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CPA BEC > Economic Concepts > Flashcards

Economic Concepts Flashcards

1
Q

What is the formula for the consumer price index?

A

Current Price - Old Price
_______________________
Old Price

*

100
____________________________
Consumer Price Index

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2
Q

What is the formula for elasticity of supply and demand?

A

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

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3
Q

What is the strategic planning process?

A

Formulating a mission statement

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4
Q

What are distinguishing characteristics of oligopolistic markets?

A

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

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5
Q

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

A

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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6
Q

What are some lagging business cycle indicators?

A

Unemployment duration

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7
Q

What does macro-environmental analysis cover?

A

Characteristics of a country or region

Political, economic, social, and technological

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8
Q

What are the top three export countries?

A

China 11%
Germany 10%
United States 10%

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9
Q

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

A

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

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10
Q

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

A

Change in Consumption and/or Savings
__________________________
Change in Income

Consumption and/or Savings
_______________________________
Income

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11
Q

What range determines product elasticity, inelasticity, and unit elasticity

A

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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12
Q

What makes up MI?

A

Paper
Coins
Check writing

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13
Q

Direct vs

Indirect exchange rate

A

$1.00=$1.20

$0.80=$1.00

Respectively

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14
Q

What are the demand curves for the various business environments?

A

Monopolistic=Negative

Perfect competition=Horizontal

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15
Q

What are considered leakages?

A

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

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16
Q

When is diminishing returns relevant?

A

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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17
Q

What is a natural monopoly?

A

A monopoly occurring from increasing returns to scale

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18
Q

What are some free market economy characteristics?

A

Individual decision makers
Interdependent B2C relationships
Production based on end users

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19
Q

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

A 
Inward demand=Left
(Decrease)
Outward demand=Right
(Increase)
Inward supply=Left
(Decrease)
Outward supply=Right
(Increase)
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20
Q

What might aid an entity with a cost leadership strategy?

A

Efficient processing

Outsourcing

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21
Q

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

A

Agricultural

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22
Q

What is PEST analysis?

A 
Assessing the macro environment of a nation or region (domestic or foreign)
Politically
Economically 
Socially
Technologically
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23
Q

What determines business cycles?

A

The duration and intensity of real GDP.

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24
Q

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

A

Monetary

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25
Q

What are the characteristics of a perfectly competitive market?

A 
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

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26
Q

How are exchange rates determined?

A

Supply and demand in the foreign exchange market

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27
Q

What is affected by maximizing utility in economics?

A

Satisfaction

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28
Q

What is the theory of derived demand?

A

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

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29
Q

What is the company equivalent of CPI?

A

PPI=Producer Price Index

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30
Q

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

A

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

31
Q

What is price discrimination?

A

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

32
Q

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

A

16

33
Q

What are the major components of real GDP?

A

Worker hours

Labor productivity

34
Q

What organization creates general economic development through leading?

A

World Bank

35
Q

What form of collusion is allowed?

A

Tacit

Not Overt

36
Q

What elements differ between PEST and PESTEL?

A

Environmental

37
Q

What are injections?

A 
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
38
Q

What are the characteristics of monopolistic competition?

A 
Large number of sellers
Close substitutes
Ease of market entry/exit
Slight differentiation (heterogeneous products)
Advertisements
Econ or diseconomies of scales
39
Q

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

A

Balance of payments account

40
Q

What cost curves have a U shape?

A

Average fixed cost
Average variable cost
Marginal cost

(Not average fixed cost)

41
Q

What is the difference between microeconomic sectors and macroeconomic sectors?

A

Micro=Individual and business

Macro=individual, business, and government

42
Q

What types of crisis is handled by IMF?

A

Banking
Currency
Debt

43
Q

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

A

Revenue=Cost (marginal)

44
Q

What is the principle of diminishing marginal marginal utility?

A

The principle that marginal utility declines with each additional unit consumed

45
Q

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

A

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).

46
Q

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

A

The Central Bank

47
Q

What is the goal of monetary policy?

A

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

48
Q

Are imports and/or export included in determining GDP?

A

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

49
Q

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

A

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

50
Q

What are some foreign exchange controls?

A

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

51
Q

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?

A

Scanning

52
Q

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

A

The year of completion

53
Q

What form of unemployment is excluded from full employment?

A

Cyclical

54
Q

What are the benefits of outsourcing?

A

Quality

Time

55
Q

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

A

Capital Account
Current Account
Financial Account

56
Q

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

A

Both imports and exports are included

Imports reflect outgoing cash. Exports reflect the receipt of cash

57
Q

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

A

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

58
Q

What are the components for the GDP formula?

A 
Personal consumption expenditures
Gross private domestic fixed investments
Government expenditures
Net exports
Changes in business inventories
59
Q

How is disposable income calculated?

A

Personal income
-Personal taxes
___________________

60
Q

What formula computes percent changes from a prior balance?

A

Current-Prior balance
____________________________
Prior balance

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

61
Q

What is GATT and it’s purpose?

A

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

62
Q

What is the GDP deflator formula?

A

Nominal GDP
______________
GDP Deflator

*
100
______________
Real GDP

63
Q

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

A

Productive Possibility Curve

64
Q

Should strategic goals be measurable and/or time bound?

A

Both

65
Q

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

A

Recessionary phase

66
Q

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

A

25%

67
Q

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

A

Perfect Monopoly
Oligopoly
Perfect Competition
Monopolistic Competition

68
Q

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

A

Dependent moves the same direction as independent=positive

Dependent does not move when independent moves=neutral…

69
Q

What is trade protectionism?

A

Restricting domestic producers by restricting imports

70
Q

What is unique about the Keynesian supply curve?

A

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

71
Q

What type of merger could create an oligopoly?

A

Horizontal

72
Q

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

A

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

73
Q

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

A

D=dependent variable
m=constant
a=independent variable

CPA BEC (5 decks)

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