Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Series 7 OT > Economics > Flashcards

Economics Flashcards

You may prefer our related Brainscape-certified flashcards:
Series 7 Top-off Exam flashcards
1
Q

4 stages of the business cycle?

A

1) Expansion
2) Peak
3) Contraction
4) Trough

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Longer, severe contraction is called?

A

A depression

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Mid, short-term contractions are called?

A

A recession

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What defines a recession?

A

When GDP declines for 6 months or more

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What defines a depression?

A

GDP declines 18 months or more and unemployment is greater than 15%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Expansion is characterized by?

A
  • Increased demand for goods and services
  • Increases in industrial production
  • Rising stock prices
  • Rising property values
  • Increasing GDP
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Downturns characterized by?

A
  • Rising bankruptcies and defaults
  • High consumer debt
  • Falling stock prices
  • Rising inventories
  • Decreasing GDP
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What makes up GDP?

A
  • Personal consumption
  • Government spending
  • Private investments
  • Foreign investments
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is CPI?

A

Consumer price index.

- Measures general price changes. Food, housing, transport, medical care etc..

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What does mild inflation do?

A

Encourage growth

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What does high inflation do?

A

Reduces dollar buying power

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Increased inflation?

A
  • Drives up interest rates of fixed income securities&raquo_space; drives down bond prices
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What does rising interest rates and inflation mean for bond prices?

A

They will fall

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Why do bond prices fall with inflation rises?

A

Becuase purchusing power drops&raquo_space; there is less investor demand for the bonds

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What does fed do when concerned about inflation rises?

A

Raise rates to slow economy down&raquo_space; incentivise savings not spending

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Bond rates go up with interest rates, why?

A

To incentivse people to put money into bonds, not keep in savings accounts?

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Leading indicators reflect where an economy is going. What are some examples?

A
  • Money supply
  • Building permits
  • New orders for goods
  • Machine tool orders
  • Stock prices
  • Changes in borrowing
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Coincident indicators - comfirm where economy is. What are examples?

A
  • Number of hours worked
  • Employment levels
  • Personal income
  • Sales
  • GDP
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Lagging indictaors - factors that change&raquo_space; confirming a new trend

A
  • Corporate profits
  • Avg duration of employment
  • Labour cost per unit of output
  • Inventory to sales ratio
  • Loans outstanding
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is fiscal policy?

A

Adjusting level of taxation and government spending

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What do Keynesians believe?

A

Government intervention

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What do Laffer and Supply-side believe?

A

The market should take over

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Monetarist Theory?

A

Well-controlled, increasing money supply

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Parts of the money supply are?

A

M1 - Currency in circulation and accounts etc
M2 - Savings less than 100,000
M3 - Savings more than 100,000

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

What are the 3 Federal Reserve Bank policy tools?

A

1) Open market operations (buying/ selling gov securities
2) Changes in discount rates (loans to banks)
3) Changes in reserve requirement

26
Q

What does the Fed do when wants to loosen monitory supply?

A

Buys securities from banks&raquo_space; banks receive credit&raquo_space; make more loans

27
Q

What is the discount rate?

A

The rate that the Fed lends to banks at

28
Q

What is the Fiscal policy?

A

Government budget decisions

29
Q

Areas of the Fiscal policy include:

A
  • Federal spending
  • Money raised through taxes
  • Federal budget deficits or surplusses
30
Q

What is disintermediation?

A

The flow of money from traditional low yielding accounts to higher yielding investments

31
Q

Why does disintermediation occur?

A

When inflation rates are high but bank interest rates are stagnant (usually due to government control), and the bank depositors can get better returns by investing in mutual funds or in securities

32
Q

Balance of Payments:

A

The flow of money between the US and other countries.

33
Q

Largest comonent of balance of payments?

A

Balance of Trade

  • Debit (Spending abroad) - Spensing, Investments, bank loans, foreign aid
  • Credit (Foreign spending and investing in US)
34
Q

Difference between Fiscal and Monitory policy?

A

Fiscal:

  • Actions of congress and president
  • Government spending and taxation

Monitory:

  • Policy of the Fed
  • Discount rate
  • Reserves
  • Open market operations (Buying/ selling gov securities)
35
Q

FOMC purchases T-Bills. What will happen to interest rates and bond prices?

A
  • Money supply increases&raquo_space; Interest rates with rise

|&raquo_space; bond prices will fall

36
Q

How would increased foreign investment impact USD?

A

USD would rise

37
Q

How would US investors buying Japanese securities would impact USD?

A

USD would fall

38
Q

How would an increase Japan’s trade surplus would impact USD?

A

USD would fall (US consumers are buying more Jap products than Japs buying US products)

39
Q

Disintermediation occurs when?

A

Money is tight and rates are high

40
Q

Which is the narrowest index?

A

The DJA - 30 stocks

41
Q

Cyclical vs. Defensive stocks/ industries

A

Cyclical - Highly correlated to the economic activity (cars, IT companies)
Defensive - Price has a very low correlation to the economic activity (Healthcare, Household, Personal Care)

42
Q

Growth industries

A

IT, bioengineering. Retain earnings to invest in development. Don’t pay many dividends.

43
Q

Balance Sheet equation

A

Assets = liabilities + shareholders equitiy

44
Q

Balance Sheet - Assets:

A
  • Current Assets - Cash, accounts receivable, inventory
  • Fixed Assets - Physical assets that can be sold (property)
  • Other Assets - Usually intangible, only of value to the company owning them
45
Q

Balance Sheet - Liabilities:

A
  • Current liabilities - Debt due for payment within next 12 months (acc payable, unpaid wages, accrued taxes)
  • Long-term liabilities - Obligations due for payment after 12 months (mortgage, promissory notes)
46
Q

Working Capital:

A

Current assets - current liabilities

47
Q

When an investor converts bonds into common stock, what happens to the balance sheet?

A

Liabilities decrease and owners’ equity increases. But the balance sheet remains the same.

48
Q

How is a balance sheet affected when a corporation declares a cash dividend?

A
  • Current liabilities increase
  • Total liabilities increase
  • Net worth decreases
49
Q

What are retained earnings?

A

Profits that a company has earned to date, less any dividends or other distributions paid to investors.

50
Q

What is book value?

A

Theoretical liquidation value

51
Q

Price to earnings (PE) Ratio =

A

Earnings per share (EPS)

52
Q

Earnings per share (EPS) =

A

No. of common shares outstanding

53
Q

Current Yield =

A

Market value per common share

54
Q

Dividends per share =

A

No. of common shares outstanding

55
Q

Book value per share =

A

Shares of common stock outstanding

56
Q

What companies have either very high or very low PE ratios?

A

Speculative

57
Q

What are liquidity ratios?

A
  • Acid Test
  • Current Ratio
  • Quick Ratio
58
Q

What is a capitalization ratio?

A

Debt to equity ratio

59
Q

Which rate is the most volatile?

A

Federal funds rate

60
Q

What was Keynes’ theory?

A

Demand side economics. Increaseing income through higher taxes and gov spending.

61
Q

Divident payount ratio =

A

1) EPS (Earnings / Shares outstanding)

2) Divide dividend per share / EPS

62
Q

Paid in surpluss =

A

When more shares are sold in excess of par value

Series 7 OT (15 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions