Economic Concepts Flashcards by MONIKA BARNES

What is the formula for the consumer price index?

Current Price - Old Price
_______________________
Old Price

100
____________________________
Consumer Price Index

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What is the formula for elasticity of supply and demand?

% change in quantity supplied/demanded
______________________
% change in price

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What is the strategic planning process?

Formulating a mission statement

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What are distinguishing characteristics of oligopolistic markets?

Few sellers
Difficult market entry
Mutual interdependence of firm pricing and output decisions

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What types of monetary and fiscal policies do the Federal Reserve use to expand/contract the economy?

Monetary:
Buying/Selling federal securities through its Open Market Committee (most important)
and
Raising and lowering the discount rate

Fiscal: (established and implemented primarily by Congress)
Raise/Lower taxes
Increase/Decrease gov’t spending

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What are some lagging business cycle indicators?

Unemployment duration

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What does macro-environmental analysis cover?

Characteristics of a country or region

Political, economic, social, and technological

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What are the top three export countries?

China 11%
Germany 10%
United States 10%

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What framework examines the nature, operating attractiveness, and profitability of a competitive industry and what does it include?

Five forces:
Bargaining power of customers
Intensity of rivalry
Threat of new competition

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What is the formula for the marginal propensity to consume and/or save vs the average propensity to consume and/or save?

Change in Consumption and/or Savings
__________________________
Change in Income

Consumption and/or Savings
_______________________________
Income

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What range determines product elasticity, inelasticity, and unit elasticity

Greater than 1=percent change in quantity is greater than percent change in price
Less than 1 and
Exactly 1, respectively

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What makes up MI?

Paper
Coins
Check writing

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Direct vs

Indirect exchange rate

$1.00=$1.20

$0.80=$1.00

Respectively

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What are the demand curves for the various business environments?

Monopolistic=Negative

Perfect competition=Horizontal

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What are considered leakages?

Income is used outside of domestic consumption such as savings, taxes, and imports.

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When is diminishing returns relevant?

In the short run
(Returns to scale is used in long term scenarios)

[Diminishing returns occur when marginal product falls as more units of a variable input are added to fixed inputs]

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What is a natural monopoly?

A monopoly occurring from increasing returns to scale

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What are some free market economy characteristics?

Individual decision makers
Interdependent B2C relationships
Production based on end users

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Which way does the demand/supply curve shift inward/outward?

Inward demand=Left
(Decrease)
Outward demand=Right
(Increase)
Inward supply=Left
(Decrease)
Outward supply=Right
(Increase)

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What might aid an entity with a cost leadership strategy?

Efficient processing

Outsourcing

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What type of good does the U.S.export more than import?

Agricultural

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What is PEST analysis?

Assessing the macro environment of a nation or region (domestic or foreign)
Politically
Economically 
Socially
Technologically

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What determines business cycles?

The duration and intensity of real GDP.

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What type of policy is implemented by the Federal Reserve System to achieve national economic objectives?

Monetary

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What are the characteristics of a perfectly competitive market?

``` Many buyer and sellers All homogeneous products or services No barriers to entry Firms have little control of price Buyers and sellers have perfect info Customers are indifferent about the firm they purchase from ``` Horizontal demand curve Gov't does not set prices

How are exchange rates determined?

Supply and demand in the foreign exchange market

What is affected by maximizing utility in economics?

Satisfaction

What is the theory of derived demand?

Demand resulting from being an input in another good or service that is in demand

What is the company equivalent of CPI?

PPI=Producer Price Index

Change in quantity demanded/supplied vs shift in demand/supply curve.

Quantity is affected by price (movement along the demand curve) Shifts are affected by other factors such as input costs, technology, and number of buyers and sellers

What is price discrimination?

A pricing strategy that charges customers in different market segments different prices for the same product

What is the minimum age for being considered part of the work force

What are the major components of real GDP?

Worker hours | Labor productivity

What organization creates general economic development through leading?

World Bank

What form of collusion is allowed?

Tacit | Not Overt

What elements differ between PEST and PESTEL?

Environmental

What are injections?

``` Amounts added to domestic production that do not result from domestic consumption expenditures... Gov't spending Gov't subsidiaries Investment spending Amounts received for exports ```

What are the characteristics of monopolistic competition?

``` Large number of sellers Close substitutes Ease of market entry/exit Slight differentiation (heterogeneous products) Advertisements Econ or diseconomies of scales ```

What account includes all I international payments made by one nation to another (including capital movements)?

Balance of payments account

What cost curves have a U shape?

Average fixed cost Average variable cost Marginal cost (Not average fixed cost)

What is the difference between microeconomic sectors and macroeconomic sectors?

Micro=Individual and business | Macro=individual, business, and government

What types of crisis is handled by IMF?

Banking Currency Debt

In the short run, where does a firm in monopolistic competition maximize profit?

Revenue=Cost (marginal)

What is the principle of diminishing marginal marginal utility?

The principle that marginal utility declines with each additional unit consumed

What is the difference between potential GDP and equilibrium of the real output?

Potential GDP is the max production with full utilization of economic resources. Equilibrium of real output is the point where the aggregate demand and aggregate supply curve intersect (that point may be at, above, or below potential GDP).

Who implements a government's monetary policy in most countries?

The Central Bank

What is the goal of monetary policy?

Provide a supply of money, employment, and a relatively stable price level

Are imports and/or export included in determining GDP?

Both imports and exports are included in determining GDP (the net of the two is included [exports-imports])

What is expropriation and how can a foreign subsidiaries reduce related losses?

Taking property from its owner for public use and it can be reduced by financing the subsidiary with local country capital

What are some foreign exchange controls?

Fixed exchange rates Banning possession of foreign currency Gov't approved currency exchanges

What activity involves collecting data on all segments of a firms general environment to understand the effects of economic changes on the firm's industry?

Scanning

Are finished goods added to GDP in the year of completion or selling?

The year of completion

What form of unemployment is excluded from full employment?

Cyclical

What are the benefits of outsourcing?

Quality | Time

What account does the U.S. use to account for transactions and balances with other nations?

Capital Account Current Account Financial Account

Are imports and/or exports included in the macroeconomic free-market model?

Both imports and exports are included | Imports reflect outgoing cash. Exports reflect the receipt of cash

What are the major relationships in a free market economy flow?

People give resources to businesses Businesses pay people for resources Businesses provide goods and services to people People pay businesses for goods and services

What are the components for the GDP formula?

``` Personal consumption expenditures Gross private domestic fixed investments Government expenditures Net exports Changes in business inventories ```

How is disposable income calculated?

Personal income -Personal taxes ___________________

What formula computes percent changes from a prior balance?

Current-Prior balance ____________________________ Prior balance (Current balance as the denominator calculates percent change from current balance)

What is GATT and it's purpose?

General Agreement on Tariffs and Trade. GATT eliminates import quotas, eliminates subsidies to export industries, and harmonizes intellectual property laws.

What is the GDP deflator formula?

Nominal GDP ______________ GDP Deflator * 100 ______________ Real GDP

What graph show the max combo of goods and services produced if resources are efficiently used?

Productive Possibility Curve

Should strategic goals be measurable and/or time bound?

Both

When potential national income exceeds actual national income what is indicated?

Recessionary phase

What is the U.S. Share of worldwide GDP?

25%

What are the common market structures of a free market economy?

Perfect Monopoly Oligopoly Perfect Competition Monopolistic Competition

What is considered positive, negative, and neutral relationships when using dependent and independent variables?

Dependent moves the same direction as independent=positive | Dependent does not move when independent moves=neutral...

What is trade protectionism?

Restricting domestic producers by restricting imports

What is unique about the Keynesian supply curve?

It is horizontal up to the point of full employment then it "kinks" into a slope to reflect output at a higher price

What type of merger could create an oligopoly?

Horizontal

How should foreign investors protect their investment from expropriation and why?

Investing with local country capital because expropriation could result in defaulting on local creditors and the host gov't would have to satisfy the debt

What does the letters "D", "m", and "a" represent in a graphic plot?

D=dependent variable m=constant a=independent variable

Economic Concepts Flashcards

(73 cards)