In addition, the firm may not have the same financial pressures if they are managing their entire supply chain in the same currency. Increased competition is likely to result in lower sales.
Question 3 - Decreasing Level of National Income
If Thailand suffers a decrease in the level of national income this means that there will be less money in the economy as a whole, with less being earned. Where the level of money in the economy declines there will be a decline in the aggregate demand. The decline will not be evenly spread across all products; those which are essential will still be purchases, those which are not necessary will suffer a greater decline. As the Blades products are not an essential product there is likely to be a decline in the demand and a reduction in the revenue earned if Thailand suffers a decline in national income.
Question 4 - Deprecation of the Bhatt
As noted in question 1, if the Bhatt depreciates it becomes worth less; meaning it will take more Bhatt's to buy a Dollar. If Blades do not change the prices of their goods they will suffer a decrease in revenue when the currency is exchanged back to dollars. In this transaction it is Blades that is carrying the exchange rate risk. This is the reason Blades may be preferred over other...
suppliers is that invoice in dollars. If the buyers have to pay in dollars and the currency depreciates it is the buyers that will suffer higher costs and reduced profits as they will need to use more of the Bhatt to buy the dollars they need for the transactions. In the short-term the U.S. firms will not suffer, as they are receiving their income in dollars. However, in the longer term, as the effective price increases they may see a decrease in demand as the demand either reduces or shifts to lower priced goods from other suppliers.
Question 5 - Financing
A number of agencies exist to help both the government and the private sector with the aim of supporting development. The Asian Development Bank aids private investment, but this is focused on projects, rather than ongoing commercial operations. For firms facing challenges there are a number of organizations that may help in terms of advice and support. For example, the U.S. Commercial Service in Thailand may be useful. This is a U.S. government department that has the remit of promoting U.S. interest aboard. The trade federal promotion and export finance agencies may also be able to provide some aid and support.
There are various parity theories, but this general approach is suitable for this question.
