Economic Analysis Flashcards
What defines a recession?
GDP dropping for 2 consecutive quarters
What defines a depression?
GDP drops for 18 months
What is fiscal policy?
Government actions that influence economic activity. Such as changing tax rate or government spending
What is monetary policy?
Action taken by Federal Reserve to influence growth of money supply
What is the leading indicator of inflation trends?
Producer Price Index (PPI)
Cost-Push Inflation theory
rising costs and increasing wage demands from workers force producers to raise prices
Demand-Pull Inflation
demand for goods outstrips productive potential
Monetarist theory
inflation caused by fed reserve
During economic expanstion will inflation go up or down?
up
How do repurchase agreements affect credit?
Repo loosens credit
Reverse repo tightens credit
What is disintermediation?
taking money out of banks into other higher paying investments
Fed Funds Rate
rate member banks charge each other for overnight loans
Discount rate
rate at which member banks can borrow reserves from fed
broker loan rate
rate banks charge brokers on loans
prime rate
rate banks charge best commercial customers
M1
currency in circulation and checkable deposits
M2
all m-1 plus time deposits of less that 100k
m3
m-2 plus time deposits of over 100k
L
m3 plus all other liquid assets
Is GDP measured in inflated dollars?
no
Leading business cycle indicators
New consumer goods orders Initial claims for unemployment length of man. workweek delivery delays by vendors building permits contracts for plant and equipment stock prices on sp 500 index of consumer expectations money supply level spread yield of 10 year treasury and federal funds
Coincident business cycle indicators
personal income industrial production employment levels manufacturing and trade sales gross national product
Lagging business cycle indicators
employment duration inventory to sales ratio labor cost per manufactured unit commercial loans outstanding ratio of consumer credit to income level reported corporate profits
