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Macroeconomics > Exam 2 > Flashcards

Exam 2 Flashcards

1
Q

Economic Stability

A

economic growth with low inflation (price increases) and full employment of Resources.

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2
Q

Economic Expansions

A

Increases in aggregate output, income and employment (and generally rise in growth in investments, construction, consumption of goods/services, stock market indices and inflation)

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3
Q

Economic Contractions

A

declines in aggregate output, income and employment (and generally decreases in investments, construction, consumption of goods/services, stock market indices and possibly deflation)

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4
Q

Recession

A

2 consecutive quarters of decline in economic activity (or decline in GDP)

Recessions are ‘dips’ in total GDP long-term growth

Advanced economies tend to experience expansions and Recessions at same time

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5
Q

Economic Indicators

A

Changes before the economy has changed

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6
Q

Costs of Unemployment

A
  • Loss of income for unemployed
  • Less tax revenue and higher gov’t borrowing
  • Loss of human capital
  • Inefficient use of resources
  • Social problems / alienation
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7
Q

Furlough

A

suspension or discharge of a worker or workers on account of economic conditions or shortage of work, especially when temporary:

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8
Q

Layoff

A

a discharge of a worker or workers because of economic conditions or shortage of work

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9
Q

Frictional Unemployment

A

Normal turnover rate. This is usually described as short-run mismatch of skill and jobs

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10
Q

Structural Unemployment

A

Portion of unemployed resulting from changes in the structure of the economy which resulted in significant job loss in certain industries

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11
Q

Cyclical Unemployment

A

usually due to business cycle. Generally short-term. But can be long-term

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12
Q

Normal Unemployment %

A

4 - 6%

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13
Q

Entreprenuership

A

Self-employment through business ownership which has significant elements of risk, control, and reward

How it influences Economic Growth: creates jobs, take risks = creates better healthcare + education + welfare

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14
Q

Creativity

A

Novel ideas that are communicated, useful, and appealing

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15
Q

Invention

A

Creating something new

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16
Q

Innovation

A

Making the invention into a product form

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17
Q

Intellectual Property Rights

A

Legal protection of intellectual developments so they can be monetized

Incentive to create, invent and innovate

Ex: Patents, Copyright, Trademark, + Design

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18
Q

Private Property

A

Resources owned by individuals not gov’t.

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19
Q

Generic

A

Relating to a whole class or group.
Non-Brand name products

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20
Q

Pirated

A

Fake Goods

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21
Q

Reverse Engineering

A

Implementation -> Design -> Analysis -> Requirements

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22
Q

Business Lifecycle

A
  1. Startup
  2. Rapid Growth
  3. Maturity
  4. Decline
  5. Rebirth or Death
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23
Q

Profit

A

a financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something

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24
Q

Investment of capital

A

devoting funds in plant, equipment and activity to (develop or produce) new product, sell, add value, utilize a new resource or better utilize a resources (new/improve process) in the pursuit of a profit.

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25
Q

Investment

A

Expecting returns on money / future

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26
Q

Simple ROI equation

A

(Gains - Investment Costs) / Investment Cost

27
Q

Risk Analysis

A

.

28
Q

Bank

A

Financial institution licensed to receive deposits and make loans. Banks may also provide financial services such as wealth management, currency exchange, and safe deposit boxes.

29
Q

Types of Banks

A

Central
Commercial
Cooperative
Specialized

30
Q

Credit Union

A

Nonprofit institution owned by its members

Must qualify for a membership

31
Q

NCUA

A

National Credit Union Administration

32
Q

FinTech

A

Online competition to physical banks

33
Q

Loan Risk

A

Banks tie interest rate to risk of the loan and risk of loan is based upon company results and future expectations/prospectus

34
Q

Bond Rating

A
35
Q

Bond

A

Generally, less risky than stocks

Face value (Principle) + interest rate attached to it

Is a loan for a given amount of years. Borrowing from investor. Company pays interest quarterly

36
Q

FICO

A

Fair, Isaac, and Co.

37
Q

Interest Rate

A

The cost of borrowing money expressed as a percentage of the loan amount

38
Q

Investment Funding Stages

A
  • Concept/ Start up stage: Angel/seed (very high risk)
  • Seed: Start up/early growth (high risk)
  • Private Venture capitalists: early to high growth (reduced risk) or ceiling
39
Q

Entrepreneur Choices to scale up / continue growth

A
  1. Retain Ownership
    Seeking loans or bonds
  2. Merger / Acquisition
    Horizontal / Vertical / Conglomerate / Concentric
  3. Sell start up / mature to private equity
  4. Take company public un an IPO
40
Q

Horizontal Merger & Acquisition

A

Companies in same industry

41
Q

Vertical Merger & Acquisition

A

Companies at different stages of the supply chain

42
Q

Conglomerate Merger & Acquisition

A

Companies in different industries

43
Q

Concentric Merger & Acquisition

A

Companies in the same industry, but different stages of the supply chain

44
Q

IPO

A

Initial Public Offering

45
Q

SPAC

A

Special Purpose Acquisition Company

Sole purpose is take company from private to public

46
Q

Asset Classes

A

Cash
Equity
Fixed Income
Real Estate
Commmodities

47
Q

Capital Market

A

markets for buying and selling equity and debt instruments

Primary
Secondary

48
Q

Primary Market

A

A source of new securities.

Often on an exchange, it’s where companies, governments, and other groups go to obtain financing through debt-based or equity-based securities.

Primary markets are facilitated by underwriting groups consisting of investment banks that set a beginning price range for a given security and oversee its sale to investors.

49
Q

Secondary Market

A

The secondary market is where investors buy and sell securities they already own.

It is what most people typically think of as the “stock market,” though stocks are also sold on the primary market when they are first issued.

The national exchanges, such as the New York Stock Exchange (NYSE) and the NASDAQ, are secondary markets.

50
Q

Bond Types

A

Corporate
Municipal
Treasury
Junk
Bond Funds

Term
Serial
Secured
Debentures

51
Q

Bond Yields

A

Equivalent to Interest Rate

Bond price and yield rates move in opposite directions ie Higher the price, the lower the yield.

In macro-economic expansions, generally, bond prices go down (stocks are preferred)

(But the lower the price of the bond, the higher the yield so there is a reason to invest in bonds during ‘good’ times)

52
Q

Bond and Stock Prices

A

Bond and stock prices tend, generally, to move in opposite directions.

In ‘good’ times, Stock prices go up, bond prices tend to go down

In ‘bad times’ Stock prices go down, bond prices tend to go up (move to safety)
53
Q

Common Stock

A
  • Voting Rights
  • Dividends Fluctuate
  • More Volatile
54
Q

Preferred Stock

A
  • No Voting Rights
  • Dividends are set
  • Less Volatile
55
Q

Dividends per Share Formula

A

Annual Dividends / Purchase Price

56
Q

NASDAQ

A

Dealer’s Market
More Tech
No physical location
More volatile + Growth Oriented

57
Q

NYSE

A

Auction Style Market
Physical Interaction
Stricter listing requirements / More Stable

58
Q

Market Index

A

Method of Measuring a section of the stock market

    * Dow Jones
* S&P 500
* NASDAQ
* Russell 3000
	○ Russell 2000
	○ Russell 1000
59
Q

Mutual Fund

A

Representative of stock price

60
Q

Productivity Formula

A

Output / Input

61
Q

Solow Growth Model

A

Technological progress is necessary for sustained increases in standard of living

exogenous neoclassical model of economic growth representing the changes in output level due to changes in labor, capital accumulation change, and technological progress.

62
Q

LEAN

A

Higher quality + Lower Prices

63
Q

Economies of Scope / Scale

A

Companies dealing with a variety of goods have better cost advantage than those specializing in the production of a single product / service

Macroeconomics (3 decks)

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