Unit 14: Economics & Analysis Flashcards
Refers to governmental budget decisions, which can include increases and decreases in:
• Federal Spending
• Money Raised Through Taxes
• Federal Budget Deficits or Surpluses
Fiscal Policy
The flow of money between the United States and other countries
Balance of Payments
Industries least affected by normal business cycles; during recessions and bear markets, stocks in defensive industries generally decline less than stocks in other industries; Investments in defensive industries tend to involve less risk and consequently lower investment returns; nondurable consumer goods: food, pharmaceuticals and tobacco
Defensive Industries
The number of issues closing up or down on a specific day
Market breadth
Reflect where the economy is going; spot checks of business activity that reliably predict trends in the economy.
Leading Indicators
The largest and most liquid component of the money supply is M_
M1
Believe the quantity of money, the money supply, is the major determinant of price levels. A well-controlled, moderately increasing supply leads to price stability.
Monetarist Theory
The economy is ________ when characterized by:
• Increased consumer demand for goods and services;
• Increases in industrial production;
• Rising stock prices;
• Rising property values;
• Increasing Gross Domestic Product (GDP)
Expansions
The analysis that attempts to predict the direction of prices on the basis of historic price and trading volume patterns when laid out graphically on charts.
Technical analysis
More money flowing out of the country than in
Deficit
time deposits of more than $100K and repurchase agreements with terms longer than one day are M_
M3
The general increase in prices; a barometer (indicator) in the general direction of price levels.
Inflation
Severe contractions; lasting six quarters (18 months) or more with unemployment rates greater than 15%
Depression
The FRB affects the money supply through 3 policy tools:
1) Open Market Operations - The Fed buys and sells U.S. Government securities in the open market to expand and contract the money supply.
2) Changes in the discount rate (on loans to member banks)
3) Changes in reserve requirements
The difference between current assets and current liabilities
Working Capital
Periods of economic expansion followed by periods of economic contraction
Business Cycle
Time deposits: savings accts, nonnegotiable CDs, money market funds, and overnight repurchase agreements are M_
M2
Rare; is the general decline in prices; usually occurs during severe recessions when unemployment is on the rise.
Deflation
The interest rate banks charge each other for loans. The most volatile rate in the economy
Federal Funds Rate
Holds that the government should allow market forces to determine prices of all goods.
Supply-Side Economics
Who determines monetary policy and takes action to implement its policies
Federal Reserve Board
The economy is in a _________ when the business cycle tends to be characterized by:
• Rising numbers of bankruptcies and bond defaults;
• Higher consumer debt;
• Falling stock prices;
• Rising inventories
• Decreasing Gross Domestic Product (GDP)
Downturn
Mild, short-term contractions; when decline in real output of goods and services lasts for six months or more.
Recession
Those factors that change after the economy has begun a new trend, but serve as confirmation of the new trend. Help analysts differentiate long term trends from short-term reversals. (example: the numbers corporations report showing profits or losses generally come at least one quarter after the actual occurrence. These numbers tell us where the company stood at the time.
Lagging Indicator
