CFA Flashcards
(38 cards)
Which component of the cash flow statement may be prepared under the indirect method?
Operating
Investing and Financing sections must be prepared under the direct method
Inventory Turnover
Cost of Goods Sold/ Average Inventory Value
A country has a comparative advantage over another if what cost for the good is less than its trading partner?
Opportunity Cost
The Ricardian Trade model states that a country captures more gains from trade if
The terms of a trade are closer to its partners autarkic prices than its autarkic
According to Heckscher-Ohlin Model, when trade opens
The abundant factor gains relative to the scare factor in each country
Current Account Formula
(Exports- Imports) + net Income from Abroad + Net Current Transfer
Trade deficit
When a country imports more things than it exports to that country.
The other country will have a trade surplus
GDP
GDP = Consumption + Gross private Domestic Investment + Government Spending
National Income
National Income = GDP - CCA
Savings balance of trade)
S = I + (G-T) + (X-M)
Sustainable Growth Rate
The Growth in the labour force + Growth of labour productivity
Convergence of incomes over time between emerging market countries and developed countries is most likely the result of…
Diminishing marginal productivity of capial
First Degree Price Discrimination
Charges customers the maximum price that they are willing to pay for a good or service
Second Degree Price Discrimination
Discounts for items purchased in bulk
Third-degree Price Discrimination
Occurs when a company charges a different price to different groups of consumers
Economic Profit
Revenue from sales-Opportunity costs from all inputs
Income Effect
The change in demand for a good as a result of a change in income
Substitution Effect
The change in demand for a product can be attributed to the consumer switching to/from cheaper alternatives as the price changes.
Precautionary Money Demand
The act of holding real balances of money for use in a contingency
Transaction Money demand
Money in its liquid forms, especially cash and checking account balances. Demand arises from the absence of perfect synchronization of payments and receipts.
Speculative money demand
The desire to have money for the purchase of an asset.
Money Neutrality
The theory is that an increase in the money supply will lead to a long-run increase in the price level while leaving variables such as output and employment unaffected. Therefore, there is no real effect on economic equilibrium.
The Fisher Effect
The tendency for nominal interest rates to change to follow the inflation rate
The Fisher Equation
Real interest rate = nominal interest rate - expected inflation rate
