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1 Becker BEC > B5 > Flashcards

B5 Flashcards

1
Q

Nominal =

A

today’s dollar (doesn’t measure real impact)

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2
Q

GDP

A
  • total value of all final goods and services

* *NOT BARTERING

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3
Q

Price Index

A

(Nominal GDP) / (GDP Deflator) x 100

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4
Q

Economic Growth =

A

Real GDP Growth

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5
Q

Business Cycle Stages

A
  1. Expansionary
  2. Peak
  3. Contractionary
  4. Trough
  5. Recovery
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6
Q

Recession

A

*two consecutive quarters of falling national output

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7
Q

Long-Run Aggregate Supply Curve is

A

vertical

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8
Q

Potential Level of Output

A
  • determines expansion or recession

* full maximization of resources (capital and labor)

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9
Q

Aggregate Level Determines _______

_______ Determines ________

A
  • price

* price; quantity

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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)

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11
Q

Multiplier Effect

A

1 / (1 - MPC)

(1 - MPC) = MPS

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12
Q

Fiscal Elements a Government Can Use

A
  1. taxes

2. government spending

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13
Q

GNI is equal to

A

GDP

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14
Q

Two Methods to Calculate GDP

A
  1. expenditure approach

2. income approach

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15
Q

Expenditure Approach for GDP

A
  1. Government Purchases
  2. Investment (gross private domestic)
  3. Consumption (personal)
  4. Net Export (Import)
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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)
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17
Q

Depreciation can also be known as the

A

capital consumption allowance

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18
Q

Net Domestic Product =

A

GDP - depreciation

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19
Q

GNP =

A

made by citizens anywhere in the globe

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20
Q

Disposable Income

A

*income less personal taxes

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21
Q

Types of Unemployment

A
  1. Frictional: workers finding the right job (young workforce)
  2. Structural: skills needed (technological updates)
  3. Seasonal
  4. cyclic (tied to economic performance)
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22
Q

Unemployment Rate =

A

number unemployed (seeking) / total labor force (seeking & employed)

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23
Q

Natural Rate of Unemployment =

A

Frictional + Structural + Seasonal

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24
Q

Full Employment =

A

NO CYCLICAL unemployment (doesn’t mean 100% employment)

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25
Q

Inflation Rate Calculation

A

[CPI(1) - CPI(0)] / [CPI(0)] x 100

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26
Q

Two Types of Inflation

A

Demand Pull

Cost Push

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27
Q

Monetary Assets/Liabilities

A

*denominated in fixed amounts; do not change with deflation or inflation

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28
Q

Inflation Effect on Monetary Assets/Liabilities

A

Assets: bad, could have gotten more
Liabilities: good, don’t have to pay as much

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29
Q

Phillips Curve

A

*inverse relationship between inflation and unemployment

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30
Q

Budget Deficit vs. Budget Surplus

A

Deficit: preventing a recession (spending more than taxes)
Surplus: preventing inflation (spending less than taxes)

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31
Q

Nominal Interest Rate

A

interests rate including inflation

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32
Q

Real Interest Rate =

A

Nominal Interest Rate - Inflation

*only affected by supply and demand (factors out inflation)

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33
Q

Nominal Interest Rate and Inflation have what type of relationship?

A

directly correlated

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34
Q

M1

A

*coins, currency, checkable deposits

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35
Q

M2

A

M1 + savings, CDs, money market deposits

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36
Q

M3

A

M1 + M2 + larger savings and CDs

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37
Q

3 Methods of Monetary Policy

A
  1. money supply (buy/sell government securities)
  2. required reserve ratio
  3. discount rate
38
Q

Demand for Money is _________ related to interest rates

A

inversely

39
Q

Supply of Money Line on a Graph is

A

vertical; set by the Federal Reserve

40
Q

Fundamental Law of Demand

A

*price and quantity are inversely related

41
Q

Substitution Effect

A

*consumers tend to purchase more (less) of a good when its price falls (rises) in relation too the price of other goods

42
Q

Income Effect

A

*when only prices drop, PP increases and more of the lower products are purchased

43
Q

Where do surpluses and shortages occur?

A
  • surpluses are above equilibrium

* shortages are below equilibrium

44
Q

Market Clearing Idea

A

*the market will eventually be cleared of all excess supply and demand (all surpluses and shortages) assuming that prices are free to change

45
Q

Can the effect of changes in both supply and demand be known for each factor (price and quantity)

A

Not always for ever factor

46
Q

Price Ceilings vs. Price Floors

A 
Ceilings = Shortages
Floors = Surpluses
47
Q

Price Elasticity of Demand

A

= (% delta in quantity demanded) / (% delta in price)

PERCENTAGE, not amount

48
Q

Midpoint Method for Price Elasticity

A
  • works for numerator and denominator

* (difference/sum of the two points)

49
Q

Inelasticity, Elasticity, Unit Elasticity

A

Inelasticity: 1

Unit Elasticity: = 1

50
Q

Two Factors on Elasticity

A
  • number of substitutes

* time (more products available after a certain period of time)

51
Q

Effects on Total Revenue for Elastic and Inelastic Products

A

Inelastic: total revenues increase with price increases
Elastic: total revenues decrease with price increases

(opposite for price decreases)

52
Q

Price Elasticity of Supply

A

= (% delta in quantity supplied) / (% delta in price)

53
Q

Cross Elasticity

A

= (% delta in number of units of X demanded/supplied) / (% delta in price of Y)

54
Q

Cross Elasticity: Substitute Goods vs. Complementary Goods

A

Substitute: positive coefficient
Complementary: negative coefficient

55
Q

Income Elasticity of Demand

A

= (% delta in number of units of X demanded) / (% delta in income)

56
Q

Income Elasticity of Demand: Luxury vs. Inferior

A

Luxury: positive coefficient
Inferior: negative coefficient

57
Q

In the long run, all costs are

A

VARIABLE

58
Q

Marginal Product of Labor =

A

(delta total output) / (delta labor)

59
Q

Law of Diminishing Returns

A

*output increases, but at a diminishing rate at some point

60
Q

Average Fixed Cost

A

= FC/Q

61
Q

Average Variable Cost

A

= VC/Q

62
Q

Average Total Cost

A

= TC/Q

63
Q

Marginal Cost

A

= (change in total cost) / (change in quantity)

64
Q

What are marginal costs dependent upon?

A

ONLY variable costs (not fixed costs at all)

65
Q

Produce at the point where MC

A

intersects the lowest point in the curve of TC

left: economies of scale
right: diseconomies of scale

66
Q

Produce at the point where …

A

MC = MR

67
Q

Perfect (Pure) Competition

A
  • all equivalent products
  • no differentiation
  • price takers
  • no barriers to entry
  • demand is perfectly elastic (horizontal)
68
Q

Monopolistic Competition

A
  • similar products
  • product differentiation
  • few barriers
  • some influence on price
  • highly elastic, but downward sloping demand curve
  • focus on enhanced product differentiation
69
Q

Oligopoly

A
  • 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
Q

Monopoly

A
  • one firm
  • insurmountable barriers
  • price setters
  • supply is vertical
  • focus on profitability
  • usually will result in lesser quantity
71
Q

ALL FIRMS WILL PRODUCE UP UNTIL MR =

A

MC

72
Q

Factors of Production =

A

*labor, capital, land

73
Q

Derived Demand

A

= demand for the factors of production

74
Q

Monopsony

A

*only one employer in a market (lower wages and lower levels of employment)

75
Q

Unions and Wages

A

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
Q

SWOT Analysis

A

Strengths
Weaknesses
Opportunities
Threats

77
Q

Major Strategies for Value Chain Analysis

A
  • core competencies
  • industry structure
  • segmentation analysis
78
Q

Porter’s Five Forces

A
  • barriers to entry
  • intensity of competition
  • existence of substitutes
  • bargaining power of customers
  • bargaining power of suppliers
79
Q

When is competition strongest?

A
  • when a market is not growing very fast

* it is relatively low in a quickly-growing market

80
Q

Two Major Types of Competitive Strategies

A 
Cost Leadership Advantage 
**build market share
**match price of rivals
Differentiation Advantage
**build market share
**increase price
81
Q

Best Cost Provider =

A

*combination of cost leadership and differentiation

82
Q

Cost Leadership Analyzed

A

Good: inferior products
Bad: overlooking technological advances

83
Q

Differentiation Analyzed

A

Good: customers see value
Bad: cost > benefit

84
Q

Niche Strategy Analyzed

A

Good: competitors have ignored the niche
Bad: easy to copy

85
Q

Three Major Forms of Value Chain Analysis

A
  1. Internal Cost Analysis (variances)
  2. Internal “Differentiation” (benefit > cost)
  3. Vertical Linkage Analysis (EXTERNAL in both directions)
86
Q

Four General Steps in Value Chain Analysis

A
  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
Q

Porter’s Four Factors that Impact Global Competitive Advantage

A
  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
Q

Supply Chain management is

A

*a collaborate effort between buyers and sellers

89
Q

SCOR Model

A
  1. Plan (demand requirements)
    * *assessing the ability of suppliers
  2. Source (acquire resources)
  3. Make (conversion costs)
  4. Deliver (A/R is here)
90
Q

Benefits of SCOR

A

*decrease costs and increase profits

1 Becker BEC (7 decks)

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