Chapter 2 Flashcards
Economy
Total of all economic activity in a given region
Economics
Study of how a society uses its scarce resources to produce and distribute goods and services
Microeconomics
Study of how individual actors make choices in response to changes in incentives, prices resources or methods of production
Macroeconomics
Branch of economics that studies how overall economy behaves
Factors of production
Economic resources, including natural resources, HR, capital, entrepreneurship and knowledge
Scarcity
Productive resource that has a limited supply
Trade-off
The more time you spend on an activity means less time for any other
Opportunity cost
Value of the most appealing alternative
Economic indicators
Statistics that measure the performance of the economy (GDP, Unemployment rate)
Durable-goods
Goods that typically last more than 3 years
Price indexes
A way to monitor the inflation or deflation
CPI
Statistic that measures changes in prices in goods and services people typically buy overtime
PPI
Statistical measure of price trends at the producer levels
GDP
The value of all goods and services produced by businesses located within the nation’s boarders, usually in a year
GNP
The value of all goods and services produced by country’s residents no matter where they live, usually in a year
Economic system
Policies that define a society’s particular economic structure
Planned system
Economic system in which the government controls most of the factors of production
Free-market system
Economic system in which decisions about factors of production are decided by the market’s buyers and sellers
Capitalism
Economic system based of economic freedom and competition
Regulation
Relying more on laws and policies than on market forces to govern economic activity
Deregulation
Removing regulations to allow the market to prevent excesses and correct itself overtime
4 major areas in which the government plays a role
Protecting stakeholders, Fostering competition, Encouraging innovation and economic development, Stabilizing and stimulating the economy
Monetary policy
Applied by the Fed, involves the control of money supply and interest rates to influence the economy
Fiscal policy
Use of government revenue and spending to influence the business cycle
Antitrust legislation
Limit what businesses can and cannot do, to ensure that competitors have an equal chance
Divesting
Selling some parts of the company or making other concessions
Demand
Quantity that consumers are willing and able to buy at a given time for various prices
Supply
Quantity that producers are willing and able to provide at a given time at various prices
Demand curve
Graph that shows the quantity of a product that buyers will purchase at a given time at various prices
Supply curve
Graph that shows the quantity of a product that producers are willing to provide at a given time at various prices
Equilibrium price
The point at which quantity demanded equals quantity supplied
Competition
Rivalry among businesses for the same customers
Monopoly
A dominant company in a market to the degree it can control prices and shut out other competitors
Pure competition
Multiple suppliers of whom none is dominant enough to control prices
Oligopoly
A market situation in which a small number of suppliers provide particular goods and services and cn influence each other though production and pricing
Monopolistic competition
Situation in which many sellers offer differentiated products and new suppliers can enter the market
Recession
Period during which national income, employment and production all fall, often defined at least two quarters of decline in the GDP
Business cycle
Fluctuations in the rate of growth that an economy experiences over a period of several years
Unemployment rate
Percentage of the labor force currently without a job
The 4 types of unemployment
Frictional, Seasonal, Structural, Cyclical
Inflation
Steady rise in the average prices of g/s
Deflation
Steady fall in the average prices of g/s
Money
Anything generally accepted as a means of paying for g/s, serves as a medium of exchange, unit of accounting, store of value and standard of deferred payment
Fiat money
Official currencies issued through the government fiat (U.S. dollar, Euro)
Cryptocurrency
Currency represented by digital tokens
Non-fungible tokens (NFTs)
Digital certificates that convey sole ownership of a digital asset, cannot be replaced by something else unlike crypto
Money supply
The amount of money in circulation at any given time
M1
Cash held by the public and money deposited in a variety of checking accounts
M2
M1+ saving accounts
Federal Reserve system
Central banking system in the U.S. responsible for banks and implementing monetary policy, maximizing employment, keeping prices stable and keeping inflation under control
Fed funds rate
Interest rate that member banks charge each other to borrow money overnight from the funds they keep in the Fed accounts
Discount rate
Interest rate that member banks pay when they borrow funds from the Fed
Prime rate
Interest rate a bank charges its best loan customers
Investment banks
Firms that offer a variety of services related to initial public stock offerings, mergers and acquisitions etc..
Commercial banks
Banks that accept deposits, offer various checking and saving accounts and provide loads. Rather applied to serve businesses only, not customers
Retal bank
Banks that serve customers with checking and saving accounts, debit and credit cards and loans for home, cars etc…
Fintech
Technologies with potential to improve of disrupt the financial services
What 5 major fields does fintech explore?
Making financial services more inclusive
Improving the efficiency of financial activities
Strengthening the security of financial systems
Improving the customer experience in financial services
Enhancing financial decision-making
Neobanks
Banks that provide services entirely through mobile and digital channels
