Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CSC > Chapter 4 - Economic Principles > Flashcards

Chapter 4 - Economic Principles Flashcards

1
Q

What are the three main groups that interact with the economy?

A
  1. Consumers (maximize satisfaction/well-being)
  2. Firms (max profits)
  3. Governments
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is the Expenditure Approach of measuring GDP?

A

Looks at total spending on “final goods” and services:

GDP = C + G + I + (X - M)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is the Income Approach to measuring GDP?

A

Looks at total income from producing goods & services:

  • Wages for Labour
  • Rent for land
  • Interest for Capital goods
  • Profits for entrepreneurs
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What 3 factors can lead to GDP growth?

A
  • Increases in population
  • Increases in capital stock (equipment and education)
  • Technological improvement
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What leads to increased output per worker?

A

Higher savings (increased capital stock) and technology.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What phase has stable inflation, strong stock market activity, and increasing profits, inventories, and jobs?

A

Expansion

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

In what phase does demand outstrip supply, and has high inflation and interest rates?

A

Peak

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What phase has declining economic activity, reduced production and falling employment?

A

Contraction

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What phase has falling interest rates (along with a bond rally), falling inflation and stock price rally?

A

Trough

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What phase has high but flat unemployment, and increasing production?

A

Recovery

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Money supply, average work week hours and commodity prices are what type of infocator?

A

Leading

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

The inflation rate, business loans and interest, and private sector plant/equipment spending are what type of indicator?

A

Lagging

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Personal income, GDP, industrial productions and retail sales are what type of indicators?

A

Coincident

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Manufacturers’ new orders, stock prices and housing starts are what type of indicator?

A

Leading

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is a “soft landing” vs a recession?

A

Recession is major decline in GDP, while soft landing has significantly slowed growth (but not negative).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is the “participation rate”?

A

The share of working-age population in the workforce.

17
Q

What factors can cause the unemployment rate to rise?

A

Number of employed falls or number of people entering the workforce rose (or both).

18
Q

What type of unemployment is part of a healty economy?

A

Frictional

19
Q

What type of unemployment means workers cannot find jobs due to lack of skills?

A

Structural

20
Q

What type of unemployment rises when the economy weakens and falls when the economy strengthens?

A

Cyclical

21
Q

What 5 factors determine interest rates?

A
  1. Demand/Supply of capital
  2. Default risk of central Gov
  3. Foreign interest and exchange rates
  4. Central bank creditability
  5. Inflation
22
Q

What are the 3 functions of money?

A
  1. Medium of exchange
  2. Unit of account (price)
  3. Store of value
23
Q

What is the formula for inflation rate?

A

100 x (Current CPI - Previous CPI) / Previous CPI

24
Q

What is the “output gap”?

A

Difference between real GDP and potential GDP.

25
Q

What is potential GDP?

A

The maximum level of real GDP that the economy can maintain without increasing inflation.

26
Q

What is a negative output gap? And how does it affect inflation?

A

When actual output is below potential output. There is “spare capacity”. Inflation falls or stays the same.

27
Q

What is a positive output gap and how does it affect inflation?

A

Occurs when actual output is above potential, increasing inflation. (Scarce labour)

28
Q

What is demand-pull inflation?

A

When there is a positive output gap there is strong consumer demand for goods which increases inflation.

29
Q

What is cost-push inflation?

A

When the cost to produce output increases. (Such as higher inputs and wages).

30
Q

What does the Phillips curve say about disinflation?

A

When unemployment is low, inflation is high.

When unemployment is high (or growth is slow) inflation is low.

31
Q

What is the sacrifice ratio?

A

The extent to which GDP must be reduced in order to see a 1% decrease in inflation.

32
Q

What is deflation vs disinflation?

A

Deflation occurs when change in CPI is negative year over year.
Disinflation is a slowing in the rate of inflation.

33
Q

What are the two components of a country’s balance of payments?

A

Current account - exchange of goods and services between citizens and foreigners, plus foreign aid.
Capital & financial account - investment flow between citizens and foreigners.

CSC (10 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions