B5-M1 Economic & Business Cycles, Measures, & Indicators

Question 1

what is order of business cycle?

Answer 1

peak, recession, trough, recovery

Question 2

what is gross domestic product (GDP)

Answer 2

total dollar (monetary) value of all new FINAL products and services produced within the economy in a given time period

Question 3

what is business cycles (economic fluctuations)?

Answer 3

fluctuations in the level of economic activity, relative to a long term growth trend

Question 4

what is a feature of a firm in monopolistic?

Answer 4

a downward sloping and fairly elastic demand curve

Question 5

what are the characteristics of monopolistic competition?

Answer 5

• numerous firms with differentiated products
• ease of entry - few barriers
• firms exact some influence over price and market
• non price competition is frequent and critical. Have more influence over price and can afford higher costs
• producing marginal revenue (MR) = marginal cost (MC)

strategic plan focus on: maintain market share and plan for enhanced product differentiation

Question 6

what are characteristics of perfect competition?

Answer 6

• large number of sellers and a standardized (homogeneous) products
• prices are set by the market, so costs have to be kept low to survive
• producing marginal revenue (MR) = marginal cost (MC)

strategic plan focus on: maintain market share and be responsive to market condition related to sales price

Question 7

what are characteristics of oligopoly?

Answer 7

• Few sellers with differentiated products
• Significant barriers to entry
• Fixed (or semi fixed) prices
• Kinked sharply downward demand curves
• producing marginal revenue (MR) = marginal cost (MC)

strategic plan focus on: maintain market share, ensure product differentiation, adapt to price and volume change

Question 8

what are characteristics of monopoly?

Answer 8

• only one efficient supplier
• producing marginal revenue (MR) = marginal cost (MC)

strategic plan focus on: maximizing profit

Question 9

what is economies of scale?

Answer 9

Economies of scale occur when companies experience cost advantages resulting from gains in production efficiencies

Question 10

what does expansionary fiscal policy involve?

Answer 10

increase government purchases and/or decrease taxes

Question 11

what will increase in government spending tend to?

Answer 11

it provides more money to industries and companies, which will cause GDP to rise and unemployment to fall

Question 12

What can the Fed do to decrease money supply (reduce inflationary pressure)?

Answer 12

• sell government securities in the open market
• increase the discount rate
• increase the required reserve ratio