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Economics Flashcards

1
Q

When the prices of an item increases supply increases- because more sellers are willing to sell.

A

Economics

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2
Q

When supply changes due to something other than price.

A

Economics

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3
Q

Supply increases at each price point

Higher Equilibrium GDP

Number of sellers increases - market can get flooded

Examples: Government subsidies or technology improvements that decrease costs for suppliers

A

Economics

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4
Q

Supply decreases at each price point

Lower Equilibrium GDP

Cost of producing item increases

Examples: Shortage of gold- so less gold watches are made; wars or crises in rice-producing countries means there is less rice on the market

A

Economics

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5
Q

When the prices of an item increases- demand for it decreases.

A

Economics

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6
Q

When demand changes due to something other than price.

A

Economics

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7
Q

When demand increases at each price point

Price of substitutes go up - price of beef rises- so people buy more chicken

Future price increase is expected - War in Middle East- people go out and buy gas

Market expands - i.e. people get new free health care plan- demand at clinic rises

Expansion - more spending increases equilibrium GDP

A

Economics

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8
Q

Demand decreases at each price point.

Price of complement goes up - price of beef goes up- less demand for ketchup

Boycott - Company commits social blunder- consumers boycott

Consumer income rises - Demand for inferior goods drops as people have more money to spend

Consumer tastes change

Contraction - less spending decreases equilibrium GDP

A

Economics

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9
Q

How much you spend when your income increases

Calculate: Change in Spending / Change in Income

A

Economics

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10
Q

How much you save when income increases

Calculate: Change in Savings / Change in Income

Also equals 1 - Marginal Propensity to Consume

A

Economics

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11
Q

(1 / 1-MPC) x Change in Spending

A

Economics

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12
Q

As spending by consumers or the government increases- the demand curve increases (shifts right).

A

Economics

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13
Q

The increase in demand ends up being larger than the amount of additional income spent in the economy due to the multiplier effect.

One consumer spends money- which:
*Increases the income of a business
*Increases the income of a vendor
*Increases income of employees
*Increases tax revenue

A

Economics

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14
Q

% Change in Quantity Demand / % Change in Price

A

Economics

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15
Q

Price increases- Revenue decreases

Price decreases- Revenue increases

A

Economics

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16
Q

Many substitutes (luxury items)
Considered elastic if elasticity is greater than 1
10% drop in demand / 8% increase in price : 1.25 (Elastic)

Price increases- Revenue decreases
Price decreases- Revenue increases

A

Economics

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17
Q

Price increases- Revenue increases

Price decreases- Revenue decreases

A

Economics

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18
Q

Few substitutes (groceries- gasoline)
Considered inelastic if coefficient of elasticity is less than 1
5% drop in demand / 10% increase in price : .5 (inelastic)

Price increases- Revenue increases
Price decreases- Revenue decreases

A

Economics

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19
Q

Total revenue will remain the same if price is increased

Considered unitary if coefficient of elasticity : 1

A

Economics

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20
Q

% Change Quantity Demanded / % Change in Income

Normal goods greater than 1 (demand increases more than income)

Inferior goods less than 1 (demand increases less than income)

A

Economics

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21
Q

Interest rates increase
Reduced demand for loans
Reduced demand for houses- autos- etc.
Value of bonds and fixed income securities decrease
Inferior good demand to increase
Foreign goods more affordable than domestic
Demand for domestic goods decrease

A

Economics

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22
Q

Overall spending increases

Demand increases (shifts right)

Market equilibrium price increases

A

Economics

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23
Q

Overall production costs increase
Supply decreases (shifts left)
Market equilibrium price increases

Note: Demand-Pull and Cost-Push Inflation BOTH result in market equilibrium price to increase

A

Economics

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24
Q

The price where Quantity Supplied : Quantity Demanded

A

Economics

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25
When Marginal Revenue : Marginal Cost
Economics
26
Causes a surplus if above equilibrium price.
Economics
27
The annual value of all goods and services produced domestically at current prices by consumers- businesses- the government- and foreign companies with domestic interests Included: Foreign company has US Factory Not included: US company has foreign factory
Economics
28
Sole Proprietor and Corp Income Passive Income Taxes Employee Salaries Foreign Income Adjustments Depreciation
Economics
29
Individual Consumption Private Investment Government Purchases Net Exports
Economics
30
Measures goods/services in current prices.
Economics
31
Used to convert GDP to Real GDP
Economics
32
Nominal GDP / GDP Deflator x 100
Economics
33
Like GDP; Swaps foreign production. US Firms overseas are included- Foreign firms domestically are not included
Economics
34
Price of goods relative to an earlier period of time- which is the benchmark. Year 1 : 1.0 ((CPI Current - CPI Last) / CPI Last) * 100
Economics
35
Personal Income - Personal Taxes
Economics
36
% Increase in output / % Increase in input Greater than 1 : Increasing returns to scale Less than 1 : Decreasing returns to scale
Economics
37
When GDP growth is negative for two consecutive quarters.
Economics
38
A prolonged- severe recession with high unemployment rates No requisite period of time for the economy to officially be in a depression
Economics
39
Peak (highest) Recession (decreasing) Trough (lowest) Recover (increasing) Expansion (higher again)
Economics
40
Conditions that occur before a recession or before a recovery Example: Stock Market or New Housing Starts
Economics
41
Conditions that occur after a recession or after a recovery Examples: Prime Interest Rates- Unemployment
Economics
42
Conditions that occur during a recession or during a recovery Example: Manufacturing output
Economics
43
Only people looking for jobs
Economics
44
GDP doesn't grow fast enough to employ all people who are looking for work Example: People are unemployed in 2010 because there aren't enough jobs available due to the economy
Economics
45
People are changing jobs or entering the work force. This is a normal aspect of full employment. Example: A recent college graduate is looking for a job
Economics
46
A worker's job skills do not match those necessary to get a job so they need education or training Example: A construction worker wants to work in an office- so they quit their job and get computer training
Economics
47
High Unemployment : Low Inflation (Vice Versa)
Economics
48
The rate a bank pays to borrow from the Fed.
Economics
49
The rate a bank charges their best customers on short-term borrowings.
Economics
50
Inflation-adjusted interest rate
Economics
51
Rate that uses current prices
Economics
52
Rate for a loan with 100% certainty of payback. Usually results in a lower rate. US Treasuries are an example.
Economics
53
Currency- Coins- and Deposits
Economics
54
Highly liquid assets other than currency- coins or deposits
Economics
55
Increased spending levels without increased tax revenue. Lower taxes without decrease in spending Gamble that the multiplier effect will take over and boost economy
Economics
56
By buying and selling the government's securities.
Economics
57
By adjusting the discount rate charged to banks
Economics
58
A tax on imported goods
Economics
59
A limit on the number of goods that can be imported
Economics
60
They are good for domestic producers. Demand curve shifts right Fewer substitutes They can charge higher prices
Economics
61
They are bad for foreign producers Demand curve shifts left Fewer buyers They must charge lower prices
Economics
62
They are good for foreign consumers Supply curve shifts right Goods purchased at lower prices in the foreign markets
Economics
63
They are bad for domestic consumers Supply curve shifts left Fewer goods bought due to higher prices
Economics
64
Explicit (Actual) cost of operating a business Implicit costs are opportunity costs
Economics
65
Revenue - Accounting Cost
Economics
66
Explicit + Implicit Cost
Economics
67
Revenue - Economic Cost
Economics

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