Brainscape's Knowledge GenomeTM

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


See full index

CFP Flashcards > Economics/Markets > Flashcards

Economics/Markets Flashcards

You may prefer our related Brainscape-certified flashcards:
CFP® flashcards
1
Q

Economic Expansion: GDP (increases/decreases) and unemployment (increases/decreases)

A

increases; decreases

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

Economic Contraction: GDP (increases/decreases) and unemployment (increases/decreases)

A

decreases; increases

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

Gross Domestic Product (GDP)

Definition

A

The market value of goods and services produced by labor and property in the US

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

Recession

A

Two consecutive quarters of negative GDP growth
- Not every contraction is a recession, but every recession is a contraction

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

Characteristics of Early Expansion

A
  • Activity rebounds (GDP, unemployment)
  • Credit begins to grow
  • Profits grow rapidly
  • Policy still stimulative
  • Inventories low; sales improve
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Characteristics of Mid Expansion

A
  • Growth peaking
  • Credit growth strong
  • Profits growth peaks
  • Policy neutral
  • Inventories, sales grow; equilibrium reached
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Characteristics of Late Expansion

A
  • Growth moderating
  • Credit tightens
  • Earnings under pressure
  • Policy contractionary
  • Inventories grow; sales growth falls
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Characteristics of Contraction

A
  • Falling activity
  • Credit dries up
  • Profits decline
  • Policy eases
  • Inventories, sales fall
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

The Business Cycle

A

Expansion –> Peak –> Contraction –> Trough –> Expansion

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

GDP is important because it…

A
  1. Indicates the pace of growth or decline of the economy relative to history
  2. Determines which sectors are over or under-performing
  3. Can compare the size and growth rate of economies throughout the world
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Real GDP Includes:

A
  1. Market value of all final goods and services produced within an economy
  2. Income of foreigners working in the US
  3. Profits that foreign companies earn in the US
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Real GDP Excludes:

A
  1. Imports
  2. Inflation
  3. Transactions where money changes hands but no new goods or services are produced
  4. Income of US citizens working abroad
  5. Profits earned by US companies in foreign countries
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

GDP Formula

A

Y = C + I + G + (X - M)

C - consumer spending
I - investment made by industry
G - government spending
(X-M) - excess of exports over imports (may see this listed as NE (Net Exports))

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

A good is __________ when its quantity demanded responds greatly to price changes.

A

elastic

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

A good is _________ when its quantity demanded responds little to price changes.

A

inelastic

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

In theory, all items are (elastic/inelastic) over the long term.

A

elastic

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

Goods are considered __________ when an increase in the price of one causes an increase in the demand for the other.

A

substitutes

18
Q

Goods are considered __________ when a decrease in the price of one causes an increase in the demand for the other.

A

complements

19
Q

__________ __________ is the additional benefit received from the consumption of an additional unit of a good.

A

Marginal utility

20
Q

As the rate of consumption increases, the marginal utility derived from consuming additional units will (increase/decrease).

A

decrease (known as diminishing marginal utility)

21
Q

Who controls Fiscal Policy?

A

Congress

22
Q

What tools does Congress use to control Fiscal Policy?

A
  1. Taxation
  2. Government Spending
23
Q

__________ is the only means of revenue generation for the government.

A

Taxation

24
Q

(Increases/Decreases) in government spending are used to promote economic growth and/or recovery.

A

Increases

25
Q

In deficit spending, the government will (buy/sell) treasury securities.

A

sell

26
Q

In a stimulative fiscal policy, Congress will (increase/decrease) taxes and (increase/decrease) government spending.

A

decrease;increase

27
Q

Who controls Monetary Policy?

A

The Federal Reserve Bank

28
Q

Federal Reserve Mandates

A
  1. Maintain sustainable long-term growth as measured by GDP
  2. Maintain price levels that are supported by economic growth as measured by CPI (2%)
  3. Maintain full employment as measured by the long-term unemployment rate (4%)
29
Q

What tools does the Fed use to control monetary policy?

A
  1. Discount Rate
  2. Reserve Requirements
  3. Open Market Activities
30
Q

The __________ __________ is the rate at which member banks borrow from the government.

A

discount rate

31
Q

The percentage of deposits that must be held on reserve overnight by banks is called the __________ __________.

A

reserve requirement

32
Q

The __________ __________ __________ is the rate at which banks borrow from other banks.

A

federal funds rate

33
Q

In a contractionary monetary policy, what happens to:
- discount rate?
- reserve requirements?
- open market operations?

A
  • discount rate increases
  • reserve requirements increase
  • Fed sells treasury investments
34
Q

In an expansionary monetary policy, what happens to:
- discount rate?
- reserve requirements?
- open market operations?

A
  • discount rate decreases
  • reserve requirement decreases
  • Fed buys treasury investments
35
Q

Financial Ratios:
Current Ratio

A

Current Assets / Current Liabilities

Higher is better

36
Q

Financial Ratios:
Quick Ratio

A

(Current Assets - Inventories) / Current Liabilities

37
Q

Financial Ratios:
Liquidity Ratios

A
  • Current Ratio
  • Quick Ratio
  • Working Capital Ratio
38
Q

Financial Ratios:
Activity Ratios

A
  • Inventory Turnover
  • Days to Sell Inventory
  • Accounts Receivable Turnover
  • Receivable Collection Period
39
Q

Financial Ratios:
Profitability Ratios

A
  • Gross Profit Margin
  • Operating Profit Margin
  • Return on Assets (ROA)
  • Return on Equity (ROE)
40
Q

Financial Ratios:
Debt Ratios

A
  • Debt to Equity
  • Times Interest Earned
  • Debt Ratio
41
Q

Financial Ratio:
Debt Ratio

A

Total Debt / Total Assets

Lower is better

CFP Flashcards (9 decks)

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