Chapter 14 - Economics and Analysis Flashcards
What are the four stages of the business cycle?
Expansion, Peak, Contraction, Trough
What is GDP?
Gross Domestic Product measures the economic output of all the goods and services that a nation produces in a given year.
True of False, a constant dollar adjustment is used to account for the impact of inflation?
True
What are some leading indicators?
Help predict trends in the economy and when positive, predict economic improvement; M2, housing starts, jobless claims, stock prices, changes in inventories, business and consumer borrowing…
What are some coincident indicators?
Measures where the economy is at now; employment levels, personal income, industrial production, GDP, manufacturing and trade sales…
What are some lagging indicators?
Factors that change after the economy has begun a trend; corporate profits, labor cost per unit, average duration of employment, commercial and industrial loans outstanding, ratio of inventories to sales…
What primarily do Keynesian economists believe?
They believe in government intervention and that it is essential. Government spending and taxation are used to manipulate aggregate demand.
What do monetarist economists believe?
They believe that the money supply is a major determinant in price levels. A well controlled but moderately increasing money supply leads to price stability. Money supply is controlled through the Federal Reserves discount rate, reserve requirements, and open market operations.
What do Laffer and supply side economics believe?
They believe government should allow market forces to determine prices of goods, and reduce government spending and taxation.
What are the levels of money supply?
M1 - NOW accounts, travelers checks, checking accounts, demand deposits, paper currency, coins…
M2 - Consumer savings deposits, mutual funds, overnight repos, time deposits less than $100k
M3 - Large denomination time deposits $100k, repos held longer than a day
What is disintermediation?
The flow of money from traditional low yielding savings accounts to higher yielding investments in the marketplace without a bank acting as a middleman.
What is the balance of payments and when might a deficit occur?
The flow of money between the US and other countries. A deficit may occur when other countries have higher interest rates than the US, since that is where money will flow too.
What are some common patterns in stock price trendlines?
Consolidation, reversals, and support & resistance
What is the Odd Lot Theory?
Small investors engaging in odd lot trading. Smaller investors buy and sell and the wrong times and analysts take the opposite side of their trades.
What is the Short Interest Theory?
Number of shares that have been sold short. Short positions eventually have to be repurchased which creates demand and support level.
