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economic business cycle, consumer protection Flashcards

1
Q

when interest rates rise… investment returns…

A

returns decrease

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2
Q

when interest rates rise… purchasing power…

A

purchasing power decreases

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3
Q

when tax rates rise… there is a redistribution of wealth…

A

from the higher tax brackets to the lower tax brackets

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4
Q

as inflation increases… the cost of goods…

A

also increases

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5
Q

as unemployment decreases…

A

wage rates (wages paid to employees) increases because firms are competing for workers

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6
Q

when monetary and fiscal policy take on a loosening policy… that leads to

A

economic expansion

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7
Q

when monetary and fiscal policy take on a tightening policy… that leads to

A

economic slowdown

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8
Q

demand reflects…

A

the quantity of a good or service that consumers are willing to purchase

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9
Q

as price increases.. demand

A

decreases

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10
Q

as price decreases… deman

A

increases

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11
Q

supply reflects…

A

the quantity of a good or service that businesses are willing to supply at a given price

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12
Q

the higher the price, the ___ suppliers are willing to supply

A

more

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13
Q

the lower the price, the ___ suppliers are willing to supply

A

less

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14
Q

the demand curve will shift due to an increase or decrease in…

A

income, taxes, savings rate, and disposable income

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15
Q

anything that causes discretionary income to increase will shift the demand curve..

A

up and to the right

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16
Q

anything that causes discretionary income to decrease will shift the demand curve…

A

down and to the left

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17
Q

the supply curve will shift to the left or right because of a change in….

A

technology, competition, anything other than price

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18
Q

anything that causes production to improve will shift the supply curve…

A

down and to the right

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19
Q

anything that causes an increase in production costs or supply to decrease, the supply curve will shift…

A

up and to the left

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20
Q

equilibrium is the price…

A

at which the quantity demanded equals the quantity supplied

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21
Q

substitutes are…

A

products that serve a similar purpose

a price change in one product changes the quantity demanded for another product

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22
Q

complements are…

A

products that are consumed jointly

a price change in one product changes the quantity demanded for another product

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23
Q

price elasticity measures…

A

the change in quantity demanded, relative to changes in price

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24
Q

elastic demand

A

quantity demanded responds significantly to changes in price

ex. airline tickets, movie tickets, alcohol, luxury goods

an elastic demand curve is almost horizontal, sloping down and to the right

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25
inelastic demand
quantity demanded changes very little to changes in price life's necessities respond very little to changes in price ex. milk and gas an inelastic demand curve is almost vertical, sloping down and to the right
26
what is inflation, interest rates, unemployment and GDP doing at THE PEAK of the business cycle?
Inflation = highest Interest Rates = highest Unemployment = lowest GDP = highest
27
what is inflation, interest rates, unemployment and GDP doing at A RECESSION of the business cycle?
Inflation = decreasing Interest Rates = decreasing Unemployment = increasing GDP = decreasing
28
what is inflation, interest rates, unemployment and GDP doing at A TROUGH of the business cycle?
Inflation = lowest Interest Rates = lowest Unemployment = highest GDP = lowest
29
what is inflation, interest rates, unemployment and GDP doing at A EXPANSION of the business cycle?
Inflation = increasing Interest Rates = increasing Unemployment = decreasing GDP = increasing
30
Gross Domestic Product measures... (GDP)
the amount of goods and services produced IN THE US regardless of ownership
31
Gross National Product measures... (GNP)
the amount of goods and services produced by a country's citizens, regardless of where the goods and services are produced
32
definition of a recession
consists of 6 consecutive months (or two quarters) of declining GDP
33
definition of a depression
a recession becomes a depression if the recession lasts for 18 months or six consecutive quarters
34
definition of inflation
an increase in prices risk of inflation is the loss of purchasing power
35
formula to measure inflation
inflation = [(price level in year x) - (price level in year y)] / price level in year y
36
definition of deflation
opposite of inflation aka prices are falling
37
definition of disinflation
a decline or slowdown in the rate of inflation
38
Consumer Price Index (CPI) measures
the price change in a basket of goods and services at the retail level
39
Producer Price Index (PPI) measures
price changes in the wholesale and manufacturing sectors
40
what are the three different types of economic indicators?
leading, lagging, and coincident
41
what are leading indicators and what are some examples?
anticipate changes in the economy ex: initial unemployment claims stock prices money supply new manufacturing orders new private housing units consumer sentiment
42
what are coincident indicators and what are some examples?
change along with changes in the business cycle ex: employees on payroll personal income industrial production manufacturing sales
43
what are lagging indicators and what are some examples?
summarize or confirm past performance ex: average duration of unemployment change in the CPI change in labor cost per unit consumer credit to income value of outstanding loans average prime rate charged by banks
44
what is Monetary Policy?
the policy and means by which the Federal Reserve controls the money supply and influences interest rates
45
what are the 3 main goals of the Federal Reserve?
maintain long term economic growth maintain price levels supported by the economy maintain full employment
46
easing monetary policy means
through increasing money supply and decreasing interest rates
47
tightening monetary policy means
decreasing money supply and increasing interest rates
48
what are the four tools that the Federal Reserve uses to influence the money supply and interest rates?
Reserve Requirement Discount Rate Open Market Operations Excess Reserves
49
what is the reserve requirement?
the percentage of deposits a bank must maintain in cash
50
what happens when the reserve requirement increases?
there is less cash available to lend, therefore the money supply decreases and interest rate increase
51
what happens when the reserve requirement decreases?
there is more cash available to lend, therefore the money supply increases and interest rates decrease
52
what is the discount rate?
the overnight interest rate at which member banks can borrow from the Federal Reserve to meet their reserve requirements
53
as the discount rate increases, short term interest rates...
increase
54
as the discount rate decreases, short term interest rates...
decrease
55
what is meant by open market operations?
as the federal reserve buys or sells government securities, the money supply is influenced and places pressure on interest rates
56
as the federal reserve buys treasuries...
money supply increases and interest rates decrease
57
as the federal reserve sells treasuries...
money supply decreases and interest rates increase
58
what are the excess reserves?
monies that a bank holds at the Federal Reserve in excess of the required reserve amount
59
an increase in the reserve requirement causes a ____ policy
contractionary
60
a decrease in the reserve requirement causes a ____ policy
expansionary
61
an increase in the discount rate causes a ______ policy
contractionary
62
a decrease in the discount rate causes a _____ policy
expansionary
63
when there is selling of treasuries in the open market, it is a ______ policy
contractionary
64
when there is buying of treasuries in the open market, it is a _____ policy
expansionary
65
when there is an increase in the excess reserve rate, it is a _____ policy
contractionary
66
when there is a decrease in the excess reserve rate, it is a _____ policy
expansionary
67
what is fiscal policy?
the policy and means by which Congress controls spending and taxation, which influences the money supply and interest rates
68
what are Congress's 3 goals when it comes to fiscal policy?
maintain economic growth maintain price stability maintain full employment
69
what are the 3 tools that Congress uses for fiscal policy?
taxation spending debt management
70
increasing tax rates will...
reduce money available for spending, thereby increasing interest rates
71
decreasing tax rates will....
increase money available for spending, thereby decreasing interest rates
72
when Congress increases government spending...
it increases the money supply and thereby decreases interest rates
73
when congress cuts spending...
it increases interest rates
74
what is deficit spending?
when Congress spends more than tax revenues that are collected
75
as Congress borrows more, the amount of dollars available to be lent decreases AND
it places increasing pressure on interest rates
76
Expansionary policy from both fiscal and monetary policy results in a...
normal yield curve
77
Contractionary policy from both fiscal and monetary policy results in a....
inverted yield curve
78
FDIC Insurance has a total of how much in coverage?
Total of 250k of insurance per type of account ownership account types are: individual, joint, trust, self directed retirement accounts
79
Bankruptcy Law Chapter 7
provides relief through liquidation
80
Bankruptcy Law Chapter 11
provides relief through reorganization for businesses or the self employed
81
Bankruptcy Law Chapter 13
provides relief through adjusting debts
82
what are debts that are not discharged through Chapter 7?
student and government loans 3 years of back taxes alimony and child support monies owed due to malicious acts, drunk driving, criminal fines and penalties, or embezzlement fraud
83
what assets are exempt from creditors?
homestead, life insurance, qualified plans
84
Securities Act of 1933
regulates new issues of securities in the primary market
85
Securities Act of 1934
regulates secondary markets established the SEC (whos primary function is to regulate the securities market)
86
Securities Investor Protection Act of 1970
created SIPC provides coverage if a broker dealer becomes insolvent or if there is unauthorized trading in an investor's account
87
what factors influence credit scores?
payment history amount of debt length of credit history new credit type of credit

My CFP Flashcards (18 decks)

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