Economic Concepts Flashcards
1
Q
Supply vs demand
A
- Supply - the quantity of good suppliers are willing to offer at a certain price (upward slope)
- Demand - How much of a good buyers are willing to buy at a certain price (downward slope)
- Equilirbirum - when supply and demand meet
2
Q
Two reasons why when the price of a good/service increases, consumers will buy less?
A
- Substitiuion effect
- They will buy items that subsittiute those other items
- These include items that are similar but lower priced
- Income Effect
- When prices of goods increase at a rate faster than consumer income
3
Q
Complement goods
A
Usuually pruchased together
4
Q
Price elasticity
A
- How consumers react to a change in price of a good/service
- Elastic - increase in price do affect demand
- Inelastic - increase in price does NOT affect demand
5
Q
GDP vs GNP
A
- Gross domestic product is the value of all good and services WITHIN the country borders
- Gross national product is the value of all good and services produced by US residents inside and outside the US
6
Q
Recession vs Depression
A
2 consecutive quarters
VS
6 consectuve quarters
of declining GDP
7
Q
Monetary policy
A
- Controlled by the Federal Reserve Board
- Goals are to maintain long-term economic growth
- Full employment
- Optimal price levels
- Fed tools
- Discount rate
- Buy/sell of government bonds
- Reserve requirements
8
Q
Buying vs selling government securities - Fed
A
- Buying would result in MORE money supply
- Which would decrease interest rates
- Selling would result in LESS money supply
- Increase interest rates
9
Q
Fed - Disocunt rate, prime rate, and federal funds rate
A
- Discount rate is controlled by fed
- Prime rate is NOT controlled but rather influenced by fed
- Rate charged to member banks who have great credit
- Federal funds rate is NOT controleld but also influenced by fed
- What banks charge EACH OTHER for overnight transactions
10
Q
Fiscal policy
A
- Taxation and
- Government spending (increasing unemployment payments, other government programs)
11
Q
How is the interest rate impacted?
A
By the supply/demand of loanable funds
12
Q
Deflation vs Disinflation
A
- Deflation - the general decreasing of prices
- Disinflation - The slowing of increasing prices
