B5 Flashcards
What industry is not impacted by business cycles?
Healthcare industry
Define Economic fluctuations
Fluctuations in the level of economic activity, relative to a long-term growth trend
When would the govt reduce taxes on investments?
Capital spending is expected to be unusually low
What would halt inflation?
Increasing int rates -> reduces AD which will reduce GDP and lower prices
What is the level of unemployment at the peak business cycle?
The natural rate
What is the implication that a tax reduction might cause?
Increase in price level -> inflation to rise
What can the fed do to reduces inflationary pressures?
Increase the margin requirements -> lower money supply
What is the velocity of money?
rate at which money is exchanged in the economy -> measured by taking the GDP /Money supply
What changes in demand and SRAS will lead to a reduction in inflation?
Decrease in AD and increase in SRAS
What would increase the amount of frictional unemployment?
A reduction in the average age of the workforce
What are goods that are related to a comfortable life-style considered regarding elasticity?
Comfortable life-style would be relatively price insensitve -> inelastic
Define Collusive pricing
Anticipates that competitors will collude or conspire to maintain prices and mutual profitablilty
What is a price ceiling
Setting a ceiling price below the price dictated by the market creates a shortage
Quantity demanded would exceed the quantity supplied
Under a monopoly, what do strategic plans focus on?
Profitability from production levels that maximize profits
Under pure competition, what do strategic plans focus on?
maintaining the market share and being responsive to market conditions related to sales price
