The organizations strategic plan you wrote about in Week 2 calls for an aggressive growth plan, requiring investment in facilities and equipment, growth in productivity, and labor over the next five years. It is your responsibility to determine how the U.S economy during this five year period will impact such an aggressive growth plan. To do so, you should:Develop a 1,500-word economic outlook forecast that includes the following:Analyze the history of changes in GDP, savings, investment, real interest rates, and unemployment and compare to forecast for the next five years.Discuss how government policies can influence economic growth.Analyze how monetary policy could influence the long-run behavior of price levels, inflation rates, costs, and other real or nominal variables.Describe how trade deficits or surpluses can influence the growth of productivity and GDP.Discuss the importance of the market for loanable funds and the market for foreign-currency exchange to the achievement of the strategic plan.Recommend, based on your above findings, whether the strategic plan can be achieved and provide support. Use a minimum of 3 peer-reviewed sources from the University Library.Format your paper consistent with APA guidelines.1
The Real Economy in the Long Run
Tyrone Ashe, Eric Candelaria, Kayla Finnegan, Nicholas Marshall
December 12, 2016
Juan Carlos Ginarte
Real Economy in the Long Run
When operating a company as large and as successful as Apple, a strategic plan needs to
address expansion and relocation. By using the strategic plan, we can determine in what
facilities and equipment we need to invest, as well as other influencing factors such as
productivity and labor over the next five years. Weighing these determines where, if at all,
outside the Unites States Apple should expand. This paper discusses a possible expansion into
China. It enumerates factors like productivity and growth, financial system, risk reduction, and
current and projected unemployment.
Country’s Productivity
Productivity is the quantity of goods and services produced from each unit of labor input.
Several factors affect productivity: physical capital, human capital, natural resources and
technological knowledge. Physical capital describes the machinery, building and electrical
equipment an economy requires in the process of production. The more equipment workers have
to do their job, the more productive they can be. Human capital refers to the workers, their skills
and training needed to perform the tasks that enable productivity. The ability to produce anything
requires human capital. Education and training enable innovation so that more efficient
production methods can result. Natural resources describe inputs into production that derive from
natural means. Anything from land, water, metals and minerals, whether renewable or
nonrenewable, have a tremendous contribution to the country’s productivity. Resources like coal
and oil have been the driving force behind the development of entire nations. Technological
knowledge is that factor that involves analyzing the production process and determining the best
way produce those goods and services. This factor comes into play when deciding to use a
different method of conveying merchandise for one location to another based reliability and cost
Policies Influencing Productivity Growth
Currently, Apple has many policies in which the must follow and enforce. Per
Trading Economics (2016), China has become more competitive for production because of the
rise in the production rate which rose 6 percent in April 2016. The manufacturing output growth
in which China has seen grew by 6.9 percent and the expectations for growth show a 10.9 percent
rise. Private firms are making investments in this country which should help the industrial
production rates to carry on the growing path making China a favorable place for investment by
production facilities. China is one of the largest manufacturing powers. Working with
electronics such as Apple products is something that the country has been historically proven for
substantial output in production at a lower labor cost. Although the indicated labor cost factors
are on the rise, the ability to provide workers for the production environment of computer based
products such as Apple’s is something that this country can provide.
Policies influencing Financial System
Understanding a country’s financial system and it relates to key macroeconomic variables
is important when deciding to expand. Mankiw describes that the variables pertaining to
financial situations are not based on behavior, but instead based on accounting (Mankiw 266).
The term accounting is referring to how various numbers are defined and added up. One variable
used more regularly than others is a country’s Gross Domestic Product, or GDP. The GDP is a
part of the national income accounts, which contain several vital components. These aid to clear
up confusing aspects on how the variables are related to another.
When examining a country’s Gross Domestic Product, it is important to remember that
“GDP is both total income in an economy and the total expenditure on the economy’s output of
goods and services (Mankiw 266).” One factor in a country’s GPD (denoted as Y) is the division
of GDP into four components of expenditure: consumption (C), investment (I), government
purchases (G), and net exports (NX) (Mankiw 266). This would create the equation
Y=C+I+G+NX, in which every dollar of expenditure shows up on one side will also be found on
the other side. Being able to comprehend these macroeconomic variables gives a better
understanding of a country’s GDP. This coupled with other statistics factor into the decision
regarding a company’s expansion into another country.
Reduced Risk in Relocation
Apple faces the risk of competition with similar corporations already established in
China. For example, China both manufactures products and owns the market. To reduce some of
these risks, Apple can conduct research and select a location where there are skilled workers
available. Having labor manpower will guarantee one aspect of production. The hourly rate in
China is much less compared to that in the Unites States. Lower labor costs result in higher
return on production. Before relocating, research and comparisons can be made with similar
corporations. A comparison of similar company’s financial statements and quarterly reports will
be valuable.
In addition, there needs to be research on China’s export and taxation regulations. Apple
needs to factor in export costs such as transportation via air and ocean freight. In addition to
trade regulations, Apple needs to consider possible changes in government, political unrest, and
open market currency. Another issue is that China has one of the world’s largest economies, but
is still a developing nation in terms of per-capita income. Apple needs to prioritize its strategic
goals. Is the expansion based on the low-cost labor alone, or also for competition for China’s
emerging market?
Projected Unemployment
When considering where to expand, Apple first must look at current and projected
unemployment rates at home and abroad to make an educated decision on expansion. While
analyzing the employment rates it is important to understand specific labor market conditions and
regulations. According to Okun’s Law, a decline in unemployment by 1 percentage point
corresponds to a 3 percent rise in output (Hobbs, 2013). Keeping this relationship in mind will
be important in maximizing productivity leading to an increase in economic growth.
According to the Unites States Bureau of Labor Statistics the current unemployment rate
in the United States is 4.6\% (U.S. Government, 2016). China has a lower unemployment rate of
4.04\% when compared to the United States. When analyzing the unemployment trends in China
the unemployment rate has steadily decreased from a high of 4.3\% in the fourth quarter of 2003
to its current rate of 4.04\% in July of 2016. Unemployment is steadily decreasing and the
productivity is increasing in the country. According to Chinese Premier Li Keqiang, during the
first nine months of 2016 China has created 10.67 million new jobs. Premier Keqiang also
summaries that just in the month of September 2016 that unemployment rates fell to below five
percent in 31 of China’s largest industrial cities (The State Council, 2016).
With the continued declining unemployment rate in China, and if Okun’s law holds
correct, there will be a large return in productivity in the economy. If China’s trend of lower
unemployment continues over the next five years, it will indicate that the economy, productivity,
and growth will continue to expand. This will lead to an increase in jobs and income as well as a
demand for new goods and services.
There are many factors when deciding to expand into another country. Statistics of both
the United States and China’s Gross Domestic Product, unemployment rates, and relocation risks
are all important variables in making a decision to relocate. Comprehending all of these, plus an
understanding of key macroeconomic principles, helps inform those decisions.
China Industrial Production, 1990-2016. Trading Economics, 2016. Retrieved from
Hobbs, B. K. (2013). Okuns law. In T. Cate (Ed.), An encyclopedia of Keynesian economics.
Cheltenham, UK: Edward Elgar Publishing. Retrieved from
Mankiw, N.G. (2015). Principles of Macroeconomics (7th ed.). Retrieved from
The State Council. December 10, 2016. Employment reflects economic resilience. The Peoples
Republic of China. Retrieved from
United States Government, 2016. Department of Labor, Bureau of Labor Statistics. Retrieved

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