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BEC > Economic Concepts & Analysis > Flashcards

Economic Concepts & Analysis Flashcards

1
Q

What’s federal reserve system’s reserve ratio?

A

Specified % of a commercial bank’s deposit liabilities that must reserve in the central bank

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2
Q

What’s marginal revenue?

A

Change in total revenue associated with producing and selling one more unit of output

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3
Q

What’s economic of scale?

A

Reduction in average total cost of production when a firm expands plant production

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4
Q

What’s aggregate demand?

A
  • 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
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5
Q

What’s frictional unemployment?

A
  • 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
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6
Q

What’s structural unemployment?

A
  • 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
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7
Q

What’s cyclical unemployment?

A

Loss of jobs due to economy such as recession or contraction

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8
Q

Formula of full unemployment

A
  • Friction + Structual unemployment
  • Cyclical = 0
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9
Q

What actions to take to implement an expansionary monetary policy?

A
  • Purchase federal securities
  • Lower the discount rate
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10
Q

What actions to take in contractionary phase?

A

Lower the discount rate

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11
Q

Which group is the primary beneficiary of a tariff?

A

Domestic procedures of goods protected by the tariff

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12
Q

What’s producer price index (PPI)?

A

The price of a basket of commodities at the point of the first commercial sale.

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13
Q

What’s the law of diminishing marginal utility?

A

Marginal utility will decline as a consumer acquires more units of specified product

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14
Q

What’s capital account?

A

Related to the int’l movement of financial capital

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15
Q

What’s kinked demand curve means in Oligopoly?

A

Competitors match price decreases, but not to match price increases

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16
Q

What’s the effect when a foreign competitor’s currency becomes weaker compared to U.S dollar?

A
  • Foreign company will have an advantage in the U.S market
  • Foreign products become cheaper for purchasers in another country
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17
Q

What’s comparative advantage?

A

Ability of one nation to produce at a relatively lower opportunity cost than another nation.

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18
Q

What’ll cause a nation’s currency to appreciate on the foreign exchange market?

A
  • 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
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19
Q

If country A has a higher nominal interest rate than country B, the currency of country A will selling at

A
  • 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
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20
Q

Definition of monopolistic competition

A
  • Large number of firms operating non-collusively
  • Producing differentiated products
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21
Q

Formula for reserve ratio

A

Reserves / Total demand deposits

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22
Q

What’s normal goods?

A
  • Demand increases as personal income increase
  • Ex: Steaks, airline tickets, new clothing
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23
Q

What’s inferior goods?

A
  • Demand decreases as personal income increases
  • Ex: Public transportation, used clothing
24
Q

What’s open market operations?

A
  • Purchase gov’t securities, ↑ $ supply
  • Sell gov’t securities, ↓ $ supply
25
Q

Relationship between reserve ratio & money supply

A
  • ↑ Reserve Ratio: ↓ $ supply, Slow down economy
  • ↓ Reserve Ratio: ↑ $ supply, Speed up economy
26
Q

What’s predatory pricing?

A

Lowering prices to such an extent as to drive competition out of business.

27
Q

What’s collusive pricing?

A

Competitors agree to restrict production, to ↑ the price they receive for their product

28
Q

What’s dual pricing?

A

Setting different prices for a product dependent on the currency used to buy it

29
Q

What’s transfer pricing?

A

Price charged by one unit within a larger business to another unit in that business

30
Q

Describe put option?

A

Sell a specified security @ fixed conditions of price & time

31
Q

Formula for real $ terms

A

Actual $ / ( 1 + Inflation rate) # of period

32
Q

All int’l transactions between domestic & foreign countries are reflected in:

A

Trade balance in the current account

33
Q

Which action will prevent from deflation?

A
  • Increase in $ supply
  • Decrease the demand of $
  • Decrease in supply of other goods
  • Increase in demand of other goods
34
Q

What’s economic exposure?

A

Impact of exchange rate fluctuations on a firm’s future cash flow

35
Q

What’s return of scale?

A

↑ in output relative to associated ↑ in the input

36
Q

What condition will increase the return of scale?

A

↑ in output is greater than the input

37
Q

What condition will decrease the return of scale?

A

↑ in output is less than the input

38
Q

What happens when the price is below the equilibrium price?

A
  • Shortage
  • Price ceiling
  • Ex: rent control
39
Q

What happens when the price is above the equilibrium price?

A
  • Surplus
  • Price floor
  • Ex: minimum wages, agricultural price supports, gov’t price support program
40
Q

Formula for % change from prior to the current year

A

(Current balance - Prior balance) / Prior balance

41
Q

How does a change in net investment affect the level of income?

A

↓ in net investment will cause a more than proportional ↓ in the level of income

42
Q

What’s economic exposure?

A

Impact of exchange rate fluctuations on a firm’s future cash flow

43
Q

How’s national economic growth calculated?

A

Change in the real per capita output

44
Q

What’re the characteristics of elastic?

A
  • Greater than 1
  • Price & revenue are inversely related
  • Many substitutes
  • Ex: Luxury items
45
Q

What’re the characteristics of inelastic?

A
  • Less than 1
  • Price & revenue are directly related
  • Few substitutes
  • Ex: groceries, gasoline
46
Q

What are the leading indicators?

A
  • Occur before a recession or before a recovery
  • Ex: Stock market or new housing
47
Q

What are the lagging indicators?

A
  • Occur after a recession or after a recovery
  • Ex: Prime interest rates, unemployment
48
Q

What are the coincident indicators?

A
  • Occur during a recession or during a recovery
  • Ex: Manufacturing
49
Q

Formula for forward premium or discount

A

Forward Rate - Spot Rate x Days in Years

Spot Rate Days in Forward Period

50
Q

What’s laffer curve?

A

↓ in very high tax rates results in ↑ tax revenues

51
Q

What happens when actual GDP exceeds potential GDP?

A

Inflation will occur

52
Q

The relationship between inflation and unemployment

A
  • High inflation ► Reduce unemployment
53
Q

Formula for the marginal propensity to consume

A

△ in Spending / △ in Income

54
Q

Formula for the marginal propensity to save

A

△ in Savings / △ in Income

55
Q

CPI is a measure of

A

The overall cost of a basket of goods & services typically consumed by households in a given time period.

BEC (5 decks)

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