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CPA > BEC Custom 4 > Flashcards

BEC Custom 4 Flashcards

1
Q

Who are always not included in the labor force?

A
  • <16 years old
  • Retired
  • Not seeking work
  • Institutionalized
  • Active Military
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2
Q

Frictional Unemployment

A
  • in transition between jobs

- don’t have information needed to get matched up with an employer

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3
Q

Structural Unemployment

A
  • the need for their prior types of jobs have been greatly reduced or eliminated
  • they lack the skills for currently available jobs
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4
Q

Seasonal Unemployment

A
  • those out of work because their jobs regularly and predictably vary by the season of the year
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5
Q

Cyclical Unemployment

A

Those not employed because of a downturn in the business cycle

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6
Q

Unemployment rate

A
  • % of the labor force not employed

* not the % of the population not employed

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7
Q

Natural unemployment rate

A

those unemployed due to frictional, structural, and seasonal reasons

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8
Q

When does full employment occur?

A
  • when there is no cyclical unemployment

* frictional, structural, and seasonal are not counted as unemployed in measuring full employment

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9
Q

Aggregate demand

A
  • total spending in economy

- sum of all market demand curves

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10
Q

What is aggregate demand the sum of?

A

consumption spending, investment, government spending, and net exports (net imports would be subtracted)

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11
Q

Consumption spending

A

spending by individuals on goods and services

  • does not include new housing (that is investment)
  • primarily determined by personal disposable income (PDI)
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12
Q

Consumption function

A

measures the relationship between disposable income (PDI) and consumption spending (CS)

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13
Q

Average Propensity to Consume (APC)

A
  • measures the % of disposable income (PDI) spent on consumption (CS)
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14
Q

Average Propensity to Save (APS)

A

Reciprocal of APC

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15
Q

Marginal Propensity to Consume (MPC)

A

Measures the change in consumption spending as a % of the change in disposable income

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16
Q

Investment spending

A

Spending on capital items including -

  • residential construction
  • non-residential construction
  • business property, plant, and equipment
  • business inventory
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17
Q

Government spending

A
  • purchase of goods and services by all levels of the government
  • excludes transfer payments - not for goods or services
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18
Q

Discretionary fiscal policy

A

government changes to spending or taxation to impact aggregate demand

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19
Q

Multiplier Effect equation

A

change in spending x [1/(1 - MPC)]

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20
Q

Aggregate Supply

A

Total output of goods and services produced in the economy at different price levels

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21
Q

Classical Aggregate Supply Curve

A
  • completely vertical supply curve
  • no change in output as price increases at full employment
  • may be associated with the very short-term
22
Q

Keynesian Aggregate Supply Curve

A
  • horizontal up to the output at full employment, then slopes upward
  • increasing supply at a price until full employment, then increased supply only with increased price
23
Q

Conventional Aggregate Supply Curve

A
  • continuous positive slope that is steeper for output after full employment
  • at full employment, prices increase proportionately faster than output supplied
24
Q

Aggregate Equilibrium

A

aggregate demand = aggregate supply

25
Q

Business Cycles

A

cumulative fluctuations up and down in aggregate real gross domestic product

  • recur over time
  • no consistent pattern of length (duration) or magnitude
26
Q

What are common causes for changes in the business cycle?

A
  • changes in interest rate
  • changes in taxes
  • changes in outlook and confidence
27
Q

Business cycle indicators

A

changes in specific measures of economic activity that are associated with changes in overall business cycle

28
Q

leading economic indicators

A

changes in measures that occur before changes in business cycle
* i.e. consumer expectations, initial unemployment claims, and stock prices

29
Q

lagging economic indicators

A

changes in measures that occur after changes in business cycle
*i.e. relationship between inventory and sales, length of unemployment, and amount of commercial loans outstanding

30
Q

Consumer Price Index (CPI)

A

CPI relates price of a basket of goods and services during a period to price of the basket of consumer goods and services in a prior base period

31
Q

Wholesale Price Index (WPI)

A

relates price of basket of raw materials, intermediate materials and finished goods at the wholesale level during a period to price of basket in a prior base period

32
Q

Gross Domestic Product (GDP) Deflator

A
  • relates nominal GDP to real GDP

- GDP deflator = nominal GDP/real GDP X 100

33
Q

Inflation

A

rate of increase in the price level

34
Q

Deflation

A

rate of decrease in the price level

35
Q

Demand induced (demand-pull) inflation

A

Aggregate spending for goods and services exceeds productive capacity of the economy at full employment

36
Q

Supply induced (cost-push) inflation

A

Increases in the cost of inputs result in higher prices passed on to end user

37
Q

What are the three functions of money?

A
  • medium of exchange
  • measure of value
  • store of value
38
Q

M1 measure of money

A
  • narrowest definition of money
  • includes - paper and coin currency held outside banks, and check-writing deposits in banks (funds that can be accessed using checks)
39
Q

M2 measure of money

A
  • includes all items of M1 plus - savings deposits, money-market deposits, certificates of deposit less than $100,000, and individual-owned money-market mutual funds
40
Q

M3 measure of money

A
  • includes items in M2 plus - certificates of deposit greater than $100,000, and institutional-owned money-market mutual funds
41
Q

Fed Board of Governors

A

7 member policy making body of the Federal Reserve System

42
Q

Fed Open-Market Committee

A

12 member body responsible for implementing monetary policy to effect money supply through open-market operations

43
Q

Monetary Policy

A
  • managing the money supply to achieve national economic objectives, including: economic growth and price level stability
44
Q

How does the Fed exercise monetary policy?

A

reserve requirement, open market operations, and the discount rate

45
Q

Fed Reserve Requirement

A
  • percent of loans made by banks that must be held in reserve
46
Q

Fed Open Market Operations

A

Fed buying and selling U.S. Treasury debt with member banks

47
Q

Fed Discount Rate

A

Interest rate member banks pay when borrowing from the Fed

  • increasing discount rate = reduced borrowing and reduced money supply
  • decreasing discount rate = increased borrowing and increased money supply
48
Q

Absolute Advantage

A

ability of a country, business or individual to produce a good or provide a service more efficiently than another entity

49
Q

Comparative Advantage

A

Ability of one country, business or individual to produce a good or provide a service with lower opportunity cost than another entity

50
Q

Porter’s Four Attributes of National Advantage

A
  • factor endowment - advantages in factors of production (land, labor, infrastructure, etc.)
  • demand conditions - nature of domestic demand for a good or service
  • relating and supporting industries - extent to which supplier and related industries are internationally competitive
  • firm strategy, structure, and rivalry - how entities are created, organized, managed and how they compete

CPA (16 decks)

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