| Course | GB540 Economics for Global Decision Makers |
|---|---|
| Unit | Unit 8 |
| Paper type | Monetary and fiscal policy memo |
| Length | About 800 words, 5 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | MBA |
| Updated | October 2026 |
Free sample paper for GB540 Unit 8
The Rate Matters Through the Dollar: A Unit 8 Monetary and Fiscal Policy Memo for an Outboard Maker
[Student Name]
Purdue University Global
GB540: Economics for Global Decision Makers
Unit 8 Monetary and Fiscal Policy Memo
[Instructor Name]
[Date]
Ruddiman Marine, the state rebate and every figure are composite and illustrative; the economics sources cited are real.
Recommendation
To: Vice President of Planning. From: Product Planning. Re: Next season's policy risks.
Treat the expected rate rise as a currency risk, not a demand risk, and plan foreign prices accordingly. In the two rebate states, keep the national price increase of $200 recommended in Unit 6 and do not raise prices further to absorb the rebate.
Monetary Policy: Three Channels
Mishkin (1995) describes the several routes by which a change in the policy rate reaches spending, and three of them touch Ruddiman.
Carrying cost at dealers. Ruddiman places motors at its sixteen US dealers on consignment and finances that stock on its credit line. Each dealer holds about seven motors for about five months at a delivered cost of $2,998. A half-point rise adds about $43.72 per dealer per season, about $700 across all sixteen.
Consumer loans. Bernanke and Gertler (1995) show that tighter policy raises borrowing costs for households, and durable goods are among the most sensitive purchases. But a buyer financing $4,600 over five years, at a loan rate near 7.5 percent, would pay only about $1.10 more each month after a half-point rise. Few buyers will notice.
The exchange rate. A higher US rate relative to Norway and Australia tends to firm the dollar. If the dollar firms 3 percent against both the krone and the Australian dollar, and Ruddiman holds its local prices, foreign revenue in dollars falls by about $196,800 on about $6.76 million. That single channel is worth more than 250 times the carrying cost.
Fiscal Policy: A State Rebate
Two states served by five of Ruddiman's dealers will offer a $750 rebate on electric outboards from the spring. The rebate lowers what buyers pay, so it shifts sales along Ruddiman's demand curve. Using the Unit 3 slope of 0.0745 motors per dollar per dealer, the five dealers' base of 137 motors each and a delivered cost of $2,998, three responses compare as follows.
Hold price at $4,400. Buyers pay $3,650 after the rebate. Extra sales of about 279 motors across the five dealers. Contribution in those dealers about $1.35 million, up from $0.96 million without the rebate.
Raise $200 to $4,600. Buyers pay $3,850. Extra sales about 205. Contribution about $1.43 million.
Raise $375 to $4,775. Buyers pay $4,025, absorbing half the rebate. Extra sales about 140. Contribution about $1.47 million.
The highest contribution comes from absorbing half the rebate, but that captures money the state meant for buyers and risks the program's goodwill for about $40,000.
Who Should Get the Rebate
Research on similar incentives suggests buyers usually keep most of them. Busse et al. (2006) found that most of a manufacturer's cash-back promotions to car buyers reached those buyers, and Sallee (2011) found that buyers captured most of the federal tax credit for a popular hybrid car even when supply was tight. A firm that raises prices to absorb a rebate stands out. The $200 increase is the national price change already recommended, so in the rebate states buyers still pay $550 less than they do today. The $375 increase would be visible as a response to the rebate alone.
Combined Effect
The rate rise, if it firms the dollar by 3 percent, costs about $196,800 in foreign revenue. With the rebate and the $200 increase together, contribution in the five dealers rises by about $465,000. The two policies arrive together and roughly offset, but they call for different actions: the currency risk calls for a pricing review in Norway and Australia, examined in Unit 9, and the rebate calls for nothing beyond the planned national price.
What Would Change This Advice
Two developments would change the recommendation. If the dollar firms by much more than 3 percent, for instance because Norway and Australia cut rates while the United States raises, the currency loss would grow in proportion, and the foreign price review would need to happen before the season rather than during it. If the rebate states attach conditions to the program, such as a cap on the price eligible for the rebate, the $200 increase would need to be checked against that cap before it takes effect in those states.
Next Steps
Ask the treasury team to report the dollar's movement against the krone and the Australian dollar weekly from the start of the season. Ask the two states' dealers to show the rebate separately on each invoice so its effect on sales can be measured.
References
Bernanke, B. S., & Gertler, M. (1995). Inside the black box: The credit channel of monetary policy transmission. Journal of Economic Perspectives, 9(4), 27-48. https://doi.org/10.1257/jep.9.4.27
Busse, M., Silva-Risso, J., & Zettelmeyer, F. (2006). $1,000 cash back: The pass-through of auto manufacturer promotions. American Economic Review, 96(4), 1253-1270. https://doi.org/10.1257/aer.96.4.1253
Mishkin, F. S. (1995). Symposium on the monetary transmission mechanism. Journal of Economic Perspectives, 9(4), 3-10. https://doi.org/10.1257/jep.9.4.3
Sallee, J. M. (2011). The surprising incidence of tax credits for the Toyota Prius. American Economic Journal: Economic Policy, 3(2), 189-219. https://doi.org/10.1257/pol.3.2.189
Reading the GB 540 Unit 8 instructions
Unit 8 in GB540 asks you to write a memo assessing how monetary and fiscal policy affect your firm. Open with a recommendation. Trace a change in the policy rate through each channel that reaches your firm, such as borrowing costs for the firm, consumer credit and the exchange rate, and size each in dollars. Explain which channel matters most. Then analyze a fiscal measure, such as a tax credit, subsidy or rebate, showing how it shifts demand and comparing the firm's possible responses on volume and contribution. Address who should benefit from the measure, citing research on incidence. Combine the two policies and say what each calls for. State what would change your advice and the next steps. About four pages, addressed to a senior manager with the recommendation first, is a common format for this memo.
How the GB 540 Unit 8 example is put together
The sample memo recommends treating the rate rise as a currency risk and keeping only the national $200 increase in rebate states. It sizes three monetary channels: consignment carrying cost at about $44 per dealer, consumer loans at about $1.10 a month and the exchange rate at about $196,800, with a margin note on sizing and citations to Mishkin and to Bernanke and Gertler. The rebate section compares holding price, raising $200 and raising $375, and the highlighted sentence explains why the highest contribution is refused. Busse and colleagues and Sallee support leaving the rebate with buyers. Combined effects, conditions that would change the advice and next steps close the memo.
Reading the GB540 Unit 8 grading rubric
GB540 instructors grade the policy memo on correct reasoning about transmission, sized estimates and a clear recommendation. The memo should lead with its advice. Each monetary channel should be traced and sized, and identifying the one that matters most earns credit. The fiscal analysis should show how the measure shifts demand and compare responses on both volume and contribution. Discussing incidence with research shows depth at MBA level. Combining policies and stating what each requires demonstrates synthesis. Conditions that would change the advice show judgment. Next steps should be practical. Sources on monetary transmission and incentive incidence should be cited, and the memo format should suit a senior reader.
GB540 Unit 8 help from the desk
Many GB540 policy memos describe monetary and fiscal policy in general and never size their effects on the firm. Others assume interest rates matter through borrowing costs without checking how small that effect is. Students often analyze a subsidy only for volume, ignoring contribution and who captures the benefit. The exchange rate channel is frequently missed. Recommendations come last or not at all. Lead with advice, trace and size each channel, find the one that matters, analyze the fiscal measure for volume and contribution, consider incidence with research, combine the policies and say what would change your view. With your firm's figures in hand, our team can work through the policy memo alongside you.
Get a GB540 Unit 8 example written to your instructions
Send the policy scenario your Unit 8 memo addresses, a rate decision, a budget measure or both, with the firm, prompt and rubric. The memo returns in 24-48h, recommendation first, each channel sized, and fiscal incidence computed wherever a tax or subsidy is involved. First samples cost nothing. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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GB540 Unit 8 questions, answered
Through which channels does monetary policy affect a firm?
The main ones are borrowing costs for the firm and its customers, asset prices and household wealth, and the exchange rate, which shifts competitiveness abroad. Their importance varies by firm. A domestic retailer may feel consumer credit most, an exporter the currency. A strong memo names the channels, sizes them for the particular firm, and ranks them.
What does incidence mean for a subsidy or tax?
Incidence describes who actually bears a tax or receives a subsidy, as opposed to who writes the check. It depends on how responsive buyers and sellers are. When demand is more elastic than supply, sellers bear more of a tax; with a subsidy, the less responsive side captures more of the benefit. Your prompt may ask you to compute the split.
Should the memo recommend a response to policy, or just analyze it?
Recommend. GB540 prompts in this unit usually ask what the firm should do, and a memo that stops at analysis leaves the most heavily weighted question unanswered. State the recommendation in the opening paragraph, give its expected effect in numbers, and reserve the rest of the memo for the reasoning and the risks behind it.
Where can I find a free GB540 Unit 8 sample paper?
A complete GB540 Unit 8 monetary and fiscal policy memo is on this page, sizing three rate channels for an outboard maker and pricing a state rebate.
Why might a rate rise matter more through the exchange rate?
A higher rate can firm the dollar, cutting the dollar value of every foreign sale. For an exporter, that loss can be far larger than the added cost of borrowing.