ECONOMIC COPCEPTS

Question 1

in a conventional graph, the ‘intercept’ is the point at which:

Answer 1

the dependent variable intersects the Y axis, and where the independent variable has the lowest value, usually zero

Question 2

elasticity of supply?

Answer 2

%change in quantity supplied/%change in price

Question 3

what is elasticity of demand?

Answer 3

the % change in quantity is greater than the % change in price

Question 4

how do you prevent deflation?

Answer 4

you increase the money supply by lowering the reserve requirement, or lowering interest rates which stimulates demand and increases the general price level

Question 5

what does an import quota do?

Answer 5

it restricts the quantity of a commodity that can be brought into the country from foreign providers. The biggest beneficiary is the domestic suppliers of the commodity.

Question 6

3 generic strategies by Michael Porter?

Answer 6

cost leadership, differentiation, and focus

Question 7

which framework is for gauging the attractiveness of the competitive environment of an industry?

Answer 7

five forces

Question 8

what analysis method is for evaluating a macro-environment?

Answer 8

PEST analysis: political, economic, social, and technological characteristics

Question 9

what are the five forces?

Answer 9

1-threat of new competition entering the market2-threat of substitute goods or services3-bargaining power of buyers of the industry good or service4-bargaining power of suppliers of the inputs used in the industry5-intensity of rivalry

Question 10

what does SWOT stand for?

Answer 10

strengths and weaknesses of the entity, and the opportunities and threats faced by the entity

Question 11

what is a time series model?

Answer 11

models based on extrapolation of past data to predict a future value

Question 12

delphi method?

Answer 12

form of qualitative forecasting that involves consensus of a group of experts using a multi-stage process to converge on a forecast.

Question 13

diff in quantitative & qualitative forecasting?

Answer 13

quantitative is objective and rely on math and calculations. qualitative are subjective and rely on judgement and opinion

Question 14

the purchase and sale of commodities for current delivery is what:

Answer 14

the spot market. the futures market is for delivery in the future

Question 15

what is a specialist on the NYSE?

Answer 15

a NYSE member acting as a dealer in a small number of securities

Question 16

what is a call option?

Answer 16

the right to purchase a security at a specified price for a defined period of time.

Question 17

what factors make up the nominal risk free rate?

Answer 17

the real rate of interest and an inflation premium

Question 18

if the Fed reserve purchases a large number of US gov securities, what is the effect?

Answer 18

it increases the monetary supply and puts downward pressure on interest rates

Question 19

what is a put option?

Answer 19

it lets you sell a stock at a certain price for a period of time.

Question 20

what is transfer pricing?

Answer 20

the pricing strategy for products and services bought and sold across international borders between related parties. it is mainly part of tax planning.

Question 21

target pricing?

Answer 21

set prices based on what you think customers are willing to pay based on perceived value

Question 22

does deflation encourage or discourage borrowing?

Answer 22

deflation discourages borrowing because people want to borrow money in times of inflation because you can repay it with money with less purchasing power

Question 23

what are x and y in a line equation?

Answer 23

x is the independent variable, and y is the dependent variable.

Question 24

what is the slope of a demand curve?

Answer 24

it is negative. the lower the price, the greater quantity demanded

Question 25

a positive GDP gap exists when:

Answer 25

potential GDP exceeds real GDP. This means that the economy is operating at less than full capacity- which implies unemployment and under-utilized plant and equipment

Question 26

2 largest export countries?

Answer 26

germany and china- each about 9%

Question 27

US share of worldwide GDP is:

Answer 27

approximately 25%

Question 28

which type of employment is not considered in calculating full employment?

Answer 28

cyclical- the other 3 types can exist and still have “full employment”

Question 29

a supply schedule shows the relationship between the quantity of a commodity that will be supplied during a period of time and:

Answer 29

the selling price of the commodity. A supply curve is basically saying that as price increases, more sellers would enter the market and more of the good would be supplied

Question 30

freely fluctuating exchange rates:

Answer 30

automatically correct a lack of equilibrium in the balance of payments

Question 31

what would the Federal Reserve NOT do to stimulate the economy?

Answer 31

Reduce tax rates. The Fed Reserve does not change tax rates. This would stimulate the economy, but tax rates are set by Congress, not the Fed. The Fed could reduce the reserve requirement, reduce the discount rate which would increase loan activity, and they could increase the money supply.

Question 32

who controls fiscal and monetary policy?

Answer 32

The Fed controls monetary policy(money supply), and Congress controls fiscal policy(gov spending and taxes)

Question 33

calculate marginal propensity to consume:

Answer 33

change in spending over change in disposable income

Question 34

calculate avg propensity to consume:

Answer 34

% of disposable income spent on consumable goods

Question 35

the preventive measure for deflation?

Answer 35

increase the money supply. this stimulates demand and increases the general price level

Question 36

how does deflation distort reported income?

Answer 36

depreciation is NOT reflective of current fixed-asset replacement costs?

Question 37

what is SWOT concerned with?

Answer 37

the relationship between an entity and its environment

Question 38

what is the 5 forces concerned with?

Answer 38

the nature, operating attractiveness, and probably long-run profitability of a competitive industry

Question 39

what is the basis for a natural monopoly?

Answer 39

economics of scale- or an increasing return to scale.

Question 40

in a perfectly competitive market, what is the best level of output for the firm?

Answer 40

Marginal revenue = marginal cost.

Question 41

the direct exchange rate expresses the domestic price (in dollars) of:

Answer 41

one unit of foreign currency. 1 euro to $1.15

Question 42

PEST is acronym for:

Answer 42

political, economic, social, and technological

Question 43

What does PESTEL add to PEST?

Answer 43

E= environmental factorsL= legal factors