B5 Flashcards
1
Q
Nominal =
A
today’s dollar (doesn’t measure real impact)
2
Q
GDP
A
- total value of all final goods and services
* *NOT BARTERING
3
Q
Price Index
A
(Nominal GDP) / (GDP Deflator) x 100
4
Q
Economic Growth =
A
Real GDP Growth
5
Q
Business Cycle Stages
A
- Expansionary
- Peak
- Contractionary
- Trough
- Recovery
6
Q
Recession
A
*two consecutive quarters of falling national output
7
Q
Long-Run Aggregate Supply Curve is
A
vertical
8
Q
Potential Level of Output
A
- determines expansion or recession
* full maximization of resources (capital and labor)
9
Q
Aggregate Level Determines _______
_______ Determines ________
A
- price
* price; quantity
10
Q
When dealing with foreign currency exchanges, think in terms of the
A
foreign country and its demand (not the demand in the home country)
11
Q
Multiplier Effect
A
1 / (1 - MPC)
(1 - MPC) = MPS
12
Q
Fiscal Elements a Government Can Use
A
- taxes
2. government spending
13
Q
GNI is equal to
A
GDP
14
Q
Two Methods to Calculate GDP
A
- expenditure approach
2. income approach
15
Q
Expenditure Approach for GDP
A
- Government Purchases
- Investment (gross private domestic)
- Consumption (personal)
- Net Export (Import)
16
Q
Income Approach for GDP
A
*not expenditure approach I ncome of proprietors P rofits of corporations I nterest (net) R ental income A djustments for net foreign income T axes (indirect business taxes) E mployee compensation D epreciation (capital consumption allowance)
17
Q
Depreciation can also be known as the
A
capital consumption allowance
18
Q
Net Domestic Product =
A
GDP - depreciation
19
Q
GNP =
A
made by citizens anywhere in the globe
20
Q
Disposable Income
A
*income less personal taxes
21
Q
Types of Unemployment
A
- Frictional: workers finding the right job (young workforce)
- Structural: skills needed (technological updates)
- Seasonal
- cyclic (tied to economic performance)
22
Q
Unemployment Rate =
A
number unemployed (seeking) / total labor force (seeking & employed)
23
Q
Natural Rate of Unemployment =
A
Frictional + Structural + Seasonal
24
Q
Full Employment =
A
NO CYCLICAL unemployment (doesn’t mean 100% employment)
25
Inflation Rate Calculation
[CPI(1) - CPI(0)] / [CPI(0)] x 100
26
Two Types of Inflation
Demand Pull
| Cost Push
27
Monetary Assets/Liabilities
*denominated in fixed amounts; do not change with deflation or inflation
28
Inflation Effect on Monetary Assets/Liabilities
Assets: bad, could have gotten more
Liabilities: good, don't have to pay as much
29
Phillips Curve
*inverse relationship between inflation and unemployment
30
Budget Deficit vs. Budget Surplus
Deficit: preventing a recession (spending more than taxes)
Surplus: preventing inflation (spending less than taxes)
31
Nominal Interest Rate
interests rate including inflation
32
Real Interest Rate =
Nominal Interest Rate - Inflation
| *only affected by supply and demand (factors out inflation)
33
Nominal Interest Rate and Inflation have what type of relationship?
directly correlated
34
M1
*coins, currency, checkable deposits
35
M2
M1 + savings, CDs, money market deposits
36
M3
M1 + M2 + larger savings and CDs
37
3 Methods of Monetary Policy
1. money supply (buy/sell government securities)
2. required reserve ratio
3. discount rate
38
Demand for Money is _________ related to interest rates
inversely
39
Supply of Money Line on a Graph is
vertical; set by the Federal Reserve
40
Fundamental Law of Demand
*price and quantity are inversely related
41
Substitution Effect
*consumers tend to purchase more (less) of a good when its price falls (rises) in relation too the price of other goods
42
Income Effect
*when only prices drop, PP increases and more of the lower products are purchased
43
Where do surpluses and shortages occur?
* surpluses are above equilibrium
| * shortages are below equilibrium
44
Market Clearing Idea
*the market will eventually be cleared of all excess supply and demand (all surpluses and shortages) assuming that prices are free to change
45
Can the effect of changes in both supply and demand be known for each factor (price and quantity)
Not always for ever factor
46
Price Ceilings vs. Price Floors
```
Ceilings = Shortages
Floors = Surpluses
```
47
Price Elasticity of Demand
= (% delta in quantity demanded) / (% delta in price)
PERCENTAGE, not amount
48
Midpoint Method for Price Elasticity
* works for numerator and denominator
| * (difference/sum of the two points)
49
Inelasticity, Elasticity, Unit Elasticity
Inelasticity: 1
| Unit Elasticity: = 1
50
Two Factors on Elasticity
* number of substitutes
| * time (more products available after a certain period of time)
51
Effects on Total Revenue for Elastic and Inelastic Products
Inelastic: total revenues increase with price increases
Elastic: total revenues decrease with price increases
(opposite for price decreases)
52
Price Elasticity of Supply
= (% delta in quantity supplied) / (% delta in price)
53
Cross Elasticity
= (% delta in number of units of X demanded/supplied) / (% delta in price of Y)
54
Cross Elasticity: Substitute Goods vs. Complementary Goods
Substitute: positive coefficient
Complementary: negative coefficient
55
Income Elasticity of Demand
= (% delta in number of units of X demanded) / (% delta in income)
56
Income Elasticity of Demand: Luxury vs. Inferior
Luxury: positive coefficient
Inferior: negative coefficient
57
In the long run, all costs are
VARIABLE
58
Marginal Product of Labor =
(delta total output) / (delta labor)
59
Law of Diminishing Returns
*output increases, but at a diminishing rate at some point
60
Average Fixed Cost
= FC/Q
61
Average Variable Cost
= VC/Q
62
Average Total Cost
= TC/Q
63
Marginal Cost
= (change in total cost) / (change in quantity)
64
What are marginal costs dependent upon?
ONLY variable costs (not fixed costs at all)
65
Produce at the point where MC
intersects the lowest point in the curve of TC
left: economies of scale
right: diseconomies of scale
66
Produce at the point where ...
MC = MR
67
Perfect (Pure) Competition
* all equivalent products
* no differentiation
* price takers
* no barriers to entry
* demand is perfectly elastic (horizontal)
68
Monopolistic Competition
* similar products
* product differentiation
* few barriers
* some influence on price
* highly elastic, but downward sloping demand curve
* focus on enhanced product differentiation
69
Oligopoly
* few firms
* differentiated
* large barriers to entry
* kinked demand curve due to potential price drops
* INTERDEPENDENT firms
* control over quantity and price
KINKED DEMAND CURVE
70
Monopoly
* one firm
* insurmountable barriers
* price setters
* supply is vertical
* focus on profitability
* usually will result in lesser quantity
71
ALL FIRMS WILL PRODUCE UP UNTIL MR =
MC
72
Factors of Production =
*labor, capital, land
73
Derived Demand
= demand for the factors of production
74
Monopsony
*only one employer in a market (lower wages and lower levels of employment)
75
Unions and Wages
Unionized Workers: wages increase but restricted supply
Non-unionized workers: fall in sector that is non-unionized due to people trying to find jobs from restricted union sector
76
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
77
Major Strategies for Value Chain Analysis
* core competencies
* industry structure
* segmentation analysis
78
Porter's Five Forces
* barriers to entry
* intensity of competition
* existence of substitutes
* bargaining power of customers
* bargaining power of suppliers
79
When is competition strongest?
* when a market is not growing very fast
| * it is relatively low in a quickly-growing market
80
Two Major Types of Competitive Strategies
```
Cost Leadership Advantage
**build market share
**match price of rivals
Differentiation Advantage
**build market share
**increase price
```
81
Best Cost Provider =
*combination of cost leadership and differentiation
82
Cost Leadership Analyzed
Good: inferior products
Bad: overlooking technological advances
83
Differentiation Analyzed
Good: customers see value
Bad: cost > benefit
84
Niche Strategy Analyzed
Good: competitors have ignored the niche
Bad: easy to copy
85
Three Major Forms of Value Chain Analysis
1. Internal Cost Analysis (variances)
2. Internal "Differentiation" (benefit > cost)
3. Vertical Linkage Analysis (EXTERNAL in both directions)
86
Four General Steps in Value Chain Analysis
1. Identify Value Activities
2. Identify Cost Drivers Associated with Each Activity
3. Develop a Competitive Advantage by Reducing Cost or Adding Value
4. Exploit Linkages among Activities in the Value Chain (SYNERGIES; segmentation analysis)
87
Porter's Four Factors that Impact Global Competitive Advantage
1. Conditions of the Factors of Production
2. Conditions of Domestic Demand
3. Related and Supporting Industries
4. Firm Strategy, Structure, and Rivalry (laws and regulations
88
Supply Chain management is
*a collaborate effort between buyers and sellers
89
SCOR Model
1. Plan (demand requirements)
* *assessing the ability of suppliers
2. Source (acquire resources)
3. Make (conversion costs)
4. Deliver (A/R is here)
90
Benefits of SCOR
*decrease costs and increase profits
