.S. firms choosing corporate structures have decided to incorporate abroad.

As a tax lawyer, Taylor pays close attention to tax rates assessed on corporations based abroad, as well as those that apply to U.S. corporations. The governments of most countries, Taylor realizes, have slashed their corporate tax rates in recent years, whereas the U.S. corporate tax rate has remained unchanged at 35 percent. The result, Taylor notes, is that the U.S. corporate tax rate is now second highest in the world, which provides a strong incentive to incorporate elsewhere. Taylor asks, “What are the pluses and minuses of being incorporated in the U.S. versus somewhere else?” He deduces that given the strong incentive provided by lower corporate tax rates abroad, “Very often, depending on what the business is, you’ll conclude that there are no pluses to being in the United States.”

  1. How have lower foreign tax rates affected the incentive to incorporate abroad?
  2. What do you suppose has happened to federal collections of corporate taxes?
  3. During the past few years, the Japanese government has established rules aimed at reducing the nation’s emissions of carbon dioxide (CO2) by nearly 3 million tons each summer. To attain this goal, Japan’s government has effectively declared war on air conditioning. The government has mandated that thermostats in all government offices be set no lower than 82 degrees during the months spanning June to September. Private Japanese businesses have followed suit with a “Cool Biz” program establishing 82 degrees as the “new office norm” for indoor temperatures. Of course, 82 degrees is above the temperature at which people in enclosed spaces are most effective at producing goods and services. Consequently, the productive contribution of Japanese labor now declines every summer. What do you suppose happened to the productive contribution of labor when Japan’s government temporarily raised the summer target office temperature to 86 degrees?
  4. Recently, a 62-mile section of highway between the Chinese cities of Beijing and Zhangjiakou became ensnarled in a massive traffic jam that took public safety officers nearly two weeks to break up. Traffic experts agree that this stretch of highway, which covers less than 0.7 square mile of area stretched thinly along the 62 miles, is often overburdened with much more traffic than it was designed to handle.

Most observers agree that this state of affairs has arisen because the people of China have allocated resources away from road construction in favor of building new manufacturing facilities. These facilities, though, churn out more products to be shipped by trucks that clog roads. Thus, in China the choice to build more factories to produce goods has entailed an opportunity cost: fewer roads for transporting those goods. What is an example of an opportunity cost that a trucker may have incurred by spending a full day traversing the traffic jam between Beijing and Zhangjiakou?

  1. Each year, consumers juggle a total of $100 billion in balances on gift cards. Keeping track of these funds and making certain all funds are spent can require considerable time. Increasingly, people are deciding that taking the time to keep tabs on their gift-card balances is a next-best alternative. These individuals pay others to make sure they are spending all available funds. For instance, a firm called Tango Card uses software to track gift-card balances and provide periodic reports to consumers.

The company also sends e-mails warning consumers when unused cards are about to expire before all funds have been spent. The fact that owners of Tango Card have a comparative advantage in keeping tabs on gift-card balances enables its customers to devote extra time to other activities, such as earning additional income. What is the comparative advantage of customers of Tango Cards who devote time to earning income instead of tracking their card balances?

 

 
"Looking for a Similar Assignment? Order now and Get 10% Discount! Use Code "Newclient"
[promo2]