Economics Flashcards
Nominal GDP vs. Real GDP
No inflation adjusted; inflation adjusted (use GDP deflator)
Real Calculation
Nominal GDP/GDP Deflator *100
Business Cycles
Expansionary, Peak, Contractionary, Trough, Recovery
Expansionary Phase
Rising economic activity
Firm profits rising
Increased workforce
Peak Phase
Capacity constraints
Highest profits
Contractionary Phase
Firm profits falling
Trough Phase
Lowest firm profits
Excess capacity
Reduction in Aggregate Demand
ADv GDPv Pv
Increase in Aggregate Demand
AD^ GDP^ P^
Reduction of Supply
SRASv GDPv P^
Increase of Supply
SRAS^ GDP^ Pv
Increase in Wealth
W^ Spend ^ AD ^ GDP^ P^
Increase in Rates
I^ Borrowv Spendv ADv GDPv Pv
Economic Outlook
Outlook^ Spend^ AD^ GDP^ P^
Appreciated Currencies
Currency^Exportsv Imports^ ADv GDPv Pv
Increase Govt Spend
Govt Spend^AD^GDP^P^
Increase Consumer Taxes
Taxes^SpendvADvGDPv Pv
Expenditure Approach-GDP
Govt purchasas
Iinvestment, private
Consumption, personal
Exports,net
Income Approach-GDP
Income of proprietors Profits of corp Interest Rental Income Adjustments for foreign income Taxes Employee wages Depreciation
Unemployment Rate Calculation
Number of unemployed/Total labor force *100
What is frictional unemployment?
Result from workers routinely changing jobs
What is structural unemployment?
Jobs available do not correpsond to to skills of workforce
Consumer Price Calculation
(CPIcurrent-CPIprevious)/CPI previous *100
What is nominal int rate?
Rate in current dollars
Real Int Rate Calculation
Nominal-inflation
What is M1
coin, currency, check deposits
What is M2
M1+CD’s<100k
What is M3
M2+CD’s>100k
Increase in Money Supply
Expansaionary
Increase^ Spend^ AD^ GDP^P^
Raise discount rate
Contractionary
Increase^ BorrowV Spendv ADv GDPv Pv
Raise reserve requirements
Contractionary
Increase^ Spendv ADv GDPv Pv
Change in Quantity Demanded (price first)
P^ Dv or PvD^
Change in Demand (demand first)
D^P^
Factors that shift demand cruve
Wealth Relared goods Income, consumer Tastes Expectations Nunmbers of buyers
Change in Quantity Supplied (price first)
P^ S^
Change in Supply
S^ Pv
Factors that shift supply
Exepctations, price Costs, production Other goods change in price/demand Subsidies, taxes Technology, production
Price Elasticity of Demand
%change in Qd/%change in P
Elasticity1=Elastic
Pure Competition
Very Competitie
No barrier to entry
Large number of suppliers/no product differentiation
Price takers
Monopoly
Price Setter
Significant barriers
Least competitive
No substitute products
Monopolistic
Numerours firms with differentiated products
Few barriers
Significant non price competition
Oligopoly
Significant barriers
Few differentiated products
Porters 5 Forces
Barriers to Entry Market Competitivness Substitute Products Bargpaining power of customer Bargaining Power of Buyer
Equilibruinr
Qd=Qs
GDP
All goods and services produced domestically
Foreign COmpany in US
GNP
US overseas production included
Disposable Income
Personal-Taxes
Tariff
Tax on imported goods
Quota
Limit on number of imported goods
What is political business theory?
Economy heading in right direction as election approaches
What is discount rate?
Rate central bank charkes for loans to other banks
3 Tools to affect monetary policy
- Inc/dec money supply
- Change interest rate
- Change reserves
MPS
1-MPC
Call/Put
Call=buy
put=sell
MPC
Change in consumption/change in income
Call Option
Put Option
Call-expect price to increase
Put-expect price to decrease
