SIE chapter 1 pt 2 Flashcards
business cycle goes through ___Stages, those are
expansion
peak
contraction
trough
expansion
increased business activity
contracting
when a business activity declines from its peak
recessions
mild- short term contractions in the economy
trough
when business activity stops declining and levels off
leading indicators
spot checks of business activity that reliably predict trends in the economy
coincident indicators
confirm where the economy is
lagging indicators
factors that change after the economy has begun a new trend but serve as confirmation for the new trend
inflation
increases in prices
dollar buying power hurt
deflation
decline in prices
buying power increases
stagnation
prolonged periods of slow or little economic growth
leads to high unemployment
stagflation
combination of inflation and high unemployment
defensive industries
are least affected by normal business cycles
generally produce nondurable consumer goods such as food, pharmaceuticals, and tobacco, or supply essential services such as utility companies
cyclical industries
highly sensitive to business cycles and inflation trends. Most cyclical industries produce durable goods such as heavy machinery, and raw materials such as steel and automobiles
an industry is considered in the growth phase if
the industry is growing faster than the economy as a whole
special situation stocks
stocks of a company with an unusual profit potential resulting from nonrecurring circumstances
Keynesian theory
believes that demand for goods ultimately controls employment and prices
not enough demand=unemployment
to much demand=inflation
believe it was governments right and responsibility to manipulate demand
Monetarist theory
quantity of money, money supply, is major determinant of price levels
they believe moderately increasing money supply leads to price stability
supply side economics
believes the government should allow market forces to determine the prices of all goods.
believe government should reduce government spending as well as taxes
balance of payments
the flow of money between the united states and other countries
surplus
more money flowing into country than out
deficit
more money flowing out of country than in
balance of trade
export and import of goods and services
when debits exceeds credits what happens to balance of payments
a deficit in the balance of payments occurs
when credits exceeds debits what happens to balance of payments
a surplus exists in the balance of payments
Gross domestic product
a nations annual economic output, all of the goods and services produced within a nation
an increase in imports would cause gdp to
initially increase and then decrease
when a government actively manipulates the economy through tax and spending policies this is referred to as
Keynesian economics
underwriting groups often referred to as
underwriting syndicates
primary offering
The proceeds raised go to the issuing corporation.
Done in the primary market
public offerings of securities
securities are offered and sold to the investing public.
