Economics 1 Flashcards

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1
Q

Measures the rate of increase in the overall price level in the economy…

A

Inflation Rate

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2
Q

Interest rate charged by banks to their best credit risk borrowers…

A

Prime Rate

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3
Q

Set by the Fed; interest rate established for short-term loans to member banks…

A

Discount Rate

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4
Q

Measures the level of economic output without taking into account the overall price level or inflation rate…

A

Nominal Rate

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5
Q

Price of all goods & services produced by labor & property supplied by the nation’s residents…

A

Gross National Product (GNP)

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6
Q

Price of all goods & services produced by a domestic economy for a year at current market prices…

A

Nominal Gross Domestic Product (GDP)

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7
Q

Price of all goods & services produced by the economy @ price level adjusted prices…
(price level adjustment eliminates the effect of inflation on the measure)

A

Real GDP

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8
Q

Price of all goods & services produced by a domestic economy for a year at current market prices minus depreciation…

A

Net Domestic Product (NDP)

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9
Q

The expenditure (input) approach to GDP includes…

A

all expenditures to purchase final goods & services by households, businesses, and the gov.
Includes personal consumption expenditures, gross private investment in capital goods (machinery), and the country’s net exports.

Net interest in NOT included in the expenditure approach.

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10
Q

The Fed would most likely purchase gov securities if the goal was to…

A

stimulate the economy.
Purchasing these securities increases money supply & expands the economy. Selling securities would take money out of the economy.

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11
Q

Approaches to calculate GDP:

A

Expenditures approach and Income approach

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12
Q

What factors have a direct relationship effect on the supply of a product…

A

Government subsidies; Expectations of price increase; Number of producers.

The prices of other goods have an inverse relationship with the supply of a product.

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13
Q

Regarding the aggregate supply curve & aggregate demand curve in the short run…

A

1) Quantity demanded is inversely related to the price level. (as prices rise, QD falls)
2) Quantity supplied is upward sloping. (QS is directly related to price level. If prices rise, sellers want to sell more)

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14
Q

When the Fed has an expansionary monetary policy…

A

interest rates fall - increases in desired investment and consumption cause an increase in aggregate demand - which increases the real GDP.

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15
Q

As aggregate demand increases…

A

GDP increases, employment increases, and unemployment decreases.

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16
Q

Inflation…

A

hurts those on a fixed income
helps those with a fixed obligation
increases the price level

17
Q

Conducting competitor analysis:

A

gathering information about competitors’ strategies, capabilities, and objectives and then using that info to understand & predict competitor behavior.

18
Q

Which non-monetary assets’ values increase with inflation?

A

precious metals (gold & silver)

19
Q

The income (output) approach to GDP includes:

A

all income earned in the production of final goods & services, such as wages, interest, rents, dividends, etc.

Net exports are NOT included in the income approach.

20
Q

Evidence of a potential, or even actual, recession:

A

falling GDP, decrease in aggregate demand or aggregate supply, unemployment rises