ASSIGNMENT- 3

Question.1) (a) Analyse both the conventional and unconventional tools used by central banks. Answer. 1) (A) Monetary policy- It is a policy given by the central bank which aims at managing the money supply and the interest rate and represents the demand side economic policy which is used by the government to achieve macroeconomic goals- 1. This policy aims on maintaining the cash supply in the economy. 2. It focuses on maintaining equal supply of credit in all economic sectors. 3. It helps in achieving the full employment level which means that there is no unemployment in the economy at that particular point of time. 4. It helps in controlling inflation in the economy by maintaining the aggregate demand and aggregate supply in the economy. 5. It helps in the continuous growth in the economy.

ASSIGNMENT- 3

Question.1) (a) Analyse both the conventional and unconventional tools used by central banks. Answer. 1) (A) Monetary policy- It is a policy given by the central bank which aims at managing the money supply and the interest rate and represents the demand side economic policy which is used by the government to achieve macroeconomic goals- 1. This policy aims on maintaining the cash supply in the economy. 2. It focuses on maintaining equal supply of credit in all economic sectors. 3. It helps in achieving the full employment level which means that there is no unemployment in the economy at that particular point of time. 4. It helps in controlling inflation in the economy by maintaining the aggregate demand and aggregate supply in the economy. 5. It helps in the continuous growth in the economy.

Business EconomicsYou operate your own small building company and have decided to bid on a government contract to build a pedestrian walkway in a national park during the coming winter.
The walkway is to be of standard government design and should involve no unexpected costs. Your present capacity utilization rate is moderate and allows sufficient
scope to understand this contract, if you win it. You calculate your incremental costs to be $268,000 and your fully allocated costs to be $440,000. Your usual
practice is to add between 60% and 80% to your incremental costs, depending on capacity utilization rate and other factors. You expect three other firms to also bid on
this contract, and you have assembled the following competitor intelligence about those companies.

Issue

Rival A

Rival B

Rival C

Capacity Utilization

At full capacity

Moderate

Very low

Goodwill Considerations

Very concerned

Moderately concerned

Not concerned

Production Facilities

Small and inefficient plant

Medium sized and efficient plant

Large and very efficient plant

Previous Bidding Pattern

Incremental cost plus 35-50%

Full cost plus 8-12%

Full cost plus 10-15%

Cost Structure

Incremental costs exceed yours by about 10%

Similar cost structure to yours

Incremental costs 20% lower but full costs are similar to yours

Aesthetic Factors

Does not like winter jobs or dirty jobs

Does not like messy or inconvenient jobs

Likes projects where it can show its creativity

Political Factors

Decision maker is a relative of the buyer

Decision maker is seeking a new job

Decision maker is looking for a promotion

Show all of your calculations and processes. Describe your answers in three- to five-complete sentences.

What price would you bid if you must win the project
What price would you bid if you want to maximize the expected value of the contribution from this contract
Defend your answers with discussion, making any assumptions you feel are reasonable and/or are supported by the information provided.

Must show all calculations (Spreadsheet)