FSOT Master 11

Question 1

Deadweight loss

Answer 1

The deadweight loss caused by a policy is the reduction in economic surplus that results from adoption of that policy.

Question 2

Debt

Answer 2

Accumulated deficits minus accumulated surpluses.

Question 3

Debt Service

Answer 3

The interest rate on debt times the total debt.

Question 4

debt utilization ratio?

Answer 4

Debt utilization ratios measure how well the firm is utilizing debt and XYZ company’s ability to repay the debt. Many novice investors believe that a company with no debt is superior. Having little debt on the balance sheet is generally very safe. But most companies assume debt to finance operations so the company can grow. General finance textbooks state that the ideal ratios is around 30%, due to leveraged buyouts the ratio of debt to assets or equity has been increasing.

Question 5

Decision tree (or game tree)

Answer 5

A diagram that describes the possible moves in a game in sequence and lists the payoffs that correspond to each possible combination of moves.

Question 6

Deficit

Answer 6

A shortfall of revenues under payments.

Question 7

Deflating (a nominal quantity)

Answer 7

The process of dividing a nominal quantity by a price index (such as the CPI) to express the quantity in real terms.

Question 8

Deflation

Answer 8

A sustained decrease in the average price level of all the goods and services produced in the economy.

Question 9

Degree of economies of scope

Answer 9

Percentage of cost savings resulting when two or more products are produced jointly rather than individually

Question 10

Demand

Answer 10

A schedule of quantites of a good that will be bought per unit of time at various prices, other things constant.

Question 11

Demand Conditions” in Porter’s Theory?

Answer 11

ERROR!

Question 12

Demand for money

Answer 12

The amount of wealth an individual or firm chooses to hold in the form of money.

Question 13

Demand is unit elastic where on the demand curve?

Answer 13

Demand is unit elastic at the MIDPOINT of the demand curve.

Question 14

Demand tends to become more or less elastic over time?

Answer 14

More Elastic, because consumers have more time to adjust to a price change.

Question 15

Demand-Pull Inflation

Answer 15

Inflation that o curs when the economy is at or above potential output.

Question 16

Dependent variable

Answer 16

A variable in an equation whose value is determined by the value taken by another variable in the equation.

Question 17

Deposit insurance

Answer 17

A system under which the government guarantees that depositors will not lose any money even if their bank goes bankrupt.

Question 18

depository institutions

Answer 18

financial institutions that accept deposits from savers and lend funds from those deposits out at interest

Question 19

Depreciation (asset)

Answer 19

A measure of the decline in value of an asset that occurs over time through use.

Question 20

Depreciation (currency)

Answer 20

A decrease in the value of a currency relative to other currencies.

Question 21

Depression

Answer 21

A particularly severe or protracted recession.

Question 22

Despository Institution

Answer 22

A financila institution whose primary financial liability is deposits in checking or savings accounts.

Question 23

Devaluation

Answer 23

A reduction in the official value of a currency (in a fixed-exchange-rate system).

Question 24

development banks?

Answer 24

There are a few multilateral development banks throughout the world. Their purpose is to assist nations in economic development though loans etc.

Question 25

difference between the current and capital accounts?

Answer 25

The current account deals with the balance of imports and exports, while the capital account deals with the balance of monetary flows. The two have an inverse relationship.

Question 26

Diminishing returns to capital

Answer 26

If the amount of labor and other inputs employed is held constant, then the greater the amount of capital already in use, the less an additional unit of capital adds to production.

Question 27

Diminishing returns to labor

Answer 27

If the amount of capital and other inputs in use is held constant, then the greater the quantity of labor already employed, the less each additional worker adds to production.

Question 28

direct effect of an increase in the money supply

Answer 28

aggregate demand rises because with an increase in the money supply, at any given price level people now want to purchase more output of real goods and services

Question 29

direct expenditure offsets

Answer 29

actions on the part of the private sector in spending income that offset government fiscal policy actions; any increase in government in an area that competes with the private sector will have some direct expenditure offset

Question 30

Direct Regulation

Answer 30

A kprogram in which the amount of a good people are allowed to use is directly limited by the government.

Question 31

Direct Relationship

Answer 31

A relationship in which when one variable goes up, the other goes up too.

Question 32

dirty float in economics?

Answer 32

It is when a country tries to manipulate the value of its floating currency.

Question 33

Disappearing political discourse

Answer 33

The theory that people who support a position may remain silent, because speaking out would create a risk of being misunderstood.

Question 34

Discount rate

Answer 34

The interest rate that the Fed charges commercial banks to borrow reserves.

Question 35

Discount window lending

Answer 35

The lending of reserves by the Federal Reserve to commercial banks.

Question 36

Discouraged workers

Answer 36

People who say they would like to have a job but have not made an effort to find one in the past four weeks.

Question 37

Diseconomies of Scale

Answer 37

A doubling of output requires more than a doubling of cost.

Question 38

Diseconomies of scope

Answer 38

means that there can be gains from trade, even when

production possibilities frontier are identical

Question 39

Disinflation

Answer 39

A substantial reduction in the rate of inflation.

Question 40

dissaving

Answer 40

a negative saving: a situation in which spending exceeds income; can occur when a household is able to borrow or use up existing assets

Question 41

Distorted assett allocation, black markets, and shortages can result from what economic regulation?

Answer 41

Price controls.

Question 42

Distribution

Answer 42

The allocation or dividing up of the goods and services a society produces

Question 43

Diversification

Answer 43

The practice of spreading one’s wealth over a variety of different financial investments to reduce overall risk.

Question 44

Dividend

Answer 44

A regular payment received by stockholders for each share that they own.

Question 45

Division of Labor

Answer 45

The splitting up of a task to allow for specialization of production.

Question 46

Do LLCs, partnerships, and sole proprietorshops pay higher or lower taxes than corporations?

Answer 46

Corporations pay higher taxes.

Question 47

Does the demand curve determine the price of a product?

Answer 47

No, it only provides the answer to a series of hypothetical questions.

Question 48

domestic firm?

Answer 48

A firm that has little or no international business activity.

Question 49

Dominant Firm

Answer 49

irm with a large share of total sales that sets price to maximize profits, taking into account the supply response of smaller firms

Question 50

Dominant strategy

Answer 50

One that yields a higher payoff no matter what the other players in a game choose.

Question 51

Downsizing

Answer 51

A reduction in the workforce.

Question 52

Dual Economy

Answer 52

The existence of two sectors: a traditional sector and an internationally oriented modern market sector.

Question 53

dumping?

Answer 53

A standard technical definition of dumping is the act of charging a extraordinarily lower price for a good in a foreign market than one charges for the same good in a domestic market. True dumping (by a technical definition) is actually very difficult under free trade, and is also made illegal by the WTO. In the United States, domestic firms can file an antidumping suit under the regulations determined by the Department of Commerce and the International Trade Commission. These proceedings operate on a timetable governed by U.S. law. The Department of Commerce has regularly found that dumping occurs in U.S. markets.

Question 54

Dunnings Eclectic theory?

Answer 54

Monopolistic/Ownership Specific Advantage (OSA) explained why firms invested overseas, Internalization explained Which form of entry the firm should take and explained Where the firm should invest through Location Specific Advantage (LSA).

Question 55

Duopoly

Answer 55

Market in which two firms compete with each other

Question 56

Duration

Answer 56

The length of an unemployment spell.

Question 57

duration gap?

Answer 57

The duration gap is an accounting term for the difference between the duration of assets and liabilites. The duration gap measures how well cash flows for assets and liabilities are matched. When the duration of assets exceeds the duration of liabilities the duration gap is positive. A positive duration gap means greater exposure to rising interest rates; if interest rates go up then the price of assets fall more than the price of liabilities. Conversely, when the duration of assets is less than the duration of liabilities the duration gap is negative; if interest rates fall then the price of assets goes up less than the price of liabilities. Duration has a double-facet view. While a positive duration gap means greater risk, it also means that, on average, payables became due before receivables.

Question 58

Earned-income tax credit (EITC)

Answer 58

A policy under which low-income workers receive credits on their federal income tax.

Question 59

E-commerce

Answer 59

Buying and selling over the Internet.

Question 60

Economic Cost

Answer 60

Cost to a firm of utilizing economic resources in production, including opportunity cost

Question 61

Economic Decision Rule

Answer 61

If the marginal benefits of doing something exceed the marginal costs, do it. If the marginal costs of doing something exceed the marginal benefits, don’t do it.

Question 62

Economic Efficiency

Answer 62

Maximization of aggregate consumer and producer surplus

Question 63

Economic Force

Answer 63

The necessary reaction to scarcity.

Question 64

Economic Functions of Government

Answer 64

In a market economy, government agencies establish and maintain a legal system to regulate both commercial and social behavior, promote competition, respond to market failures by providing public goods and adjusting for externalities, redistribute income, and establish macroeconomic stabilization policies. To perform these functions, governments must shift resources from private uses by taxing and/or borrowing.

Question 65

Economic Growth

Answer 65

An increase in real output as measured by real GDP or per capita real GDP.

Question 66

economic incentive

Answer 66

the increase in personal satisfaction that may result fro some economic activity

Question 67

Economic Incentives

Answer 67

Factors that motivate and influence the behavior of individuals and organizations, including firms and government agencies. Prices, profits, and losses are important economic incentives in a market economy.

Question 68

Economic loss

Answer 68

An economic profit that is less than zero.

Question 69

Economic Policy

Answer 69

an action (or inaction) taken by government to influence economic actions.

Question 70

Economic Principle

Answer 70

A commonly held economic insight stated as a law or general assumption.

Question 71

Economic profit

Answer 71

The difference between a firm’s total revenue and the sum of its explicit and implicit costs; also called excess profit.

Question 72

Economic Profit

Answer 72

Explicit and implicit revenue minus explicit and implicit cost.

Question 73

Economic rent

Answer 73

That part of the payment for a factor of production that exceeds the owner’s reservation price, the price below which the owner would not supply the factor.

Question 74

Economic surplus

Answer 74

The economic surplus from taking any action is the benefit of taking the action minus its cost.

Question 75

Economic System

Answer 75

the combination of social and individual decision making a society uses to answer the 3 economic questions

Question 76

Economic Takeoff

Answer 76

A stage when the development process becomes self-sustaining.

Question 77

Economic Union

Answer 77

characterized by harmonization of economic policies of member nations, including introducing a common currency.

Question 78

Economically Efficient

Answer 78

A method of production that produces a fiven level or output at the lowest possible cost.

Question 79

Economics

Answer 79

The study of how people make choices under conditions of scarcity and of the results of those choices for society.

Question 80

Economies of scale

Answer 80

A production process is said to have economies of scale if, when all inputs are changed by a given proportion, output changes by more than that proportion; also called increasing returns to scale.

Question 81

Economies of Scope

Answer 81

Joint outuput of a single firm is greater than output that could e achieved by two different firms when each produces a single product

Question 82

effect time lag

Answer 82

the time that elapses between the implementation of a policy and the results of that policy

Question 83

Efficiency

Answer 83

Achieving a goal as cheaply as possible. Also: using as few inputs as possible.

Question 84

Efficiency Seeking?”

Answer 84

Seeking to minimizing unit delivered cost to market, for both production and delivery (transportation, insurance, marketing, tariffs etc), to establish a portfolio of production sources reducing risk, obtaining knowledge including technology and skills.

Question 85

Efficiency wages

Answer 85

above-equilibrium wages paid by firms in order to increase

worker productivity

Question 86

Efficient (or Pareto-efficient)

Answer 86

A situation is efficient if no change is possible that will help some people without harming others.

Question 87

Efficient Market

Answer 87

A market where the quantity supplied=quantity demanded & the price of goods is set at the equilibrium price.

Question 88

Efficient markets hypothesis

Answer 88

The theory that the current price of stock in a corporation reflects all relevant information about its current and future earnings prospects.

Question 89

Efficient point

Answer 89

Any combination of goods for which currently available resources do not allow an increase in the production of one good without a reduction in the production of the other.

Question 90

Efficient quantity

Answer 90

The efficient quantity of any good is the quantity that maximizes the economic surplus that results from producing and consuming the good.

Question 91

Effluent Fees

Answer 91

Charges imposed by government on the level of pollution created.

Question 92

Elastic

Answer 92

The percentage change in quantity is greater than the percentage change in price.

Question 93

Elasticity

Answer 93

measure of the responsiveness of supply and demand to

changes in the price; AKA the slope of the supply or demand curve

Question 94

Embargo

Answer 94

A total restriction on the import or export of a good.

Question 95

Employer discrimination

Answer 95

An arbitrary preference by an employer for one group of workers over another.

Question 96

entitlements

Answer 96

guarenteed benefits under a government program such as social security, medicare, or medicaid (often called noncontrollable expenditures)

Question 97

Entrepreneur

Answer 97

an individual who sees an opportunity to sell an item at a price higher than the average cost of producing it.

Question 98

Equation

Answer 98

A mathematical expression that describes the relationship between two or more variables.

Question 99

equation of exchange

Answer 99

the formula indicating that the number of monetary units (Ms) times the number of times each unit is spent on final goods and services (V) is identical to the price level (P) times real GDP (Y)

Question 100

Equilibrate

Answer 100

Describes the movement of the factors of a market set at the equilibrium price.

Question 101

Equilibrium

Answer 101

refers to a situation in which the price has reached the level
where quantity supplied equals quantity demanded

Question 102

Equilibrium Income

Answer 102

The level of income toward which the economy gravitates in the short run.

Question 103

Equilibrium Price

Answer 103

The price where quantity demanded equals the quantity supplied

Question 104

Equilibrium quantity

Answer 104

The quantity of a good at the intersection of the supply and demand curves for the good.

Question 105

Equilibrium Wage

Answer 105

The wage in the labor market where labor supply=labor demand & the market clears.

Question 106

Euribor?

Answer 106

Euribor (Euro Interbank Offered Rate) is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the euro wholesale (or “interbank”) money market. The Euro reference rates are based on this.

Question 107

Excess Demand

Answer 107

Situation when quantity demanded is greated than quantity supplied.

Question 108

Excess Reserves

Answer 108

Reserves held by banks in excess of what banks are required to hold.

Question 109

excess reserves leakages

Answer 109

depository institutions may wish to maintain excess reserves greater than zero (greater the excess reserves, the smaller the money multiplier)

Question 110

Excess Supply

Answer 110

Situation when quantity supplied is greater than quanitity demanded.

Question 111

Exchange Rate

Answer 111

The price of one country’s currency in terms of another currency.

Question 112

Excise Tax

Answer 112

A tax that is levied on a specific goos.

Question 113

excise taxes?

Answer 113

Excise duties usually have one of two purposes: to raise revenue or to discourage particular behaviour. Taxes such as those on sales of fuel, alcohol and tobacco are often justified on both grounds.

Question 114

Expansion

Answer 114

A period in which the economy is growing at a rate significantly above normal.

Question 115

Expansion Path

Answer 115

Curve passing through points of tangency between a firm’s isocost lines and its isquants

Question 116

Expansionary gap

Answer 116

A negative output gap, which occurs when actual output is higher than potential output (y > y*).

Question 117

Expansionary monetary policy

Answer 117

A reduction in interest rates by the Fed, made with the intention of reducing a recessionary gap.

Question 118

Expansionary policies

Answer 118

Government policy actions intended to increase planned spending and output.

Question 119

Expected value of a gamble

Answer 119

The sum of the possible outcomes of the gamble multiplied by their respective probabilities.

Question 120

Explicit costs

Answer 120

The actual payments a firm makes to its factors of production and other suppliers.

Question 121

Exports

Answer 121

Goods and services produced in one nation and sold to consumers in other nations.

Question 122

External benefit (or positive externality)

Answer 122

A benefit of an activity received by people other than those who pursue the activity.

Question 123

External cost (or negative externality)

Answer 123

A cost of an activity that falls on people other than those who pursue the activity.

Question 124

External Debt

Answer 124

Government debt owed to individuals in foreign countries.

Question 125

Externality

Answer 125

Action taken by either a producer or a consumer which affects other produceters or consumers but is not accounted for by the market price

Question 126

Factor Endowments” in Porter’s Theory?

Answer 126

• Basic factors ie: natural advantages such as climate, location, natural resource availability, demographics.
• Advanced factors ie: acquired advantages such as r. & d capability, skills, technology and know-how).

Question 127

Factor of production

Answer 127

An input used in the production of a good or service.

Question 128

FACTOR PROPORTIONS THEORY?

Answer 128

HECKSCHER & OHLIN

the pattern of international trade is based on differences in factor endowments rather than differences in productivity.

Question 129

Fair gamble

Answer 129

A gamble whose expected value is zero.

Question 130

FDI?

Answer 130

FDI takes place when a firm (MNE) invests in another country ie: obtains a controlling interest by either building (aka a greenfield investment), or acquiring that asset. KEY IS CONTROL???

Question 131

FDIC

Answer 131

A government agency that insures the deposits held in banks and most other depository institutions; all U.S. banks are insured this way

Question 132

Fed Funds

Answer 132

Loans of excess reserves banks make to one another.

Question 133

Federal Funds Interest Rate

Answer 133

The discount interest rate at which the branch banks of the Fed loan money to other banks.

Question 134

Federal Funds Market

Answer 134

a private market (made up mostly of banks) in which banks can borrow reserves from other banks that want to lend them (usually lent for overnight use)

Question 135

Federal funds rate

Answer 135

The interest rate that commercial banks charge each other for very short-term (usually overnight) loans; because the Fed frequently sets its policy in terms of the federal funds rate, this rate is closely watched in financial markets.

Question 136

Federal Open Market Committee (FOMC)

Answer 136

The Fed’s cheif body that decides monetary policy.

Question 137

Federal Reserve

Answer 137

The central bank of the United States. Its main function is controlling the money supply through monetary policy.

Question 138

Federal Reserves notes

Answer 138

largest component of U.S. currency (paper bills); distributed by the Fed

Question 139

fedwire

Answer 139

electronic payments transfer system operated by the Federal Reserve System (about 2,000 U.S. depository institutions use to process interbank payments)

Question 140

Feudalism

Answer 140

An economic system in which traditions rule.

Question 141

Fiat Money

Answer 141

Money that has no intrinsic value, that is, its only value comes from the fact that a governing body backs & regulates the currency. This system only works if a gov’t backs the money & regulates its production.

Question 142

fiduciary

Answer 142

comes from the latin fiducia, which means “trust” or “confidence”

Question 143

fiduciary monetary system

Answer 143

a system in which money is issued by the government and its value is based uniquely on the public’s faith that the currency represents command over goods and services

Question 144

Final goods or services

Answer 144

Goods or services consumed by the ultimate user; because they are the end products of the production process, they are counted as part of GDP.

Question 145

Final Output

Answer 145

Good and services purchased for their final use.

Question 146

Financial Assets

Answer 146

Assets such as stocks or bonds, whose benefit to the owner depends on the issuer of the asset meeting certain obligations.

Question 147

Financial Institution

Answer 147

A business whose primary activity is buying, selling, or holding financial assets.

Question 148

Financial Intermediary

Answer 148

An entity, like a bank, that works between savers and borrowers by accepting deposits and making loans.

Question 149

financial intermediation

Answer 149

the process by which financial institutions accept savigns from businesses, households, and governments and lend the savings to other businesses, households, and governments

Question 150

Financial Liabilities

Answer 150

Liabilites incurred by the issuer of a financial asset to stand behind the issued asset.

Question 151

Firm

Answer 151

An economic institution that transforms factors fo production into goods and services.

Question 152

Firm’s structure, strategy, and rivalry” imply in Porter’s Theory?

Answer 152

Different nations are characterized by different management ideologies help or hinder the evolution of national competitiveness.
Competition in an industry also tends to breeds rivalry and innovation, improved quality, cost reduction and investment in upgrading same.

Question 153

First degree price discrimination

Answer 153

Practice of charging each customer her reservation price

Question 154

First-dollar insurance coverage

Answer 154

Insurance that pays all expenses generated by the insured activity.

Question 155

Fiscal Policy

Answer 155

Changes in the expenditures or tax revenues of the federal government, undertaken to promote full employment, price stability, and reasonable rates of economic growth.

Question 156

Fisher effect

Answer 156

The tendency for nominal interest rates to be high when inflation is high and low when inflation is low.

Question 157

Fitch Ratings?

Answer 157

An international credit rating agency dual-headquartered in New York City and London. It is one of the three Nationally Recognized Statistical Rating Organizations (NRSRO) designated by the U.S. Securities and Exchange Commission in 1975, together with Moody’s and Standard & Poor’s.

Question 158

five levels of integration of a Trading Group?

Answer 158

a. Free Trade Area
b. Customs Union
c. Common Market
d. Economic Union
e. Political Union

Question 159

Fixed basket

Answer 159

A group of g & s use to calculate the CPI

Question 160

Fixed Cost

Answer 160

cost that does not vary with the level of ouptut and that can be eliminated only by shutting down.

Question 161

Fixed exchange rate

Answer 161

An exchange rate whose value is set by official government policy.

Question 162

Fixed factor of production

Answer 162

An input whose quantity cannot be altered in the short run.

Question 163

fixed investment

Answer 163

expenditures by firms on new machines and buildings (capital goods) that are expected to yield a future stream of income

Question 164

Flexible exchange rate

Answer 164

An exchange rate whose value is not officially fixed but varies according to the supply and demand for the currency in the foreign exchange market.

Question 165

Flow

Answer 165

A measure that is defined per unit of time.

Question 166

Flow of FDI?”

Answer 166

value of FDI undertaken during a specified time period

Question 167

For COMPLEMENTS, the cross-price elasticity of demand is - or +?

Answer 167

For COMPLEMENTS, the cross-price elasticity of demand is NEGATIVE?

Question 168

For INFERIOR GOOD, the income elasticity of demand is - or +?

Answer 168

NEGATIVE

Question 169

For NORMAL GOODS, the income elasticity of demand is - or +?

Answer 169

POSITIVE

Question 170

For Substitutes, the cross-price elasticity of demand is - or +?

Answer 170

For substitutes, the cross-price elasticity of demand is POSITIVE

Question 171

Foreign Aid

Answer 171

Funds that developed countries lend or give to developing countries.

Question 172

Foreign Business?

Answer 172

domestic business operating in foreign countries

Question 173

Foreign Exchange Market

Answer 173

Market where demand for and supply of foreign currencies determines exchange rates.

Question 174

Forex Market

Answer 174

The foreigh exchange market.

Question 175

Formula for Total Earnings

Answer 175

Total Earnings =

Wage x Quantity of Labor Demanded

Question 176

Forward Vertical FDI?”

Answer 176

choosing to invest in economic activity downstream from the core business activity of the business unit.

Question 177

four primary motives for engaging in FDI?

Answer 177

a. Resource seeking
b. Market Seeking
c. Efficiency Seeking
d. Responding to Competitive dynamics

Question 178

fractional reserve banking

Answer 178

a system in women depository institutions hold reserves that are less than the amount of total deposits

Question 179

Fractional-reserve banking system

Answer 179

A banking system in which bank reserves are less than deposits so that the reserve-deposit ratio is less than 100 percent.

Question 180

Free Trade Area

Answer 180

characterized by elimination of trade barriers between member nations.

Question 181

Free Trade Association

Answer 181

A group of countries that have reduced or eliminated trade barriers among themselves.

Question 182

Free-rider problem

Answer 182

An incentive problem in which too little of a good or service is produced because nonpayers cannot be excluded from using it.

Question 183

Frictional Unemployment

Answer 183

A type of unemployment in which an individual is between jobs.

Question 184

Full Capacity

Answer 184

When the economy is producing at an output level to the natural rate of unemployment, or about 6%.

Question 185

Full Convertibility

Answer 185

An exchange rate system in which individuals may change dollars into any currency they want for whatever legal purpose they want.

Question 186

Full Output

Answer 186

The level of output that occurs when the labor force is at full employment.

Question 187

Function of the Federal Reserve System #1

Answer 187

supplies the economy with fiduciary currency (paper currency known as Federal Reserve notes); changes throughout the yr (ex. demands for paper currency are largers during the holiday seasons)

Question 188

Function of the Federal Reserve System #2

Answer 188

provides payment-clearing systems: long operated systems for transmitting and clearing payments

Question 189

Function of the Federal Reserve System #3

Answer 189

holds depository institutions’ reserves

Question 190

Function of the Federal Reserve System #4

Answer 190

acts as the government’s fiscal agent (helps the government collect certain tax revenues and aids in the purchase and sale of government securities)

Question 191

Function of the Federal Reserve System #5

Answer 191

supervises depository institutions: Fed periodically and without warning examine depository institutions to see what kinds of loans have been made, what has been used as security for the loans, and who has recieved them

Question 192

Function of the Federal Reserve System #6

Answer 192

acts as the “lender of last resort” (the Federal Rserve’s role as an institutions that is willing and able to lend to a temporarily illiquid bank that is otherwise in good financial condition to prevent the bank’s illiquid position from lending to a general loss of confidence in that banks or in others)

Question 193

Function of the Federal Reserve System #7

Answer 193

regulates the money supply

Question 194

Function of the Federal Reserve System #8

Answer 194

intervenes in foreign currency markets (attempts to keep the value of the dollar from changing by buying and selling U.S. dollars in foreign exchange markets)

Question 195

GAAT?

Answer 195

General Agreement on Tarrifs and Trade. This is a multilateral (many nations) agreement whose objective is to minimize government intervention in trade

Question 196

Gains from specialization and trade are always possible as long as ……………..

Answer 196

Gains from specialization and trade are always possible as long as OPPORTUNITY COSTS DIVERGE

Question 197

Galton’s Fallacy

Answer 197

higher growth rates imply eventual `convergence’ i.e. While the poor countries might have higher percentage growth rates, this
does not mean that they are closing the absolute output gap with rich
countries

Question 198

Game tree

Answer 198

See Decision tree.

Question 199

GDP Deflator

Answer 199

measures the changes in the prices of all the goods that together constitute GDP

Question 200

generic definition for globalization?

Answer 200

the trend towards a more integrated and interdependent global Economic systems

Question 201

Global Corporation

Answer 201

Corporation with substantial operations on bothe the production and sales sides in more than one country.

Question 202

Global firm?

Answer 202

A globally integrated company that tries to achieve and experience curve economies. Products tend to be largely undifferentiated and location of production is chosen to achieve “Minimized unit delivered cost to Market” with largely centralized operations.

Question 203

Globalization

Answer 203

The intergation of world economies.

Question 204

Globalization results in a greater degree of __________ across markets than would be present otherwise.

Answer 204

homogeneity

Question 205

Gold Specie Flow Mechanism

Answer 205

The long-run adjustment mechanism that maintained the gold standard.

Question 206

Gold Standard

Answer 206

The system of fixed exchange rates in which the value of currencies was fixed relative to the value of gold and gold was used as the primary reserve asset.

Question 207

Goods

Answer 207

Tangible objects that satisfy economic wants

Question 208

Government Action” in Porter’s Theory?

Answer 208

actions by government that could have a positive or negative effect of foreign business…

Question 209

Government Bonds

Answer 209

Bonds issued by the gov’t & bought & sold by the Fed as a form of monetary policy to manipulate the money supply.

Question 210

Government budget deficit

Answer 210

The excess of government spending over tax collections (G − T).

Question 211

Government budget surplus

Answer 211

The excess of government tax collections over government spending (T − G); the government budget surplus equals public saving.

Question 212

Government purchases

Answer 212

Purchases by federal, state, and local governments of final goods and services; government purchases do not include transfer payments, which are payments made by the government in return for which no current goods or services are received, nor do they include interest paid on the government debt.

Question 213

Government Spending

Answer 213

Goods and services that fovernment buys.

Question 214

graduated income tax?

Answer 214

An income tax that takes proportionately more from higher wage earners

Question 215

Grandfather

Answer 215

To pass alaw affecting a specific group but providing that those in the group before the law was passed are exempt fromn some provisions of the law.

Question 216

Graphically, does a good with elastic demand have a relatively flat or relatively steep demand curve?

Answer 216

FLAT, because the quantity demanded is dramatically affected by price.

Question 217

Graphically, where is the total consumer surplus located?

Answer 217

Under the demand curve, but above the price.

Question 218

greenfield investment?

Answer 218

This is foreign direct investment that builds new factories or infastructure. It is the type of FDI most sought by host countries because it leads to infastructure and knowledge transfers.

Question 219

Gross domestic product (GDP)

Answer 219

the total market value of all final goods and services produced within a country in a given period of time.

Y = C + I + G + X or = C + I + G + NX

Question 220

Gross domestic product deflator (GDP deflator)

Answer 220

Shows how much of the change in the GDP from a base year is reliant on changes in the price level.

Question 221

Gross domestic product per capita (GDP per capita)

Answer 221

GDP is divided among the people in the population.

Question 222

Gross national product (GNP)

Answer 222

An alternative measure of economic activity to GDP. GNP is the sum of the market values of all goods and services produced by the citizens of a country regardless of their physical location.

Question 223

gross public debt

Answer 223

all federal government debt irrespective of who owns it

Question 224

Head tax

Answer 224

A tax that collects the same amount from every taxpayer.

Question 225

Health maintenance organization (HMO)

Answer 225

A group of physicians that provides health services to individuals and families for a fixed annual fee.

Question 226

holding co mpany?

Answer 226

Business owning a majority of stock in member companies and therefore able to dictate common policy. Warren Buffett’s Berkshire Hathaway is one of the largest publicly traded holding companies; it owns numerous insurance companies, manufacturing businesses, retailers, and other companies.

Question 227

Horizontal FDI?”

Answer 227

Investing in the same economic activity abroad as one does at home.

Question 228

Horizontal Merger

Answer 228

The combining of two companies in the same industry.

Question 229

horizontal short-run aggregate supply curve

Answer 229

there is excessive unemployment and unused capacity in the economy (classical assumptino of everlasting full employment no longer holds)

Question 230

Hostile Takeover

Answer 230

A merger in which the firm being taken over doesn’t want to be taken over.

Question 231

How can firms acheive “first mover advantage?”

Answer 231

Investing in becoming a first mover requires a large allocation of cash.

Question 232

How does a firm maximize profit?

Answer 232

By producing at a level where marginal revenue equals marginal cost.

Question 233

How does the Bureau of Labor Statistics calculate unemployment?

Answer 233

egularly gathers data from 60,000 households to compute the unemployment rate.

Question 234

How is GDP measured?

Answer 234

Consumption + Investments + Government Spending + Exports - Imports. (C+I+G + Net Exports) It is a portion of the expenditure method of measuring GDP.

Question 235

How often do treasury bills pay interest?

Answer 235

Never. Only T-notes and T-bonds pay interest twice a year. T-bills are simply sold at a discounted price.

Question 236

How to calculate total consumer surplus?

Answer 236

(1/2 Base) x Height

Question 237

How to calculate Total Revenue?

Answer 237

Total Revenue= Price X Quantity Demanded

Question 238

how to decrease aggregate demand

Answer 238

cut government spending or raise taxes (note: this reduces inflationary gaps)

Question 239

How to determine % change in price?

Answer 239

(Change in price/Average Price) X100

Question 240

How to determine % change in quantity demanded?

Answer 240

(Change in Quantity Demanded/Average Quantity Demanded) X 100

Question 241

how to increase aggregate demand

Answer 241

reduce taxes or increase goverment spending (note: this reduces a recessionary gap)

Question 242

Human capital

Answer 242

An amalgam of factors such as education, training, experience, intelligence, energy, work habits, trustworthiness, initiative, and others that affect the value of a worker’s marginal product.

Question 243

Human capital theory

Answer 243

A theory of pay determination that says a worker’s wage will be proportional to his or her stock of human capital.

Question 244

Hurdle method of price discrimination

Answer 244

The practice by which a seller offers a discount to all buyers who overcome some obstacle.

Question 245

Hyperinflation

Answer 245

A very rapid rise in the overall price level.

Question 246

If a 1% change in price causes the quantity demanded to change by less than 1% then the quantity demanded is ______ sensitive to price.

Answer 246

Not very sensitive to price.

Question 247

If a 1% change in price causes the quantity demanded to change by more than 1% then the quantity demanded is ______ sensitive to price.

Answer 247

Very sensitive to price.

Question 248

If Demand is ELASTIC…..

Answer 248

P Rises 1% and Q Drops >1%

PxQ Falls

Question 249

If demand is INELASTIC?

Answer 249

P Rises 1% and Q Falls <1%

PxQ RISES

Question 250

If demand is PERFECTLY INELASTIC?

Answer 250

P rises 1% and Q unchanged

PxQ definitely rises

Question 251

If demand is UNIT ELASTIC

Answer 251

P Rises 1% and Q drops 1%

PxQ Constant

Question 252

If General Electric, a U.S. based corporation, purchased a 50% interest in a company in Italy, that purchase would be an example of

Answer 252

foreign direct investment.

Question 253

If quantity and price move in OPPOSITE directions, the probable cause is a shift in the ________ curve

Answer 253

If quantity and price move in OPPOSITE directions, the probable cause is a shift in the SUPPLY curve

Question 254

If quantity demanded is NOT very sensitive to price, what is the price elasticity of demand?

Answer 254

Price elasticity of demand is less than 1 (in absolute value)

Question 255

If quantity demanded is very sensitive to price, what is the price elasticity of demand?

Answer 255

Price elasticity of demand is greater than 1 (in absolute value)

Question 256

IF quantity supplied is not very sensitive to price (elasticity<1), supply is _________

Answer 256

IF quantity supplied is not very sensitive to price (elasticity<1), supply is INELASTIC

Question 257

IF quantity supplied is very sensitive to price (elasticity>1), supply is _________

Answer 257

IF quantity supplied is very sensitive to price (elasticity>1), supply is ELASTIC

Question 258

If the quantity sold changes in the same direction as the price, the ______ curve has probably shifted

Answer 258

If the quantity sold changes in the same direction as the price, the DEMAND curve has probably shifted

Question 259

If there is a 1% change in price which results in a 1% change in quantity demanded, the good or service is ________ elastic

Answer 259

Unit Elastic

Question 260

If Westvaco decided to produce paper in Spain, and the Spanish government stipulated that 50% of the component parts that went into Westvaco’s paper must be produced locally, that requirement would be an example of a(n)

Answer 260

local content requirement.

Question 261

illiquid’ assets

Answer 261

bonds or stocks, or savings accounts at bank
{ not accepted in exchange for goods and services (bad)
{ but they earn a return

Question 262

Imperfectly competitive firm

Answer 262

A firm that has at least some control over the market price of its product.

Question 263

Implicit Collusion

Answer 263

A typd of collusion in which multiple firms make the same pricing decisions even though they have not explicitly consulted with one another.

Question 264

Implicit costs

Answer 264

All the firm’s opportunity costs of the resources supplied by the firm’s owners.

Question 265

Import Quota

Answer 265

Limit on the quanity of a good that can be imported

Question 266

Imports

Answer 266

Purchases of foreign goods and services; the opposite of Exports.

Question 267

In accounting, what is used for inventory: FIFO or LIFO?

Answer 267

LIFO in the United States.

Question 268

In his study dealing with the competitive advantage of nations, Porter argued that in regard to demand conditions, a nation’s firms’ gain competitive advantage if their domestic consumers are __________ and __________.

Answer 268

sophisticated, demanding

Question 269

Incentive

Answer 269

Any reward or benefit, such as money or good feeling, that motivates choices and behaviors.

Question 270

Incentive Effect

Answer 270

How much a person will change his or her hours worked in response to ta change in the wage rate.

Question 271

Income

Answer 271

Payments earned by households for selling or renting their productive resources. For example, workers receive wage or salary payments in exchange for their labor.

Question 272

Income effect

Answer 272

The change in the quantity demanded of a good that results because a change in the price of a good changes the buyer’s purchasing power.

Question 273

Income elasticity of demand

Answer 273

The percentage by which a good’s quantity demanded changes in response to a 1 percent change in income.

Question 274

income velocity of money (V)

Answer 274

the number of times per year a dollar is spent on final goods and services; identically equal to nominal GDP divided by the money supply

Question 275

Income-expenditure multiplier

Answer 275

The effect of a one-unit increase in autonomous expenditure on short-run equilibrium output.

Question 276

Increasing returns to scale

Answer 276

A production process is said to have increasing returns to scale if, when all inputs are changed by a given proportion, output changes by more than that proportion; also called economies of scale.

Question 277

Independent variable

Answer 277

A variable in an equation whose value determines the value taken by another variable in the equation.

Question 278

Indexing

Answer 278

The practice of increasing a nominal quantity each period by an amount equal to the percentage increase in a specified price index. Indexing prevents the purchasing power of the nominal quantity from being eroded by inflation.

Question 279

indirect effect of an increase in the money supply

Answer 279

banks lower interest rates that they charge on loans–>encourages people to take out those loans–>businesses engage in new investment with the funds loaned–>individuals will engage in more consumption of durable goods (housing, autos, and home entertainment centers)–>generates a rise in aggregate demand—>more people involved in more spending

Question 280

INDIVIDUAL CONSUMER SURPLUS

Answer 280

The consumer’s willingness to pay minus the price paid.

Question 281

Induced aggregate demand

Answer 281

The portion of aggregate demand that is determined within the model.

Question 282

Induced Expenditures

Answer 282

Expenditures that change a s income changes.

Question 283

Inefficient point

Answer 283

Any combination of goods for which currently available resources enable an increase in the production of one good without a reduction in the production of the other.

Question 284

Inelastic

Answer 284

The demand for a good is inelastic with respect to price if its price elasticity of demand is less than 1.

Question 285

Inferior Good

Answer 285

Good whose consumption decreases whn income increases.

Question 286

Infinitely Elastic Demand

Answer 286

Consumers will buy as much of a good as they can get at a single price, but for any higher price the quantity demanded drops to zero, while for any lower price the quantity demanded increases without limit.

Question 287

Inflation

Answer 287

A rise in the general or average price level of all the goods and services produced in an economy.

Question 288

Inflation dove

Answer 288

Someone who is not strongly committed to achieving and maintaining low inflation.

Question 289

Inflation hawk

Answer 289

Someone who is committed to achieving and maintaining low inflation, even at some short-run cost in reduced output and employment.

Question 290

Inflation shock

Answer 290

A sudden change in the normal behavior of inflation, unrelated to the nation’s output gap.

Question 291

Inflation Tax

Answer 291

An implicit tax on the holders of cash and the holder of any obligations specified in nominal terms.

Question 292

Inflation-protected bonds

Answer 292

Bonds whose holders receive a nominal interest rate each year equal to the fixed real rate plus the actual rate of inflation during that year.

Question 293

inflow of FDI?”

Answer 293

flow of FDI into a country

Question 294

In-kind transfer

Answer 294

A payment made not in the form of cash but in the form of a good or service.

Question 295

Inside lag (of macroeconomic policy)

Answer 295

The delay between the date a policy change is needed and the date it is implemented.

Question 296

Interest

Answer 296

Payments for the use of real or financial capital over some period of time; paid by those who use the resources to those who own them, as in mortgage payments paid by a borrower to a lender.

Question 297

Interest Rate

Answer 297

The price paid for the use of a financial asset.

Question 298

Intermediate goods or services

Answer 298

Goods or services used up in the production of final goods and services and therefore not counted as part of GDP.

Question 299

Intermediate Products

Answer 299

Products used as inputs in the production of some other product.

Question 300

Internal Debt

Answer 300

Government debt owed to other fovernmental agencies or to its own citizens.

Question 301

International Business:

Answer 301

private or governmental business that involves activities crossing national boundaries

Question 302

International capital flows

Answer 302

Purchases or sales of real and financial assets across international borders.

Question 303

International reserves

Answer 303

Foreign currency assets held by a government for the purpose of purchasing the domestic currency in the foreign exchange market.

Question 304

Intertemporal price discrimination

Answer 304

Practice of separating consumers with different demand functions into different groups by charging different prices at different points in time.

Question 305

inventory investment

Answer 305

changes in business inventories

Question 306

Investment

Answer 306

Spending by firms on final goods and services, primarily capital goods. (also a flow concept): expenditures on new machines and buildings (capital goods) that are expected to yield a future stream of income

Question 307

investment companies

Answer 307

institutions that manage portfolios of financial instruments called mutual funds on behalf of shareholders; exist largely because of cost savings from their greater scale of operations

Question 308

investment function

Answer 308

represented bas an inverse relationship between the rate of interest and the value of planned real investment (as interest rates fall planned investment spending increases)

Question 309

Invisible Hand

Answer 309

The price mechanism; the rise and fall of prices that guides our actions in a market.

Question 310

Invisible hand theory

Answer 310

Adam Smith’s theory stating that the actions of independent, self-interested buyers and sellers will often result in the most efficient allocation of resources.

Question 311

Is goodwill a basis for the theory of Monopolistic Advantage?

Answer 311

NO

Question 312

Is it possible for an individual or country to have a comparative advantage in all products or services?

Answer 312

No, not as long opportunity costs diverge.

Question 313

Is it possible for an individual or country to have an absolute advantage in all products or services?

Answer 313

YES!

Question 314

Is the U.S. and other Industrialized nations share of the global output increasing or decreasing?

Answer 314

Decreasing

Question 315

Isocost line

Answer 315

Graph showing all possible combinations of labor and capital that can be purchased for a given total cost

Question 316

junk” bonds?

Answer 316

Companies with less-than-investment-grade (Ba and below) ratings issue bonds. These securities, known as high-yield, or “junk,” bonds, are generally too speculative for the average investor, but they can provide spectacular returns.

Question 317

keynes and followers

Answer 317

argued that prices were inflexible downward due to the existance of unions and long-term contracts; believed that there was no guarantee that a capitalist economy would reach a full employment

Question 318

Keynesian Theory

Answer 318

The macroeconomic theory holding that business cycles are caused by changes in aggregate demand and that such cycles can and should be influenced by fiscal and monetary policy undertaken to promote economic stability.

Question 319

Labor

Answer 319

The quantity and quality of human effort available to produce goods and services.

Question 320

Labor Equilibrium

Answer 320

In equilibrium, the quantity of labor demanded equals the quantity of labor supplied.

Question 321

Labor Force

Answer 321

The people in a nation who are aged 16 or over and are employed or actively looking for work.

Question 322

Labor Market

Answer 322

The factor market in which in dividuals supply labor services for wages to other individuals and to firms that need labor services.

Question 323

Labor Productivity

Answer 323

The average output per worker.

Question 324

Labor union

Answer 324

A group of workers who bargain collectively with employers for better wages and working conditions.

Question 325

labor-force participation rate

Answer 325

the percentage of the adult population that is in the labor force

Question 326

Laffer curve

Answer 326

explains relationship between tax rates and tax revenues (total tax revenues initially rise but then eventually fall as the tax rate continues to increase after reaching some unspecified tax-revenue-maximizing rate at the top of the curve)

Question 327

Laissez-Faire

Answer 327

An economic policy of leaving coordination of individuals actions to the market.

Question 328

Land Bank Program

Answer 328

A program in which government supports prices by fiving farmers economic incentives to reduce supply.

Question 329

Laspeyres Index

Answer 329

An index where the basket of goods is fixed.

Question 330

Law of Demand

Answer 330

Quantity demanded rises as price falls, other things constant.

Question 331

Law of Diminishing Marginal Returns

Answer 331

Describes a phenomenon observed in all short-run production processes, when at least one input (usually capital)is fixed. As more and more units of a variable input (usually labor) are added to the fixed input, the additional (marginal) output associated with each increase in units of the variable input will eventually decline. In other words, successive increases in a variable factor of production added to fixed factors of production will result in smaller increases in output.

Question 332

Law of diminishing marginal utility

Answer 332

The tendency for the additional utility gained from consuming an additional unit of a good to diminish as consumption increases beyond some point.

Question 333

Law of one price

Answer 333

If transportation costs are relatively small, the price of an internationally traded commodity must be the same in all locations.

Question 334

Law of Supply

Answer 334

Quanitity supplied rises as price rises, other things constant.

Question 335

leakages

Answer 335

the entire loan from one bank is not always desposited in another bank (two types)

Question 336

Lemons model

Answer 336

George Akerlof’s explanation of how asymmetric information tends to reduce the average quality of goods offered for sale.

Question 337

lender of last resort

Answer 337

the federal reserve’s role as an institution that is willing and able to lend to a temporarily illiquid bank that is otherwise in good financial condition to prevent the bank’s illiquid position from leading to a general loss of confidence in that bank or in others

Question 338

Lerner Index of Monopoly Power

Answer 338

Measure of monopoly power calculated as excess of price over marginal cost as a fraction of price

Question 339

liabilities

Answer 339

amounts owed; the legal claims against a business or household by nonowners

Question 340

LIBOR?

Answer 340

LIBOR stands for the London Interbank Offered Rate and is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the London wholesale (or “interbank”) money market.

Question 341

Life-cycle saving

Answer 341

Saving to meet long-term objectives, such as retirement, college attendance, or the purchase of a home.

Question 342

Limited Liability

Answer 342

The liability of a stockholder in a corporation; it is limited to the amount the stoackholder has iinvested in the company.

Question 343

liquid’ assets

Answer 343

cash or something close to it (e.g. balance in checking

account)

Question 344

Liquidity

Answer 344

The ease with which something of value can be exchanged for the currency of an economy.

Question 345

liquidity approach

Answer 345

a method of measuring the money supply by looking at money as a tempory store of value

Question 346

Liquidity Preference of Interest?

Answer 346

It was originally Keynes’ idea. The hypothesis is that people prefer to have their money be liquid, and must have a reason for it not to be liquid. So, lowering interest rates on low liquidity investment items (30 year bonds, etc…) will make them less attractive to invest in. So, when long term interest rates drop, the demand for money rises.

Question 347

liquidity ratio?

Answer 347

A measure of how quickly a firm can convert its assets into cash to settle debts.

Question 348

Local standards and laws?”

Answer 348

administrative instruments or trade policies

Question 349

Logrolling

Answer 349

The practice whereby legislators support one another’s legislative proposals.

Question 350

Long run

Answer 350

A period of time of sufficient length that all the firm’s factors of production are variable.

Question 351

Long Run Competitive Equilibrium

Answer 351

All firms in an industry are maximizing profit, no firm has an incentive to enter or exit, and price is such that quantity supplied equals quantity demanded.

Question 352

Long-run aggregate supply (LRAS) line

Answer 352

A vertical line showing the economy’s potential output Y*.

Question 353

Long-run equilibrium

Answer 353

A situation in which actual output equals potential output and the inflation rate is stable; graphically, long-run equilibrium occurs when the AD curve, the SRAS line, and the LRAS line all intersect at a single point.

Question 354

lump-sum tax

Answer 354

a tax that does not depend on income

Question 355

M1

Answer 355

Sum of currency outstanding and balances held in checking accounts.

Question 356

M2

Answer 356

M1 plus savings deposits, small-demonimation time deposits, and money market mutual fund shares, along with some esoteric financial instruments.

Question 357

Macroeconomic Equilibrium

Answer 357

The equilibrium level of output and the price level where aggregate demand equals aggregate supply.

Question 358

Macroeconomic policies

Answer 358

Government actions designed to affect the performance of the economy as a whole.

Question 359

Macroeconomics

Answer 359

The study of economics concerned with the economy as a whole, involving aggregate demand, aggregate supply, and monetary and fiscal policy.

Question 360

main determinant of saving (classical model)

Answer 360

the rate of interest (the higher the rate of interest, the more peole wante to save, and therefore the less people wanted to consume)

Question 361

main determinant of saving (Keynes)

Answer 361

income: Keynes argued that real saving and consumption decisions depend primarily on a household’s present real disposable income

Question 362

major theories of FDI?

Answer 362

1. Monopolistic Advantage theory
2. Strategic Behavior (Following competitors)
3. Horizontal FDI (FDI in the same industry abroad as at home)
4. Dunnings Eclectic theory (Location Theory)

Question 363

Managing an international business is different from managing a purely domestic business for all of the following reasons except:

Answer 363

the range of problems confronted by a manager in an international business are narrower than those confronted by a manager in a domestic business

Question 364

Marginal benefit

Answer 364

The marginal benefit of an activity is the increase in total benefit that results from carrying out one additional unit of the activity.

Question 365

Marginal cost

Answer 365

The marginal cost of an activity is the increase in total cost that results from carrying out one additional unit of the activity; as output changes from one level to another, the change in total cost divided by the corresponding change in output.

Question 366

Marginal expenditure

Answer 366

Additional cost of buying one more unit of a good

Question 367

Marginal External cost

Answer 367

Increase in cost imposed externally as one or more firms increase output by one unit

Question 368

Marginal Factor Cost

Answer 368

The additional cost to a firm of hiring another worker.

Question 369

Marginal Physical Product (MPP)

Answer 369

The additional units of output that hiring an additional worker will bring about.

Question 370

Marginal Product

Answer 370

The additional output that will be forthcoming from an additional worker, other inputs constant.

Question 371

Marginal product of labor (MP)

Answer 371

The additional output a firm gets by employing one additional unit of labor.

Question 372

Marginal propensity to consume (MPC)

Answer 372

The amount by which consumption rises when disposable income rises by $1; we assume that 0 < MPC < 1.

Question 373

marginal propensity to save (MPS)

Answer 373

the ratio of the change in saving to the change in disposable income

Question 374

Marginal revenue

Answer 374

The change in a firm’s total revenue that results from a one-unit change in output.

Question 375

Marginal Social cost

Answer 375

Sum of the marginal cost of production and the marginal external cost

Question 376

Marginal tax rate

Answer 376

The amount by which taxes rise when before-tax income rises by one dollar.

Question 377

Marginal utility

Answer 377

The additional utility gained from consuming an additional unit of a good.

Question 378

Marginal Value

Answer 378

Additional benefit derived from purchaisn on more unit of a good

Question 379

Market

Answer 379

The market for any good consists of all buyers or sellers of that good.

Question 380

market definition for globalization?

Answer 380

The merging of historically distinct and separate national markets into one huge global marketplace

Question 381

Market Demand Curve

Answer 381

The horizontal sum of all individual demand curves.

Question 382

Market Economy

Answer 382

An economic system based on private property and the market in which, in principle, individuals decide how, what, and for whom to produce.

Question 383

Market equilibrium

Answer 383

Occurs when all buyers and sellers are satisfied with their respective quantities at the market price.

Question 384

Market equilibrium value of the exchange rate

Answer 384

The exchange rate that equates the quantities of the currency supplied and demanded in the foreign exchange market.

Question 385

Market Failure

Answer 385

Situation in which an unregulated competitive market is inefficient because prices fail to provide proper signals to consumers and producers

Question 386

Market power

Answer 386

Ability of a seller or buyer to affect the price of a good

Question 387

Market screening eliminates:

Answer 387

environmental forces.

Question 388

Market Seeking?”

Answer 388

explore new market opportunities, to circumvent prohibitive protectionist policies and actions such as tariffs and quotas, to establish a local presence to ensure product and customer service availability, to meet buy national requirements, to become more visible locally by hiring many local staff, paying local taxes and to serve a wider range (portfolio) of markets.

Question 389

Market supply

Answer 389

refers to the sum of all individual supplies for a particular
good or service; individual supply curves are summed horizontally to obtain
the market supply curve

Question 390

Market-Clearing Level

Answer 390

The level, price, or quantity where supply and demand are equal.

Question 391

Maturation date

Answer 391

The date at which the principal of a bond will be repaid.

Question 392

Maximin Strategy

Answer 392

Strategy that maximizes the minimum gain that can be earned

Question 393

Means-tested

Answer 393

A benefit program is means-tested if its benefit level declines as the recipient earns additional income.

Question 394

Medium of Exchange

Answer 394

An item used commonly to trade for goods and services.

Question 395

Menu costs

Answer 395

The costs of changing prices.

Question 396

Merchantilism?

Answer 396

Economic Philosophy that countries should encourage exports while discouraging imports.

Question 397

Merger

Answer 397

The act of combining two firms.

Question 398

Microeconomics

Answer 398

The study of individual choice under scarcity and its implications for the behavior of prices and quantities in individual markets.

Question 399

Minimum Wage Law

Answer 399

A law specifying the lowest wage a firm can legally pay an employee.

Question 400

Mixed Strategy

Answer 400

Strategy in which a player makes a random choice among two or more possible actiosn based on a set of chosen probabilities.

Question 401

MNC?

Answer 401

an incorporated firm that operates, to a significant degree, in more than a few countries

Question 402

MODERN TRADE THEORIES?

Answer 402

STRATEGIC(NEW) TRADE THEORY

PORTER’S DIAMOND OF NATIONAL ADVANTAGE.

Question 403

Monetarist Theory

Answer 403

A macroeconomic theory holding that the main cause of changes in the business cycle are changes in money supply.

Question 404

Monetary Policy

Answer 404

Policy used to affect the money supply employed by the Fed. In particular, this describes the open market operations of buying & selling gove’t bonds.

Question 405

money

Answer 405

any medium that is universally accepted in an economy both by sellers of goods and services as payment for those goods and services and by creditors as payment for debts

Question 406

money balances

Answer 406

synonymous with money, money stock, money holdings

Question 407

Money demand curve

Answer 407

Shows the relationship between the aggregate quantity of money demanded M and the nominal interest rate i; because an increase in the nominal interest rate increases the opportunity cost of holding money, which reduces the quantity of money demanded, the money demand curve slopes down.

Question 408

money market deposit accounts (MMDAs)

Answer 408

accounts issued by banks yielding a market rate of interest with a minimum balance requirement and a limit on transactions; they have no minimum maturity

Question 409

money market mutual funds

Answer 409

funds obtained from the public that investment companies hold in common and use to acquire short-maturity credit instruments, such as certificates of deposit and securities sold by the U.S. government

Question 410

Money Multiplier

Answer 410

The number that describes the change in the money supply given an initial deposit and a reserve requirement.

Question 411

Money Supply

Answer 411

The quantity of money in an economy. In the US this is controlled through policy by the Fed.

Question 412

money supply can increase when

Answer 412

additional new reserves and deposits are created by the Federal Reserve System (the fundamental way)

Question 413

Monitoring Costs

Answer 413

costs incurred by the organizer of production in seeing to it that the emplooyees do what they’re supposed to do.

Question 414

Monoploy

Answer 414

A market structure in which one firm makes up the entire market.

Question 415

monopolistic advantage theory?

Answer 415

based on the premise that a firm has obtained a monopolistic advantage through domestic competition that would enable it to be successful internationally.

Question 416

Monopolistic Competition

Answer 416

Market in which firms can enter freely each producing its own brand or version of a differentiated product

Question 417

Monopoly

Answer 417

A market structure in which a single seller produces sells all the units of a good or service in a particular market, and where the barriers to new firms entering the market are very high.

Question 418

Monopsony

Answer 418

A market with only a single buyer.

Question 419

Moral hazard

Answer 419

The tendency of people to expend less effort protecting those goods that are insured against theft or damage.

Question 420

Most Favored Nation Status?

Answer 420

Most favoured nation (MFN), also called normal trade relations in the United States, is a status accorded by one nation to another in international trade. Somewhat counterintuitively, it does not confer particular advantages on the receiving nation, but means that the receiving nation will be granted all trade advantages, such as low tariffsm that any third nation also receives. In effect, having MFN status means that one’s nation will not be treated worse than anyone else’s nation. The members of the World Trade Organization, which include all developed nations, accord MFN status to each other. Exceptions exist for preferential treatment of developing countries, regional free trade areas and customs unions. In the early days of international trade, most favoured nation status was usually used on a dual-party, state-to-state basis. A nation could enter into a most favored nation treaty with another nation. Generally bilateral, in the late 19th and early 20th century unilateral most favored nation clauses were imposed on Asian nations by the more powerful Western countries (see Open Door Policy). In the 1990s continued most favoured nation status for the People’s Republic of China sparked U.S. controversy because of its sales of sensitive military technology and its use of prison labor, and its most favoured nation status was only made permanent in 2000. All of the former Soviet states, including Russia, were granted most favoured nation status in 1992. In the United States, “most favored nation status” has been called Normal Trade Relations since 1998 as all but a handful of countries had this status (The impetus for the change in terminology came from irritation voiced by some Americans that various totalitarian governments around the world enjoyed being a “most favored nation” of the United States).

Question 421

multi-domestic firm?

Answer 421

Multi-domestic firm is one that focuses on local responsiveness! Product offerings are customized and a complete set of value creating activities are developed in each country/region, with largely autonomous decentralized organizations.

Question 422

multiplier

Answer 422

the number by which a change in autonomous real investment or autonomous real consumption, for example, is multiplied to get the change in equilibrium real GDP

Question 423

multiplier formula

Answer 423

=1/1-MPC or 1/MPS

Question 424

Mutual fund

Answer 424

A financial intermediary that sells shares in itself to the public, then uses the funds raised to buy a wide variety of financial assets.

Question 425

Nash equilibrium

Answer 425

Any combination of strategy choices in which each player’s choice is his or her best choice, given the other players’ choices.

Question 426

NATIONAL COMMERCIAL POLICY?

Answer 426

THE INFLUENCE OF GOVERNMENT IMPOSED AND OTHER DISTORTIONS IN THE MARKETPLACE

Question 427

National Debt

Answer 427

The total amount owed by the national government to those from whom it has borrowed to finance the accumulated difference between annual budget deficits and annual budget surpluses; also called public debt.

Question 428

National Output

Answer 428

The total value of goods and services produced by an economy in a specified time period. Also known as GDP.

Question 429

National Resources

Answer 429

Gifts of nature” that can be used to produce goods and services; for example, oceans, air, mineral deposits, virgin forests, and actual fields of land. When investments are made to improve fields of land or other natural resources, those resources become, in part, capital resources.

Question 430

National saving

Answer 430

The saving of the entire economy, equal to GDP less consumption expenditures and government purchases of goods and services, or Y − C − G.

Question 431

Natural Monopoly

Answer 431

Firm that can produce the entire output of the market at a cost lower than what it would be if there were several firms

Question 432

Natural rate of unemployment, u*

Answer 432

The part of the total unemployment rate that is attributable to frictional and structural unemployment; equivalently, the unemployment rate that prevails when cyclical unemployment is zero, so the economy has neither a recessionary nor an expansionary output gap.

Question 433

Negative externality

Answer 433

See External cost.

Question 434

Negative income tax (NIT)

Answer 434

A system under which the government would grant every citizen a cash payment each year, financed by an additional tax on earned income.

Question 435

neoliberalism?

Answer 435

Neoliberalism is widely used as a description of the revived form of economic liberalism that became increasingly important in international economic policy discussions from the 1970s onwards. In its dominant international use, neoliberalism refers to a political-economic philosophy that de-emphasizes or rejects government intervention in the domestic economy. It focuses on free-market methods, fewer restrictions on business operations, and property rights. In foreign policy, neoliberalism favors the opening of foreign markets by political means, using economic pressure, diplomacy, and/or military intervention.

Question 436

Net capital inflows

Answer 436

Capital flows that are equal to foreign purchases of domestic assets (which bring funds into the country) minus domestic purchases of foreign assets (which send funds out of the country); that is, capital inflows minus capital outflows.

Question 437

Net Domestic Product (NDP)

Answer 437

The sum of consumption expenditures, government expenditures, net exports, and invetment less depreciation.

Question 438

Net exports

Answer 438

Exports minus imports.

Question 439

net public debt

Answer 439

gross public debt minus all government interagency borrowing

Question 440

net worth

Answer 440

the difference between assets and liabilities

Question 441

New Growth Theory

Answer 441

a theory that emphasizes the role of technology rather than capital in the growth process.

Question 442

New Trade Theory?”

Answer 442

Based on the assumptions that:

1. Trade has an impact on economies of scale which increases variety and average cost.
2. World trade in items that require greater economies of scale on a global scale is beneficial to first movers.

Question 443

Nominal Deficit

Answer 443

The deficit determined by looking at the difference between expenditures and receipts.

Question 444

Nominal exchange rate

Answer 444

The rate at which two currencies can be traded for each other.

Question 445

Nominal GDP

Answer 445

GDP calculated at existing prices.

Question 446

Nominal gross domestic product (nominal GDP)

Answer 446

The sum value of goods and services produced in a country and valued at current prices.

Question 447

Nominal Interest

Answer 447

The percent of the amount borrowed paid each year to the lender by the borrower in return for the use of the money not taking inflation into account.

Question 448

Nominal Prices

Answer 448

Prices of goods and services valued at dollars current when the goods and services were provided. Nominal prices are not adjusted for inflation.

Question 449

Nominal quantity

Answer 449

A quantity that is measured in terms of its current dollar value.

Question 450

Nominal Value

Answer 450

The value of something in current dollars without taking into account the effects of inflation.

Question 451

noncontrollable expenditures

Answer 451

government spending that changes automatically without action by Congress

Question 452

Nonexcludable good

Answer 452

A good that is difficult, or costly, to exclude nonpayers from consuming.

Question 453

Nonexclusion

Answer 453

A property of certain goods and services such that (once the goods or services are provided) they cannot be denied to or withheld from people who have not paid for the goods or services; examples include street lights or national defense.

Question 454

Nonrival good

Answer 454

A good whose consumption by one person does not diminish its availability for others.

Question 455

non-tarrif barriers?

Answer 455

1. Subsidies
2. Voluntary export restraints (VER’S) and voluntary export agreements (VEA’S).
3. Import Quotas
4. “Buy local” laws
5. Local standards and laws
6. Anti-dumping policies

Question 456

Normal Good

Answer 456

When a rise in income increases the demand for a good.

Question 457

Normal profit

Answer 457

The opportunity cost of the resources supplied by the firm’s owners; Normal profit = Accounting profit − Economic profit.

Question 458

Normal Rate of Profit

Answer 458

Profits just high enough to compensate producers for the explicit and implicit costs (including opportunity costs) they incur in producing a particular good or service, without leading to any net entry or exit by producers in that market. Also called normal profits. Normal profits are an economic cost of production; they mark a point at which any lower level of profit would lead a producer to pursue some other use of his or her resources.

Question 459

Normative analysis

Answer 459

Addresses the question of whether a policy should be used; normative analysis inevitably involves the values of the person doing the analysis.

Question 460

North American Industry Classification System (NAICS)

Answer 460

An industry classification that categorizes industries by type of economic activity and groups firms with like production processes.

Question 461

Official Reserves

Answer 461

Government holdings of foreign currencies.

Question 462

Okun’s Law

Answer 462

This details the inverse relationship between unemployment and real GDP.

Question 463

oligarchy

Answer 463

Govn’t by the few, especially despotic power exercised by a small and privileged group for corrupt or selfish purposes. It’s also a form of monopoly, but by more than one business.

Question 464

Oligopoly

Answer 464

An industry structure in which a small number of large firms produce products that are either close or perfect substitutes.

Question 465

Oligopsony

Answer 465

Market with only a few buyers

Question 466

On a straight-line demand curve, elasticity decreases as the price ______ and the quantity _______ increases.

Answer 466

On a straight-line demand curve, elasticity decreases as the price FALLS and the quantity demanded INCREASES.

Question 467

One cultural problem a researcher faces when doing primary research is:

Answer 467

the overuse of up-to-date maps.

Question 468

Open economy

Answer 468

An economy that trades with other countries.

Question 469

Open Market Operations

Answer 469

The Fed’s buying and selling of government securities.

Question 470

operating budget

Answer 470

expenditures for current operations, such as salaries and interest payments

Question 471

Opportunity benefit

Answer 471

What is gained by making a particular choice

Question 472

Opportunity cost

Answer 472

The opportunity cost of an activity is the value of the next-best alternative that must be forgone to undertake the activity.

Question 473

Opportunity Cost

Answer 473

Cost associated with opportunites that are forgone when a firm’s resources are not put to their best alternative use

Question 474

Opportunity Cost

Answer 474

The benefit you might have gained from choosing the next-best alternative.

Question 475

Optimal combination of goods

Answer 475

The affordable combination that yields the highest total utility.

Question 476

Optimal Comparative Advantage (Crusoe/Friday)

Answer 476

for each to be completely specialised in produc-

tion, and will then trade in order to get some of the other’s good

Question 477

Out of the Labor Force

Answer 477

Describes people who are not employed and are not currently looking for employment. This includes children and retirees.

Question 478

Outflows of FDI?”

Answer 478

the flow of FDI out of the country

Question 479

Output gap (Y* − Y)

Answer 479

The difference between the economy’s potential output and its actual output at a point in time.

Question 480

Outside lag (of macroeconomic policy)

Answer 480

The delay between the date a policy change is implemented and the date by which most of its effects on the economy have occurred.

Question 481

Outsourcing

Answer 481

The relocation of production once done in the United States to foreign countries.

Question 482

Overvalued exchange rate

Answer 482

An exchange rate that has an officially fixed value greater than its fundamental value.

Question 483

Paasche Index

Answer 483

An index based upon a flexible basket of goods and services.

Question 484

Paper Balances

Answer 484

Deposits that exist on paper but are not backed by physical currency.

Question 485

Parallel Conduct

Answer 485

Form of implicit collusion in which one firm consistently follows actions of another

Question 486

Parameter

Answer 486

See Constant.

Question 487

Pareto-efficient

Answer 487

See Efficient.

Question 488

Participation rate

Answer 488

The percentage of the working-age population in the labor force (that is, the percentage that is either employed or looking for work).

Question 489

Partnership

Answer 489

A business with two or more owners.

Question 490

Passive Deficit

Answer 490

The part of the deficit that exists because the economy is operating below its potential level of output.

Question 491

Patent

Answer 491

The legal protectin of a technical innovation that gives the person holding it sole right to use that innovation.

Question 492

payment intermediaries

Answer 492

institutions that facilitate transfers of funds between depositors who hold transactions deposits with those institutions

Question 493

Payoff matrix

Answer 493

A table that describes the payoffs in a game for each possible combination of strategies.

Question 494

Peak

Answer 494

The beginning of a recession, the high point of economic activity prior to a downturn.

Question 495

Peak-load Pricing

Answer 495

Practice of charging higher prices during peak periods when capacity constraints cause marginal costs to be high.

Question 496

People respond to ……

Answer 496

People respond to incentives

Question 497

Per Capita Growth

Answer 497

Producing more goods and services per person.

Question 498

Perfect hurdle

Answer 498

One that completely segregates buyers whose reservation prices lie above some threshold from others whose reservation prices lie below it, imposing no cost on those who jump the hurdle.

Question 499

Perfectly competitive market

Answer 499

A market in which no individual supplier has significant influence on the market price of the product.

Question 500

Perfectly Competitve Market

Answer 500

Price taking, product homegeniety, free entry and exit, and perfect information