BEC (Economics) Flashcards
GDP, Nominal GDP and Potential GDP
GDP: The market value of all final goods and services produced within the U.S. during a one-year period. Finished goods but does not matter if its sold or not
Nominal GDP is measured at current prices. Real GDP measures output (GDP) at constant prices, that is, adjusted for changes in the level of prices since a base year.
Finally, potential GDP is a measure of the market value of maximum production of final goods and service that is possible in the economy without putting upward pressure on the level of prices in the economy
What does GDP not include?
Financial transacations, 2nd hand sales, imports
Natural unemployment
Includes all unemployment but cyclical unemployment
Cyclical Unemployment
contraction/downturn in economy causes Cyclical unemployment.
Multiplier Effect
Initial Change in Spending x (1/(1 - MPC))
Average propensity to consume
percentage of disposable income spent on consumable goods
Marginal propensity to consume
change in consumption spending as the percent of change in disposable income
Keynesian supply curve
It is horizontal then it kinks or slopes sharply upward
Supply curve to left
shifts to the left/inward due to increase in prices (increase in input)
Supply curve to right
increase in quantity but decrease in price
Increase in export will cause the demand to
increase
lagging indicator of a change in the business cycle?
Long unemployment
Real GDP
nominal gdp/ gdp deflator %
M 1
cash, check writing deposits
A put is an option that gives its owner the right to do which of the following?
Sell a specific security at fixed conditions of price and time
International Monetary Funds
providing funds to countries in financial crisis, including currency crisis, banking crisis, or debt crisis.
What is cosidered foreign direct investment
Foreign direct investment involves investments in non-monetary assets (e.g., property, plant, equipment, etc.) in a foreign location
Gross Domestice Product (imports or exports)
Both a country’s imports and exports enter into the determination of that country’s gross domestic product. Specifically, it is net exports (exports minus imports) that enter into the determination of gross domestic product
Capital Markets facilitates the trading of stocks or bonds?
Capital markets facilitate the trading of both stocks and bonds.
Eurodollars are denominatedin U.S dollars or EEU euros?
Eurodollars are denominated in U.S. dollars, but not in EEU euros
Three Michael Porter Strategies
The three generic strategies he identified are cost leadership, differentiation, and focus.
Five Forces Framework
The five forces framework developed by Michael Porter is used for determining the nature, operating attractiveness, and probable long-run profitability of a competitive industry.
High intensity of rivalry: fixed cost structure and product differentiation
The highest intensity of rivalry should be in an industry with a high fixed cost structure, in which producers seek to operate at full capacity, and a low degree of product differentiation, which results in products having many substitutes.
SWOT analysis
SWOT analysis is directly concerned with the relationship between an entity (its strengths and weaknesses) and its environment (the opportunities and threats).
