Bec Module 2 Terminology

Front 1

Accounting Costs

Back 1

Explicit costs of operating a business (e.g. purchases of input services)

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Accounting Profit

Back 2

Difference between total revenue and total explicit costs. (no allowance for opportunity costs or other impicit costs)

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Aggregate Demand

Back 3

Maximum quantity of all goods and services that households, firms, and governments are will and able to purchase at any given price.

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Aggregate Supply

Back 4

Maximum quantity of all goods and services that providers are willing and able to produce at any given price.

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Average Fixed Cost (AFC)

Back 5

Total fixed cost(TFC)/total output or quantity. AFC declines as Output increases.

AFC = TFC/Q

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Average Product (AP)

Back 6

Total product (output) divided by the numer of units of the variable input requed to produce that output level.

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Average Revenue (AR)

Back 7

Total Revenue divided by total output.

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Average Total Cost (ATC)

Back 8

Total cost divided by total output or quantity

ATC = TC/Q

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Average Variable Cost (AVC)

Back 9

Total variable cost (TVC) divided by total output or quanity (AVC = TVC/Q). The average variable cost is constant regardless of increase or decreases in output.

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Balanced Budget

Back 10

Where taxes and other governmental revenues equal government spending.

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Best Cost Strategy

Back 11

Competitive strategy that combines cost leadership stragies with differentiation strategies to give customers higher value for their money.

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Boycott

Back 12

Organized group refusal to conduct market transactions with a target group or individual (using only social pressure, not legal obligation).

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Budget Deficit

Back 13

When taxes and other governmental revenues are less than governmental spending.

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Budget Surplus

Back 14

When taxes and other governmental revenues are greater than government spending.

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Business Cycle

Back 15

Rise and fall of economic activity (GDP) relative to the long-term growth trend of the economy.

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Cartel

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A group of firms acting together to coordinate output decisions and control prices so that the joint profit of the members of the cartel will be maximized. The cartel will attempt to create a monopoly.

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Compensating Balance

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A required minimum amount of funds (10 - 20%) that a firm received a loan or line of credit must keep in a non-interest bearing checking account at the bank.

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Competitive Strategies

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1) Cost leadership focused on a broad rang of buyers
2) cost leadership focused on a narrow rance of buyers
3) product differentiation focused on a broad range of buyers
4) product differentiation focues on a narrow range of buyers
5) best cost

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Complements/Complementary Products

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Products that are usually consumed jointly. They are related such that a decrease in the price of one product will cause an increase in the demand of the other product.

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Constant Returns to Scale

Back 20

The state in which the long-run average total costs stays the same as the quantity of output produced increases or decreases

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Consumer Price Index (CPI)

Back 21

An index that is used to adjust for inflation. It is designed to measure the impact of price changes on the cost of a typical basket of goods purchased by urban consumer households.

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Contractionary Monetary Policy

Back 22

Reduction of the money supply by the Fed.

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Core Competency

Back 23

Fundemental knowledge, ability, or expertise in a specific subject area or skill set.

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Cost Leadership Strategy

Back 24

A competitive strategy that emphasizes lowest overall cost.

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Cost Push Inflation

Back 25

Inflation caused by reductions in short-run aggregate supply

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Country Risk

Back 26

Risk of political and economic uncertainty in a foreign country that affects the value of loans or investments in that country.

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Covered Interest Arbitrage

Back 27

In an interest arbitrage transaction, the foreign exchange risk can be covered (coverage interest arbitrage) if, at the same time the investor exchanges the domestic currency for the foreign currency to make the foreign investment, the investor also engages in a forward sale of an equal amount of the foreign currency to coincide with the maturity of the investment.

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Cross Elasticity of Demand

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The percentage change in the quantity demanded of one good divided by the percentage change in the price of a related good.

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Cross Elasticity of Supply

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Percentage change in the quantity supplied of one good divided by the percentage change in the price of a related good.

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Cross Hedging

Back 30

Hedging the exposure in one currency by the use of futures, forwards, or other contracts in a second currency that is correlated with the first currency.

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Currency Appreciation

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Strengthening of a currency in relation to another currency. Appreciation occurs when, because of a change in currency exchange rates, a unit of currency buys more units of another currency.

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Currency Depereciation

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The weakening of a currency in relation to another currency. Depreciation occurs when, because of a chance in currency exchange rates, a unit of currency buys fewer units of another currency.

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Currency Variability

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Overall currency exposure can be assessed by considering each currency position together with that currency's variability and the correlations amonth the currencies (how much two currencies tend to increase and decrease together). The standard deviation of historical data serves as one measure of currency variability. Currency variablity levels may change over time.

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Current Method

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The current method of foreign currency transalation is the method required with a firm's books are maintained in its functional currency. Remeasurement into the functional currency is obviously then not required before the translation into the reporting currency can be done. Translation gains and losses are reported in other comprehensive income.

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Cyclical Unemployment

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Unemployment resulting from business cycles, especially recessions or depressions.

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Deflation

Back 36

Sustained decrease in the general prices of goods and services

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Demand Pull Inflation

Back 37

Demand pull inflation is inflation cuased by increase in aggreage demand (i.e., by a rightward shift in the aggregate demand curve)

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Depression

Back 38

Very severe resession.

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Derived Demand

Back 39

Demand for the factors of production of a good caused by the demand for a final good.

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Differentiation Strategy

Back 40

A product differentiation strategy is a competitive strategy that emphasizes the perception that their products are better or have a unique quality that differentiates them from competing products.

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Discount rate

Back 41

Interest rate that the Fed charges banks for short-term loans