Economic Analysis

Question 1

What defines a recession?

Answer 1

GDP dropping for 2 consecutive quarters

Question 2

What defines a depression?

Answer 2

GDP drops for 18 months

Question 3

What is fiscal policy?

Answer 3

Government actions that influence economic activity. Such as changing tax rate or government spending

Question 4

What is monetary policy?

Answer 4

Action taken by Federal Reserve to influence growth of money supply

Question 5

What is the leading indicator of inflation trends?

Answer 5

Producer Price Index (PPI)

Question 6

Cost-Push Inflation theory

Answer 6

rising costs and increasing wage demands from workers force producers to raise prices

Question 7

Demand-Pull Inflation

Answer 7

demand for goods outstrips productive potential

Question 8

Monetarist theory

Answer 8

inflation caused by fed reserve

Question 9

During economic expanstion will inflation go up or down?

Answer 9

up

Question 10

How do repurchase agreements affect credit?

Answer 10

Repo loosens credit

Reverse repo tightens credit

Question 11

What is disintermediation?

Answer 11

taking money out of banks into other higher paying investments

Question 12

Fed Funds Rate

Answer 12

rate member banks charge each other for overnight loans

Question 13

Discount rate

Answer 13

rate at which member banks can borrow reserves from fed

Question 14

broker loan rate

Answer 14

rate banks charge brokers on loans

Question 15

prime rate

Answer 15

rate banks charge best commercial customers

Question 16

M1

Answer 16

currency in circulation and checkable deposits

Question 17

M2

Answer 17

all m-1 plus time deposits of less that 100k

Question 18

m3

Answer 18

m-2 plus time deposits of over 100k

Question 19

L

Answer 19

m3 plus all other liquid assets

Question 20

Is GDP measured in inflated dollars?

Answer 20

no

Question 21

Leading business cycle indicators

Answer 21

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

Question 22

Coincident business cycle indicators

Answer 22

personal income
industrial production
employment levels
manufacturing and trade sales
gross national product

Question 23

Lagging business cycle indicators

Answer 23

employment duration
inventory to sales ratio
labor cost per manufactured unit
commercial loans outstanding
ratio of consumer credit to income level
reported corporate profits