Economic Concepts & Analysis Flashcards by Courtney Schmidt

What is economics?

Science that studies human behavior as the relationship between ends & scarce means that have alternative uses

How well did you know this?

Not at all

Perfectly

What are business cycles?

Rise & fall of economic activity relative to long-term growth trends, fluctuations of economic activity

How well did you know this?

Not at all

Perfectly

What is macroeconomics?

Study of economics as a whole

How well did you know this?

Not at all

Perfectly

What is the GDP?

Total market value of all final goods & services produced within the borders of a nation in a particular period regardless of who owns the resources

How well did you know this?

Not at all

Perfectly

What is an expansionary phase?

Rising economic activity & growth, rising above long-term growth trend, profits likely to be rising

How well did you know this?

Not at all

Perfectly

What is a peak?

High point of economic activity, end of expansionary phase, beginning of contractionary phase, capacity constraints & input shortages, higher costs & price levels

How well did you know this?

Not at all

Perfectly

What is a contractionary phase?

Falling economic activity & growth, follows a peak, profits are falling

How well did you know this?

Not at all

Perfectly

What is a trough?

Low point of economic activity, lowest profit levels, excess production capacity, reducing workflows & cut costs

How well did you know this?

Not at all

Perfectly

What is a recovery phase?

Follows a trough, economic activity increases, profits stabilize & demand for goods & services rises

How well did you know this?

Not at all

Perfectly

What is a recession?

Two quarters of falling national output

How well did you know this?

Not at all

Perfectly

What is a depression?

Severe recession with a long period of stagnation in business activity & high unemployment rates

How well did you know this?

Not at all

Perfectly

What is a leading indictator?

Predicts economic activity

How well did you know this?

Not at all

Perfectly

What is a lagging indicator?

Follows economic activity

How well did you know this?

Not at all

Perfectly

What is a coincident indicator?

Change at same time as whole economy

How well did you know this?

Not at all

Perfectly

What is perfect (pure) competition?

No firm can influence market price of its product nor shift market supply sufficiently

How well did you know this?

Not at all

Perfectly

What is monopolistic competiton?

Many sellers compete to sell differentiated product in a market in which entry of new sellers is possible

How well did you know this?

Not at all

Perfectly

What is an oligopoly?

Few sellers dominate sales of a product & entry of new sellers is difficult

How well did you know this?

Not at all

Perfectly

What is a monopoly?

Concentration of supply in a single firm

How well did you know this?

Not at all

Perfectly

What is fiscal policy?

Government’s use of government spending & taxation to influence economy

How well did you know this?

Not at all

Perfectly

What is monetary policy?

Used by a national’s central bank (Federal Reserve) to affect money supply, interest rates, & credit available in the economy

How well did you know this?

Not at all

Perfectly

What are open market operations?

Government buying & selling government securities

How well did you know this?

Not at all

Perfectly

What is the discount rate?

Interest rate the Federal Reserve charges its members banks

How well did you know this?

Not at all

Perfectly

What is the required reserve ratio?

How much money a bank is required to hold in its vault or on deposit with a Federal Reserve bank

How well did you know this?

Not at all

Perfectly

What are regulations?

Rules established by a government that guide how an industry and its entities can operate

How well did you know this?

Not at all

Perfectly

What are trade controls?

Restrict transactions & transfers of goods/services, protect domestic industries

What are export controls?

Laws protecting trade & national security

What are tariffs?

Taxes on imports which increases prices of foreign goods

What are quotas?

Limits on quantity of a good that can be imported over time

What are embargoes?

Prohibit importing or exporting of certain goods from a specific country

What is microeconomics?

How human behavior affects conduct of narrowly defined units

What is a market?

Collection of buyers & sellers meeting or communicating in order to trade goods or services

What is the demand curve?

Illustrates maximum quantity of good that consumers are willing & able to purchase at every price

What is the quantity demanded?

Quantity individuals are willing to purchase at every price

What is a change in quantity demanded?

Movement along the demand curve, change in amount of good demanded resulting from change in price

What is a change in demand?

Movement of the demand curve, change in amount of good demanded resulting from change in something other than price

What is the fundamental law of demand?

Price of a product & quantity demanded are inversely related

What is the substitution effect?

Consumers purchase more (less) of a good when its price falls (rises) in relation to other good's prices

What is the income effect?

As prices are lowered with income remaining constant, people purchase more or all of lower-priced products

WRITEN - factors shifting demand curves

Changes in wealth Changes in price of related goods Changes in consumer income Changes in consumer tastes or preferences for a product Changes in consumer expectations Change in number of buyers

What is the supply curve?

Maximum quantity of a good that sellers are willing & able to produce at every price

What is quantity supplied?

Amount of good producers are willing & able to produce at every price

What are changes in quantity supplied?

Movement along the supply curve, change in amount producers are willing & able to produce from change in price

What is a change in supply?

Movement of the supply curve, resulting from change in something other than price of good

ECOST - factors shifting supply curves

Changes in price expectations of supplying firm Changes in production costs Changes in price or demand for other goods Changes in subsidies or taxes Changes in production technology

What is market equilibrium?

When there are no forces acting to change the current price/quantity combination, where supply & demand curves intersect

What is a price ceiling?

Maximum price established below equilibrium which causes shortages, prices are low & greater demand than supply available

What is a price floor?

Minimum price set above equilibrium which causes surpluses, minimum prices established by law

What is elasticity?

How sensitive the demand for or supply of a product is to a change in price

Price elasticity of demand

% change in quantity demanded / % change in price

What is price inelasticity?

Price of demand is less than 1.0

What is unit elastic?

Price elasticity equal to 1.0

Price elasticity of supply

% change in quantity supplied / % change in price

What is price elasticity?

Absolute price is greater than 1.0

Cross elasticity of demand (supply)

% change in number of units X demanded (supplied) / % change in price of Y

What is cross elasticity?

When quantity demanded for or supplied of one good causes the price change of another good

What does a positive coefficient in cross elasticity mean?

Substitute goods

What does a negative coefficient in cross elasticity mean?

Complementary goods

What does a zero coefficient in cross elasticity mean?

Goods are unrelated

Income elasticity of demand

% change in number of units of X demanded (supplied) / % change in income

What does positive income elasticity mean?

Normal good, product whose demand is positively related to income

What does negative income elasticity mean?

Inferior good, product whose demand is inversely related to income

What is inflation?

Sustained increase in general prices of goods & services