Economic Concepts & Analysis Flashcards
What’s federal reserve system’s reserve ratio?
Specified % of a commercial bank’s deposit liabilities that must reserve in the central bank
What’s marginal revenue?
Change in total revenue associated with producing and selling one more unit of output
What’s economic of scale?
Reduction in average total cost of production when a firm expands plant production
What’s aggregate demand?
- Total expenditures on consumer goods & investment, including gov’t & foreign expenditures during a given period
- Schedule or curve that shows the amount of real GDP or output that buyers desire to buy @ every price level
What’s frictional unemployment?
- Temporary unemployment that always exists as workers change jobs or new workers enter the workforce
- Least importance when trying to predict the future state of economy
- Normal aspect of full employment
What’s structural unemployment?
- Job available doesn’t match with the skills of workforce and do not live where the jobs are located
- Cause by changes in the composition of employment opportunities
- Ex: Technology advances
What’s cyclical unemployment?
Loss of jobs due to economy such as recession or contraction
Formula of full unemployment
- Friction + Structual unemployment
- Cyclical = 0
What actions to take to implement an expansionary monetary policy?
- Purchase federal securities
- Lower the discount rate
What actions to take in contractionary phase?
Lower the discount rate
Which group is the primary beneficiary of a tariff?
Domestic procedures of goods protected by the tariff
What’s producer price index (PPI)?
The price of a basket of commodities at the point of the first commercial sale.
What’s the law of diminishing marginal utility?
Marginal utility will decline as a consumer acquires more units of specified product
What’s capital account?
Related to the int’l movement of financial capital
What’s kinked demand curve means in Oligopoly?
Competitors match price decreases, but not to match price increases
What’s the effect when a foreign competitor’s currency becomes weaker compared to U.S dollar?
- Foreign company will have an advantage in the U.S market
- Foreign products become cheaper for purchasers in another country
What’s comparative advantage?
Ability of one nation to produce at a relatively lower opportunity cost than another nation.
What’ll cause a nation’s currency to appreciate on the foreign exchange market?
- Slower rate of growth income than in other countries
- Exports increase relative to imports, foreign buyers are increasing their purchases of the country’s goods/services
If country A has a higher nominal interest rate than country B, the currency of country A will selling at
- Forward discount relative to the currency of country B
- Higher nominal interest rate is expected to experience a higher rate of inflation ► devalue the currency
Definition of monopolistic competition
- Large number of firms operating non-collusively
- Producing differentiated products
Formula for reserve ratio
Reserves / Total demand deposits
What’s normal goods?
- Demand increases as personal income increase
- Ex: Steaks, airline tickets, new clothing
What’s inferior goods?
- Demand decreases as personal income increases
- Ex: Public transportation, used clothing
What’s open market operations?
- Purchase gov’t securities, ↑ $ supply
- Sell gov’t securities, ↓ $ supply
