Economics Flashcards
3 ways the Federal reserve can increase the money supply
- Purchase government securities
- Lower the discount rate
- Lower the reserve requirement
Demand Curve
Inverse relationship between price and quantity demanded.
- Price (up) = Quantity (down)
- Price (down) = Quantity (up)
The demand curve shifts downward (left) when
Quantity demanded becomes smaller for each & every price
The demand curve shifts upward (right)
Quantity demanded becomes larger for each & every price
Ways to dampen the economy
- increase interest rates
- increase taxes
- decrease govt spending
- reduce money supply
Real GDP Calculation
Nominal GDP divided by Price Index x 100
The 2 approaches of GDP
- Income Approach
2. Expenditure Approach
Components of GDP income approach
- income earned in the production of final goods and services.
a. wages
b. interest
c. rents
d. business profits - adjustments fro indirect taxes
- economic depreciation
Components of GDP expenditure approach
- personal consumption expenditures
- businesses
- exports
- imports
The consumer price index measures?
the rate of inflation
Net domestic product (NDP) calc
GDP - Depreciation
Net national income (NNI) calc
NDP - indirect business taxes
Personal Income calc
NNI - corporate income taxes - undistributed corporate profits - social security contributions + transfer payments
Disposable income calc
Personal income - personal income taxes
Reserve Ratio
Reserves / Total Demand Deposits
Marginal propensity to Consume (MPC) Calc
chg in consumption (spending) / chg in disposable income
Marginal propensity to Save (MPS) calc
chg in savings / chg in disposable income
Structural Unemployment
Workers not having skills demanded and workers cannot easily move to the location jobs are available.
Price elasticity of demand calc
%^ in quantity demanded / %^ in price
If less than 1 then inelastic
Define economies of scale
The reduction in average total cost of production when a firm expands plant production
A put is an option to
Sell a specific security at fixed conditions of price and time
Concentration ratio measures
Market share of the several largest firms in the industry
Inter industry competition is
Competition between different markets.
Game theory is
A useful tool in choosing responses to actions of competitors
