Terms Flashcards
The Sum of probabilities of any set of mutually exclusive and exhaustive events is…
Equal to 1
Define Panel Data
Consist of observations through time on one or more variable for multiple observational units
Define Time Series Data
Sequence of observed data for a single observatory unit of a specific variable collected over time and at discrete equally space interval of time. Ex. Daily,weekly,monthly,annually, or quarterly
Define cross-sectional data
list of observations of a specific variable from multiple observational units at a given point in time
Bar Chart
Provides a snapshot to show comparisons in between categories of data
Line Chart
Best for making comparisons over time. Used to visualized ordered observations
Histogram
Best to display distributions of data, not comparisons amongst categorical data
If the reduction of a product’s price increases total revenue, demand is best described as:
Elastic. A product’s demand is elastic if demand increases by a greater percentage than the percentage price change when prices are reduced. For example, if a 1 percent price reduction increases the quantity sold by more than 1 percent, total revenue increases and demand is said to be elastic.
Which of the following factors is most likely to lead to economies of scale? 1. Supply constraints
2. Duplication of product lines
3. Specialization by workers
- Specialization by workers. can increase their proficiency, leading to lower average costs when the firm is large enough to allow specialization.
What does price elasticity of demand depend on?
depends on the length of time within which the demand schedule is being considered.
A firm in an oligopoly market most likely faces a kinked demand curve because competitors do not match:
Price increases. “[t]he most common pricing strategy assumption in these [oligopoly] price war markets is that competitors will match a price reduction and ignore a price increase. … This oligopolistic pricing strategy results in a kinked demand curve, with the two segments representing the different competitor reactions to price changes.”
A recessionary gap:
- occurs due to a vertical long-run aggregate supply curve.
- is the amount by which actual GDP falls below potential GDP.
- occurs due to a rightward shift in the aggregate demand curve.
B. Is the amount by which actual GDP falls below potential GDP
Which of the following is least likely to affect the growth of the economy?
1. The workforce attending an average of 20 hours of training per year
2. When capital depreciation exceeds gross investment within the economy
3. An increase in the labor force that is offset by a decrease in the average hours worked per worker, making the total hours worked unchanged
- An increase in the labor force that is offset by a decrease in the average hours worked per worker, making the total hours worked unchanged
In the recovery phase of the business cycle, the economy is most likely:
- enjoying an upswing and a positive output gap opens.
- going through a trough and a 3. positive output gap opens.
going through a trough and a negative output gap starts to narrow.
- Going through a through and a negative output gap starts to narrow. Economic activity, including consumer and business spending, is below potential but is starting to increase, closing the negative output gap.”
In a fractional reserve banking system, the reserve requirement is:
- equal to the money multiplier.
- the fraction of deposits that may be lent out.
- inversely correlated with potential money creation.
inversely correlated with potential money creation.
ew deposit/Reserve requirement = €100/0.10 = €1,000.” This formula shows that if the reserve requirement is increased, money creation will decrease, thereby exhibiting an inverse relationship.
Role of a central bank in the economy
A monopoly supplier of a country’s currency
Assume that a central bank has decided to lower interest rates in the economy. To carry out this policy, the central bank will most likely:
increase required reserve requirements.
buy securities.
sell securities.
Buy Securities
Which of the following acts as an automatic stabilizer for the economy?
- A decrease in corporate tax rates
- New public spending on hospitals
- Government expenditure on unemployment benefits
- Government expenditure on unemployment benefits
Cyber threats are most likely an example of:
event risk.
thematic risk.
exogenous risk.
Thematic risk. [c]yber threats are another example of thematic risk. Cyber risks include any attempt to expose, alter, disable, destroy, steal, or gain information through unauthorized access to or unauthorized use of computer systems.
Which statement about the Ricardian model of trade is most accurate? The model:
- allows for a redistribution of income through trade.
- incorporates the benefit of technology in labor productivity.
- predicts that a country with abundant labor resources relative to capital will likely export labor-intensive goods and import capital-intensive goods.
incorporates the benefit of technology in labor productivity.
In the Ricardian model of trade, labor is the only input and the benefit of technology is reflected in labor productivity.
Which of the following is considered an integral part of a complete set of financial statements?
Auditor’s report
Management commentary
Notes to the financial statements
Notes to the financial statements
According to the International Accounting Standards Board’s Conceptual Framework for Financial Reporting, which of the following is a fundamental qualitative characteristic that makes financial information useful?
Relevance
Under US GAAP, which of the following should be reported separately from continuing operations on the income statement?
Results of discontinued operations
Debt with a maturity date beyond a company’s next operating cycle is most likely classified as a component of:
Non-current liabilities.
Non-current liabilities include all liabilities not expected to be settled within one year or within one operating cycle of a business. These include financial liabilities such as debt with a maturity date beyond a company’s next operating cycle.
Interest payable decreased during a company’s fiscal year. Compared with the amount of cash interest payments made, interest expense is most likely:
Lower
Compared with its net income, a mature company’s operating cash flow is most likely:
Higher.
For a mature company, because net income includes non-cash expenses (depreciation and amortization), operating cash flow typically exceeds net income.
During a period of declining prices, a company using the last-in, first-out (LIFO) inventory method instead of first-in, first-out (FIFO) method will most likely report a lower value for:
Cost of goods sold.
If prices are declining, using LIFO would match the lower (most recent) costs with current sales. Compared with using FIFO, costs of goods sold would be lower, and gross profit (income) would be higher when using LIFO. Lower cost of goods sold means inventory balances, consisting of older, higher-priced items, would be higher using LIFO, increasing current assets relative to FIFO.
A company depreciates its asset base at 8% per year for accounting purposes and 12% per year for tax purposes. No prior period deferred taxes have been reported. If it is doubtful that future economic benefits will be realized from the temporary difference, the company should
Not recognize a deferred tax item
Which of the following most likely provides an opportunity for a company’s management to issue low-quality financial reports?
- Ineffective board of directors
- Concern about future career opportunities
- Incentive compensation based on earnings
- Ineffective board of directors.
typically, three conditions exist when low-quality financial reports are issued: opportunity, motivation, and rationalization. Opportunity can be the result of internal
conditions, such as poor internal controls or an ineffective board of directors
At the time of issue, for a corporate bond that sells at par, the liability on the issuer’s balance sheet would be
Equal to face value
The nominal risk-free rate is best described as the sum of the real risk-free rate and a premium for:
Expected inflation
Which of the following risk premiums is most relevant in explaining the difference in yields between 30-year bonds issued by the US Treasury and 30-year bonds issued by a small private issuer?
Liquidity.
US Treasury bonds are highly liquid, whereas the bonds of small issuers trade infrequently and the interest rate includes a liquidity premium. This liquidity premium reflects the relatively high costs (including the impact on price) of selling a position.
Operating Activities
refer to the day to day core business activities of a company
Investing Activities
relate to the acquisitions or disposal
Financing Activites
relate to the injection or repayment of capital
Unqualified Opinion
states that the financial statements have been presented fairly in accordance with the auditor’s findings
Qualified opinion
states the financial statements have been presented fairly but do certain exceptions to the accounting standards
Adverse opinion
states that the financial statements have not been presented fairly and significantly deviate from acceptable accounting standards
Disclaimer of opinion
issued when the auditor, is not able to issue an opinion on the financial statements
Leptokurtic
fat-tailed. A distribution with a fatter tail
Mesokustic
frequency distribution that is neither flatter nor more peaked than the normal distribution. It has kurtosis
Platykurtic
Describes a distribution that has less weight in the tail than the normal distribution (thin-tailed)
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