Economics

Question 1

What factors impact demand?

Answer 1

The price of the good, the price of related goods (complementary (laptop with second monitor)/ substitute (buy one but not the other), consumer income or wealth, consumer expectations of future prices, wealth, income, number of consumers, price elasticity, consumer behaviour (is it rational? or motivated by other factors)

Question 2

What factors impact supply?

Answer 2

price of the good, cost of producing, prices of related goods, producers expectations (the expected demand, they risk being wrong), number of sellers

Question 3

Leading indicator

Answer 3

orders of durable goods (consumer goods owned longer than 3 years), housing starts, commodity prices, manufacturer new orders, stock market returns

Question 4

concurrent indicators

Answer 4

personal income, retail sales, industrial production, manufacturing and trade sales volume, non ag payroll (how many people have jobs), GDP,

Question 5

Lagging Indicators

Answer 5

Invesntory levels, unemployment duration, consumer debt to personal income, private sector investment levels (will slow down when economy slows), exchange rate (demand for currency changes based on economic data, which is delayed)

Question 6

GDP Approaches to Calculating

Answer 6

Production of all businesses, expenditure (private consumptions + gross investments + government spending + net exports, income (all income from businesses to households, wages, div, interest, investment inc, etc)

Question 7

GDP Issues

Answer 7

Counts activity not positive in nature (smoking), doesn’t account for lifestyle (working hours), doesn’t show illegal activity (bigger issue in developing markets)

Question 8

CPI Trim

Answer 8

Removes the lowest and highest 20% of goods from CPI calculation

Question 9

Stagflation

Answer 9

Increasing or high inflation with low economic growth and high unemployment (presumably high rates). Difficult to manage situation where there are higher interest rates to lower inflation are used but raise unemployment or vice versa (high interest rates usually reflective of strong economy).

Question 10

Reflation

Answer 10

usually part of recovery

Question 11

Economic cycle

Answer 11

recovery (growing economy, high unemployment), expansion (high gdp, high inflation, and low uemployment), peak, contraction (disinflation, lower gdp, lower market returns, interest rates rising), recession (contraction with high unemployment), trough

Question 12

Money Functions

Answer 12

Unit of account (attach value to something), store of value (save money for use in the future), medium of exchange (buy goods).

Fiat money has value based on a declaration (no backing)

Question 13

Monetary policy tools

Answer 13

Interest rates, money supply, issuing government securities. open market operations involve supplying bank reserves in exchange for short term government debt, similiar to qe in the private sector

Question 14

Fiscal Policy

Answer 14

Taxation, government spending, regulation

Question 15

US Dollar

Answer 15

Reserve currency, 60% of currency reserves. borrow us dollars at a lower rate because of widespread acceptance