B5 Flashcards
Phases of the business cycle is
Expansion, Peak, Contraction (Recession), Trough, Recovery
Variations between business cycles most likely are attributable to
Duration and degree of peak or trough (INTENSITY)
Businesses increase capital investment means
the economy is in an expansionary phase
Gross domestic product is
final goods and services produced within a nation in one year
Economic fluctuations (or business cycles) are best described as
flucations in the level of economic activity bouncing up and down of making money (GDP), relative to long term growth trend (not predictable)
Trough
us unused productive capacity and an unwillingness to risk investments
Peak of cycle is
economy will be at the natural rate of unemployment which means its at 0% which is its highest potential
During a recession
potential output will exceed actual output
What are examples of economic recession
experienced a drop in purchases, rise in inventories, wages grew and unemployment increased, interest rate and stocks fell
Peaks have
capacity constraints and labor shortages are likely (because the demand is high during a peak
Features of monopolistic competition is
fairly elastic demand curve, faces few barriers to entry, influence prices, other companies produce similar products (NOT identical)
Keys to perfect competition customers are
indifferent about which firm to buy from, firms output is small relative to the industry’s total output, freedom of entry into and out of industry, prices have to be competitive not above industry price
Monopolistic competition has
FEW obstacles, Perfect Competition has NO obstacles, Oligopoly has SIGNIFICANT Obstacles
Monopolistic competition had
large sellers who produce differentiated products/ greater variety, relatively few sellers with differentiated products is oligopoly, relatively large group of sellers who produce homogeneous products is perfect competition
Any business that has ability to control prices sells a
downward sloping demand curve, only businesses in a perfectly competitive market face horizontal demand and supply curve
Pure competition focuses on
market share and being responsive to sales prices, Oligopoly include product differentiation and adapting to price and production volume
Kinked demand curve downward is the analysis of
oligopoly which is oligopolies lowers it price then other oligopolies lowers price but if they raise price the other firms ignore it
Oligopoly behavior understood by
game theory model study of conflict and cooperation between rational decision makers.
Under a monopoly their strategic plan focus’s on
profitability from production levels that maximize profits
Monopolist tends to
produce substantially less but charge a higher price
Monopolist set price at
marginal revenue equals marginal costs
Dumping is when the
selling it for less in china than your buying it in America thats dumping
If stock market boom causes a large increase in wealth the federal reserve want to counteract the effect they
sell government securities or increase the discount rate (to decrease money supply)
Federal Reserve wishes to conduct expansionary monetary policy by
purchase government securities and lower the discount rate because they actions increase money supply