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CFA Level 1 > Economics: Business Cycles > Flashcards

Economics: Business Cycles Flashcards

1
Q

Activity Ratios

A

Ratios that measure how efficiently a company performs day-to-day take, such as the collection of receivables and management of inventory

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2
Q

Boom

A

An expansionary phase characterized by economic growth “testing the limits” of the economy.

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3
Q

Coincident economic indicators

A

Turning points are usually close to those of the overall economy; they are believed to have value for identifying the economy’s present state

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4
Q

Contraction

A

The period of a business cycle after the peak and before the trough; often called a recession or, if exceptionally severe, called a depression

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5
Q

Core inflation

A

The inflation rate calculated based on a price index of goods and services except food and energy.

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6
Q

Cost-Push

A

Type of inflation in which rising costs, usually wages, compel businesses to raise prices generally.

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7
Q

Deflation

A

Negative Inflation

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8
Q

Demand-Pull

A

Type of inflation in which increasing demand raises prices generally, which then are reflected in a business’s cost as workers demand wage hikes to catch up with the rising cost of living.

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9
Q

Depression

A

The period of a business cycle after the peak and before the trough; often called a recession or, if exceptionally severe, called a depression

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10
Q

Diffusion Index

A

Reflects the of the index’s components that are moving in a pattern consistent with the overall index

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11
Q

Discouraged Worker

A

A person who has stopped looking for a job or has given up seeking employment.

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12
Q

Economic Indicator

A

A variable that provides information on the state of the overall economy.

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13
Q

Employed

A

The number of people with a job.

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14
Q

Expansion

A

The period of a business cycle after its lowest point and before its highest point.

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15
Q

Fisher Index

A

The geometric mean of the laspeyres index

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16
Q

Headline Inflation

A

The inflation rate calculated based on the price index that includes all goods and services in an economy

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17
Q

Index of Leading Economic Indicators

A

A composite of economic variables used by analysts to predict future economic conditions.

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18
Q

Inflation

A

The percentage increase in the general price level from one period to the next; a sustained rise in the overall level of prices in an economy.

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19
Q

Inflation Rate

A

The percentage change in a price index, that is, the speed of overall price level movements.

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20
Q

Labor Force

A

The portion of the working age population (over the age of 16) that is employed or is available for work but not working (unemployed)

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21
Q

Lagging economic indicators

A

Turning points that take place later than those of the overall economy; they are believed to have value in identifying the economies past condition.

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22
Q

Laspeyres index

A

A price index created by holding the composition of the consumption basket constant

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23
Q

Leading Economic Indicators

A

Turning points that usually precede those of the overall economy; they are believed to have value for predicting the economies future state, usually near term.

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24
Q

Minsky Moment

A

Named for Hyman Minsky: A point in a business cycle when, after individuals become overextended in borrowing to finance speculative investments, people start realizing that something is likely to go wrong and a panic ensues leading to asset sell-offs

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25
Q

Natural Rate of Unemployment

A

Effective unemployment rate, below which pressures emerges in labor markets.

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26
Q

Neo-Keynesian

A

A group of dynamic general equilibrium models that assume slow-to-adjust prices and wages

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27
Q

New classical macroeconomics

A

An approach to macroeconomics that seeks the macroeconomic conclusions of individuals maximizing utility on the basis of rational expectations and companies maximizing profits

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28
Q

New Keynesians

A

A group of dynamic general equilibrium models that assume slow-to-adjust prices and wages

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29
Q

Non accelerating inflation rate of unemployment

A

Effective unemployment rate, below which pressures emerged in labor markets

30
Q

Passche Index

A

An index formula using the current composition of a basket of products

31
Q

Peak

A

The highest point of a business cycle.

32
Q

Personal Consumption Expenditures

A

All domestic personal consumption; the basis for a price index for such called the PCE price index

33
Q

Price Index

A

Represents the average prices of a basket of goods and services

34
Q

Producer price index

A

Reflects the price changes experienced by domestic producers in a country.

35
Q

Recession

A

A period which real GDP decreases (ie negative growth) for at least two successive quarters, or a period of significant decline in total output, income, employment and sales usually lasting from six months to a year.

36
Q

Relative price

A

The price of a specific good or service in comparison with this of other goods and services

37
Q

Say’s Lawm

A

Named for French economist JB Say: all that is produced will be sold because supply creates its own demand.

38
Q

Stagflation

A

When a high inflation rate is combined with a high level of unemployment and a slowdown of the economy.

39
Q

Treasury Inflation- Protected Securities

A

A bond issued by the United States Treasury Department that is designed to protect the investor from inflation by adjusting the principal of the bond for changes in inflation

40
Q

Trough

A

The lowest point of a business cycle.

41
Q

Underemployed

A

A person who has a job but has the qualifications to work a significantly higher-paying job.

42
Q

Unemployed

A

People who are actively seeking employment but are currently without a job.

43
Q

Unemployment Rate

A

The ratio of unemployed to the labor force

44
Q

Unit Labor Cost

A

The average labor cost to produce one unit of output

45
Q

Voluntarily unemployed

A

A person voluntarily outside the labor force, such as a jobless worker refusing an available vacancy

46
Q

Wholesale Price Index

A

Reflects the price changes experienced by domestic producers in a country

47
Q

Household

A

A person or group of people living in the same residence, taken as a basic unit in economic ananlysis

48
Q

Impact Lag

A

The lag associated with the results of action affecting the company with a delay

49
Q

Indirect Taxes

A

Taxes such as those on spending, in comparison to direct taxes.

50
Q

Inflation Reports

A

A type of economic publication put out by many central banks

51
Q

Inflation Uncertainty

A

The degree to which economic agents view future rates of inflation as difficult to forecast.

52
Q

Keynesians

A

Economists who believe that fiscal policy can have powerful impacts on aggregate demand, output and employment when there is substantial spare capacity in an economy.

53
Q

Legal Tender

A

Something that must be accepted when offered in exchange for goods and services

54
Q

Lender of Last Resort

A

An entity willing to lend money when no other entity is ready to do so.

55
Q

Liquidity Trap

A

A condition in which the demand for money becomes infinitely inelastic (horizontal demand curve) so that injections of money into the economy will not lower interest rates or affect real activity

56
Q

Marginal propensity to consume

A

The proportion of an additional unit of disposable income that is consumed or spent; the change in consumption for a small change in income.

57
Q

Marginal Propensity to Save

A

The proportion of an additional unit of disposable income that is saved (not spent)

58
Q

Measure of Value

A

A standard for measuring value; a function of money

59
Q

Medium of Exchange

A

Function of Money,

Asset that can be used to pay for debts, goods and services

60
Q

Menu Costs

A

A cost of inflation in which business have to incur cost to change advertising material

61
Q

Monetarist

A

Economists who believe that the rate of growth of the money supply is the primary determinant of the rate of inflation.

62
Q

Monetary Policy

A

Actions taken by a nations central bank to affect aggregate output and prices through changes in bank reserves, reserve requirements, or its target interest rate

63
Q

Monetary Transmission Mechanism

A

The process whereby a central banks interest gets transmitted through the economy and ultimately affects the rate of increases of prices.

64
Q

Money

A

A generally accepted medium of exchange and unit of account

65
Q

Money Creation

A

The process by which changes in bank reserves translate into changes in the money supply.

66
Q

Money Multiplier

A

Describes how a change in reserves is expected to affect the money supply: 1/rr

67
Q

Money Neutrality

A

Money only increases price level, not real values like output and unemployment

68
Q

Narrow Money

A

Notes/Coins and other very liquid deposits

69
Q

Net tax rate

A

The tax rate net of transfer payments

70
Q

Neutral rate of interest

A

Interest rate that has no effect on economic growth

71
Q

Official Interest Rate

A

An interest rate that a central bank sets and announces publicly; normally the rate at which it is willing to lend money to the commercial banks.

72
Q

Official Policy Rate

A

An interest rate that the central bank sets and announces public ally; Normally the rate at which it is willing to lend money to the commercial banks.

CFA Level 1 (50 decks)

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