1. NATIONAL ECONOMIC GOALS GROWTH OF OUTPUT PRICE STABILITY FULL EMPLOYMENT

2. COMPONENTS OF OUTPUT HOUSEHOLD CONSUMPTION BUSINESS INVESTMENT GOVERNMENT EXPENDITURES EXPORTS

3. PRICE STABILITY CPI PRODUCTIVITY GAINS INFLATION OVERSTATED

4. FULL EMPLOYMENT SET AT 5.75% UNEMPLOYMENT NAIRU RATE ACTUAL RATE IS ~ 4.25%

5. ECONOMIC POLICY FISCAL –GOVERNMENT EXPENDITURES –TAX POLICY MONETARY –DISCOUNT RATE –RESERVE REQUIREMENTS –OPEN MARKET OPERATIONS

6. LINK TO FOREIGN ECONOMIES GLOBALIZATION OF AMERICAN INDUSTRY TECHNOLOGY EXCHANGE RATES

7. ECONOMIC EFFECT ON VALUE CREATION RECESSION IN THE PACIFIC RIM DECLINE IN EXPORTS DECLINE IN EARNINGS STOCK MARKET DEVALUATION

8. STRATEGY IN ACTION THE EFFECT OF ASIA’S WOES ON BOEING

9. ASIA’S TROUBLES MARKET DECLINES OF UP TO 80% WIPED OUT BILLIONS IN ASSETS INDONESIAN ECONOMY DOWN BY 20% IN ONE YEAR JAPAN- $600 BILLION IN BAD DEBTS, 70% DECLINE IN PROPERTY VALUES CHINA- 75% OF BANK CREDIT IN STATE ENTERPRISES, $240 BILLION IN BAD DEBTS

10. WEALTH LOSS DUE DROP IN STOCK PRICES HONG KONG - $75 BILLION KOREA - $60 BILLION INDONESIA - $45 BILLION THAILAND - $21 BILLION TOTAL IS $201 BILLION DOLLARS

11. EFFECT ON BOEING 30% OF BOEINGS BACKLOG INTENDED FOR ASIAN CUSTOMERS ORDERS ARE DEFERRED OR CANCELLED ALTOGETHER ASIAN WEAKNESS IS STRONGEST IN 747 AND 777 MODELS 48000 JOB LOSS 25% CUT IN PRODUCTION SHARE PRICE HAS FALLEN ABOUT 25% 25% CUT IN COMMERCIAL JET PRODUCTION

12. BOEING’S PROJECTIONS 1999 2000 OPERATING REVENUE $58 B $50 B TOTAL R&D SPENDING $1.7 B $1.5 B DELIVERIES 620 490 EMPLOYMENT 200000 185000 PROFIT MARGINS COMMERCIAL.02.01 SPACE & DEFENSE.08.09

13. CLASS EXERCISE Assume that the federal reserve raises interest rates again in October. (Third time this year ). 1. For your company, will there be any effect on your business? 2. What, if any, functional area will be effected most? Least? 3. If interest rates never fall again, what will be the long term effect?