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Flashcards in Economics Deck (67):
1

When the prices of an item increases supply increases- because more sellers are willing to sell.

Economics

2

When supply changes due to something other than price.

Economics

3

Supply increases at each price point

Higher Equilibrium GDP

Number of sellers increases - market can get flooded

Examples: Government subsidies or technology improvements that decrease costs for suppliers

Economics

4

Supply decreases at each price point

Lower Equilibrium GDP

Cost of producing item increases

Examples: Shortage of gold- so less gold watches are made; wars or crises in rice-producing countries means there is less rice on the market

Economics

5

When the prices of an item increases- demand for it decreases.

Economics

6

When demand changes due to something other than price.

Economics

7

When demand increases at each price point

Price of substitutes go up - price of beef rises- so people buy more chicken

Future price increase is expected - War in Middle East- people go out and buy gas

Market expands - i.e. people get new free health care plan- demand at clinic rises

Expansion - more spending increases equilibrium GDP

Economics

8

Demand decreases at each price point.

Price of complement goes up - price of beef goes up- less demand for ketchup

Boycott - Company commits social blunder- consumers boycott

Consumer income rises - Demand for inferior goods drops as people have more money to spend

Consumer tastes change

Contraction - less spending decreases equilibrium GDP

Economics

9

How much you spend when your income increases

Calculate: Change in Spending / Change in Income

Economics

10

How much you save when income increases

Calculate: Change in Savings / Change in Income

Also equals 1 - Marginal Propensity to Consume

Economics

11

(1 / 1-MPC) x Change in Spending

Economics

12

As spending by consumers or the government increases- the demand curve increases (shifts right).

Economics

13

The increase in demand ends up being larger than the amount of additional income spent in the economy due to the multiplier effect.

One consumer spends money- which:
*Increases the income of a business
*Increases the income of a vendor
*Increases income of employees
*Increases tax revenue

Economics

14

% Change in Quantity Demand / % Change in Price

Economics

15

Price increases- Revenue decreases

Price decreases- Revenue increases

Economics

16

Many substitutes (luxury items)
Considered elastic if elasticity is greater than 1
10% drop in demand / 8% increase in price : 1.25 (Elastic)

Price increases- Revenue decreases
Price decreases- Revenue increases

Economics

17

Price increases- Revenue increases

Price decreases- Revenue decreases

Economics

18

Few substitutes (groceries- gasoline)
Considered inelastic if coefficient of elasticity is less than 1
5% drop in demand / 10% increase in price : .5 (inelastic)

Price increases- Revenue increases
Price decreases- Revenue decreases

Economics

19

Total revenue will remain the same if price is increased

Considered unitary if coefficient of elasticity : 1

Economics

20

% Change Quantity Demanded / % Change in Income

Normal goods greater than 1 (demand increases more than income)

Inferior goods less than 1 (demand increases less than income)

Economics

21

Interest rates increase
Reduced demand for loans
Reduced demand for houses- autos- etc.
Value of bonds and fixed income securities decrease
Inferior good demand to increase
Foreign goods more affordable than domestic
Demand for domestic goods decrease

Economics

22

Overall spending increases

Demand increases (shifts right)

Market equilibrium price increases

Economics

23

Overall production costs increase
Supply decreases (shifts left)
Market equilibrium price increases

Note: Demand-Pull and Cost-Push Inflation BOTH result in market equilibrium price to increase

Economics

24

The price where Quantity Supplied : Quantity Demanded

Economics

25

When Marginal Revenue : Marginal Cost

Economics

26

Causes a surplus if above equilibrium price.

Economics

27

The annual value of all goods and services produced domestically at current prices by consumers- businesses- the government- and foreign companies with domestic interests

Included: Foreign company has US Factory

Not included: US company has foreign factory

Economics

28

Sole Proprietor and Corp Income
Passive Income
Taxes
Employee Salaries
Foreign Income Adjustments
Depreciation

Economics

29

Individual Consumption

Private Investment

Government Purchases

Net Exports

Economics

30

Measures goods/services in current prices.

Economics

31

Used to convert GDP to Real GDP

Economics

32

Nominal GDP / GDP Deflator x 100

Economics

33

Like GDP; Swaps foreign production. US Firms overseas are included- Foreign firms domestically are not included

Economics

34

Price of goods relative to an earlier period of time- which is the benchmark. Year 1 : 1.0

((CPI Current - CPI Last) / CPI Last) * 100

Economics

35

Personal Income - Personal Taxes

Economics

36

% Increase in output / % Increase in input

Greater than 1 : Increasing returns to scale

Less than 1 : Decreasing returns to scale

Economics

37

When GDP growth is negative for two consecutive quarters.

Economics

38

A prolonged- severe recession with high unemployment rates

No requisite period of time for the economy to officially be in a depression

Economics

39

Peak (highest)
Recession (decreasing)
Trough (lowest)
Recover (increasing)
Expansion (higher again)

Economics

40

Conditions that occur before a recession or before a recovery

Example: Stock Market or New Housing Starts

Economics

41

Conditions that occur after a recession or after a recovery

Examples: Prime Interest Rates- Unemployment

Economics

42

Conditions that occur during a recession or during a recovery

Example: Manufacturing output

Economics

43

Only people looking for jobs

Economics

44

GDP doesn't grow fast enough to employ all people who are looking for work

Example: People are unemployed in 2010 because there aren't enough jobs available due to the economy

Economics

45

People are changing jobs or entering the work force. This is a normal aspect of full employment.

Example: A recent college graduate is looking for a job

Economics

46

A worker's job skills do not match those necessary to get a job so they need education or training

Example: A construction worker wants to work in an office- so they quit their job and get computer training

Economics

47

High Unemployment : Low Inflation (Vice Versa)

Economics

48

The rate a bank pays to borrow from the Fed.

Economics

49

The rate a bank charges their best customers on short-term borrowings.

Economics

50

Inflation-adjusted interest rate

Economics

51

Rate that uses current prices

Economics

52

Rate for a loan with 100% certainty of payback.

Usually results in a lower rate.

US Treasuries are an example.

Economics

53

Currency- Coins- and Deposits

Economics

54

Highly liquid assets other than currency- coins or deposits

Economics

55

Increased spending levels without increased tax revenue.

Lower taxes without decrease in spending

Gamble that the multiplier effect will take over and boost economy

Economics

56

By buying and selling the government's securities.

Economics

57

By adjusting the discount rate charged to banks

Economics

58

A tax on imported goods

Economics

59

A limit on the number of goods that can be imported

Economics

60

They are good for domestic producers.

Demand curve shifts right

Fewer substitutes

They can charge higher prices

Economics

61

They are bad for foreign producers

Demand curve shifts left

Fewer buyers

They must charge lower prices

Economics

62

They are good for foreign consumers

Supply curve shifts right

Goods purchased at lower prices in the foreign markets

Economics

63

They are bad for domestic consumers

Supply curve shifts left

Fewer goods bought due to higher prices

Economics

64

Explicit (Actual) cost of operating a business

Implicit costs are opportunity costs

Economics

65

Revenue - Accounting Cost

Economics

66

Explicit + Implicit Cost

Economics

67

Revenue - Economic Cost

Economics