BEC Q4 Flashcards
an increase in available sources increases the economies capacity to
prroduce more goods and service
- this does not automatically increase the amount of goods and services produced
- nor does it automatically increase the standard of living
- nor automatically increase technological efficiency
If the NAIRU is 5%, the actual rate of unemployment is 9%, and the rate of inflation is 12%,
stagflation
Unemployment far above NAIRU and high inflation (in double digits) qualify as stagflation. Twelve percent is a historically high rate of inflation in the U.S.
What is the short-term Phillip Curve
It implies that in the short term - policies resulting in higher inflation may also reduce unemployment
What is the best way to minimize risk from foreign currency fluctuations
When an entity maintains equal levels of receivables and payables in the same currency, a loss on debts resulting from an increase in the exchange rate will be offset by an equal gain on receivables, and vice versa, making this an effective means of avoiding the risk.
What is the definition of opportunity cost
It is the best alternative use or benefit foregone as a result of a business decision
What are entitlement payments
These include medicare, medicaid, SS
An increase in entitlement payments might be linked with an increase in the deficit
Is the CPI a good measure for businesses
No - because it is based on a basket of goods compared to previous periods. It is not a great measure for business because what business buy is different than what consumer buy
What is the Consumer Confidence Index
the CCI surveys customer confidence on the state of the economy
What is the difference between Gross national Product and Net National Product
GNP - measures the total market value of products and services produced by the entire economy
Net National product is GNP minus depreciation
What is the purpose of the CPI
It is to compare relative price changes over time
What is structural unemployment
This is a mismatch between the skills of workers and the needs of labor market - usually from technological advances that eliminate the need for the specific skills many worker possess
- they lose their jobs because of changes in the demand for goods and services
- This is also a change in the composition of employment opportunities as jobs will be created in some sectors and others will lose jobs in other sectors
What is collusive pricing
This happens when competing suppliers agree they will not compete on the basis of price.
Therefore there is a uniform price to be charged by all suppliers
This it enables the supplier to establish higher than market prices
What is a trade surplus
This is when one country’s exports exceed their imports
Its a positive thing because it means more employment
It can strengthen their currency
It means their is higher demand for a country’s goods
What happened with the economy in the 2000’s
The global economy was expanding
- Developing countries experienced trade surpluses (your exports exceed your imports)
- This is because their goods were relatively cheap
- These countries then went out and invested these monies in expansion abroad -
What is the theory of derived demand
- This means that demand for product A will mean there is a demand for the resources for product A
An increased demand in apple pies means that there is an increased demand for apples
