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118 Cards in this Set

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the total dollar value of all new goods and services sold
during a fiscal year, which was produced by nation’s permanent residents, regardless of where they produced it.
GNP- (gross national product)
the total dollar value of all new goods and services sold
during a fiscal year, which were produced within the geographic borders of a country regardless of the nationality of the producers.
GDP- (gross domestic product)
A statistical time-series measure of a weighted average of prices
of a specified set of goods and services purchased by consumers. It is a price index that
tracks the prices of a specified basket of consumer goods and services, providing a measure
of inflation
Consumer Price Index
A fixed quantity price index and considered by some a cost-of-living
index
Consumer Price Index
· Associated with Milton Friedman. It is a set of views concerning the determination of national income and monetary economics.
· It argues that excessive expansion of the money supply is inherently inflationary, and that monetary authorities should focus solely on maintaining price stability. “Believe
that government action is the root of inflation”.
· It focuses on the supply and demand for money as the primary means by which
economic activity is regulated.
Monetarists
· promotes a mixed economy, where both the state and the private sector play an
important role.
· government policies could be used to promote demand, to fight high unemployment
and deflation. “Believe government action is helps fight inflation”.
· Keynes believed that the government was responsible for helping to pull a country
out of a depression. If the government increases their spending, then the citizens are encouraged to spend more because more money is in circulation. People will start to invest more, and the economy will climb back up to normal
Keynesians
The deliberate and thought out change in government spending, government
borrowing or taxes to stimulate or slow down the economy.
Fiscal Policy
government revenues are zero at two points:
when tax rates are 0% and 100%. Between those two extremes in tax rates, there are two
Tax rates (one high and one low) that will produce exactly the same amount of tax
revenues at every level.
Laffer Curve
Used to illustrate the concept of Taxable income
elasticity, the idea that government can maximize tax revenue by setting tax rates at an optimum point.
Laffer Curve
The process by which the government, central bank, or monetary authority manages the money supply to achieve specific goals.
Monetary Policy
The quantity of money available within the economy to purchase goods, services, and
securities.
Money Supply
conducting the nation’s monetary policy by influencing the monetary and
credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates.
The Federal Reserve
supervising and regulating banking institutions to ensure the safety and
soundness of the nation’s banking and financial system and to protect the
credit rights of consumers
The Federal Reserve
maintaining the stability of the economy and containing systemic risk that
may arise in financial markets
The Federal Reserve
providing financial services to depository institutions, the U.S. government,
and foreign official institutions, including playing a major role in operating
the nation’s payments system
The Federal Reserve
A component of the Federal Reserve System, is charged under U.S. law with
overseeing open market operations in the United States, and is the principal tool of US national monetary policy.
The Federal Open Market Committee
A general rise in prices measured against a standard level of purchasing power.
Inflation
High demand for goods and low unemployment.
Demand-Pull inflation
An event such as a sudden decrease in the supply of oil, which would increase oil prices.
Producers for whom oil is a part of their costs could then pass this on to consumers in
the form of increased prices.
Cost push inflation:
Unresponsive wage levels: wage levels that do not respond readily to
changes in the labor market (Keynesian Model)
Sticky Wages
The lowest hourly, daily or monthly wage that employers may legally pay to employees or workers
Minimum Wage
Phillips curve
a historical inverse relation and tradeoff between the rate of
unemployment and the rate of inflation in an economy.
A global commodity futures exchange trading treasury bonds, corn, soybean, wheat, mini-sized Dow, gold, silver and more.
Chicago Board of Trade
A standardized contract traded on a future exchange (i.e. CBT), to buy or sell a certain commodity at a certain date in the future, at a specified price
Futures
A group of economists who believed that the wealth of nations was derived solely from agriculture
Physiocracy
Granted each state 30,000 acres of public land for colleges originally for the benefit of agriculture, military and mechanic arts and offered free education – led to the creation of 72 universities
The Morrill Act
Disallows certain people who's vote would impact their employment from voting i.e. military officers can't vote, and certain people in the government
Hatch Act 1887
To buy people's vote for instance
by offer a sewer system so congressman will vote for you and law get's passed through congress
Christmas Treeing
Extended schools to accommodate farm family students (correspondence, night schools).
Smith Lever Act 1914
Only central bank that is not a national bank owned by the government.
Owned by the private sector – run by the private banks (therefore not politically motivated)
Federal Reserve Bank
No business can act as a bank and a securities dealer/broker at the same time.
Glass-Steagle Act 1933
Price established by Federal Farm Board that leads farmers to receive
for their production a price for their product to allow them to have a standard of living on par with non-farm population.
Parity Price
Food aid and market development program focused
on the needs of developing countries and is aimed at stablishing a U.S. presence
in such markets and supporting their economic growth.
Public Law 480
Soft currency money, which is money that is only used to
pay for consulate services in those countries and the Peace Corps (Sergeant Shriver's creation)
Counterpart Funds
Land retired from crop cultivation and planted with soil-building crops; government subsidies are paid to farmers for their retired land
Soil Banking
Pay farmers not to plant their soil
Soil Banking
o Don't pick, government pays you not to pick produce (government silos were full)
o Government gives you a supply of what you would have picked from the government silos
o Farmer has to keep produce in the silo and pay for storage fees
o Shift supply to the right
Payment in Kind
Government buys enough of the supply so that the so that the market
supply function crosses the demand function at the parity price (equilibrium price becomes the market price)
Government Purchase
Fill out form and government pays the difference between what you actually received and what you should have received. Costs consumer less.
Price Differential
· Created as part of a larger plan for economic recovery after World War I
· Main purpose was to reduce barriers to international trade
· Achieved through the reduction of tariff barriers, quantitative restrictions and subsidies on trade through a series of different agreements.
· The functions of the organization weren't making enough progress so it was replaced by the World Trade Organization (WTO) which was established through the final round of negotiations in the early 1990s.
GATT – General Agreement on Tariffs and Trade
i. Have to have absence of internal tariffs (free trade area)
AND
ii. Have common external tariff (customs union)
AND
iii. Factor mobility – factors can move without restriction
Necessary Conditions of a Common Market
Acronym for the common market that pre-dated (and is now
included in) the European Community formed by the nations of Belgium,
Netherlands, and Luxembourg.
Benelux
The nations of Europe would be
disinclined to wage war over historical disagreements if their economies were
interdependent
Scrambled Eggs Doctrine
Countries increase their
economic prosperity by exporting the goods that they are relatively more efficient at producing and importing the goods that other countries are relatively more efficient at producing.
Law of Comparative Advantage
In international economics, the maximum benefit gained
by either side of a transaction while the other side neither gains nor loses. Part of Ricardo's explanation of why actual trading ratio, called the terms of trade, takes
place between the two extremes.
Limit of Trade
Equals the market price, but during Ricardo's time there
still wasn't concept of demand. Terms of trade will occur in between the limits of
trade.
Terms of Trade
i. less quantity produced
ii. higher prices
iii. higher average costs – results because we end up using factors of
production for things they shouldn't be used for
iv. increase in excess profits – people making off money are paying off congress to get this done
v. decrease in consumer surplus
Effects of Trade Restrictions
A trade restriction which protects a domestic producer by limiting the amount of a particular good that may be imported from a specific foreign nation
Quotas
A form of trade restriction whereby a government controls the foreign market by establishing an official rate and location of exchange, and
retaining the foreign currency for use as determined by political leadership.
Exchange Control
A business organization that operates as a DBA (doing business as) for the owner(s) who are personally responsible for all taxes and liabilities.
Proprietorship
A type of business entity in which partners share with
each other the profits or losses of the business undertaking in which all have invested.
Partnership
A business organization (entity) having a legal status, with liability
limited to the assets of the entity.
Corporation
A static report of a firm’s stock of assets and liabilities at a
point in time. Prepared for the last day of the fiscal (business year).
ASSETS- LIABILITIES= NET WORTH
BALANCE SHEET
Cash, Accounts Receivable, Inventories, and Prepaid insurance
Current assets
Land, buildings, equipment
Fixed assets
Patents, copyrights, goodwill
Intangible assets
A non-cash expense that is incurred as capital goods are used up (result of wear and tear, age, or obsolescence).
Depreciation
A non-cash expense that is incurred as natural resources (i.e. oil, coal, timber) are used up.
Depletion
This may be called Book Value, Owner’s Equity, the Stock Account, the Capital Account, or the Proprietorship Account
NET WORTH
A dynamic profit and loss report of the flow of income
over a period of time. Prepared annually and quarterly, and sometimes monthly.
REVENUES-EXPENSES= PROFIT
INCOME STATEMENT
Material and direct labor expenses
COST OF GOODS SOLD
Revenue from the sale of goods or services
SALES
Sales less Cost of Goods Sold (Sales- COGS)
GROSS PROFIT
All expenses except the cost of goods sold
-Payroll (wages, salaries, transfer payments), Rent, Insurance,
Depreciation, depletion, utilities (water, power, telephone), supplies,
automotive (transportation), interest on debt, etc.
OPERATING EXPENSES
Gross Profit less Operating Expenses plus other revenues
(Gross Profit – Operating Expenses + Other revenues)
NET PROFIT
Current Assets/Current Liabilities
Current Ratio
current liabilities > current assets
Illiquidity
total liabilities > total assets ; -net worth
Insolvency
A court ruling which provides relief, granted if insolvency exists or is
anticipated:
Bankruptcy
Permanent bankruptcy relief
Chapter 7
Temporary bankruptcy relief to a municipality or county
Chapter 9
Temporary bankruptcy relief to a firm
Chapter 11
Temporary bankruptcy relief to an individual
Chapter 13
Total earnings divided by the number of shares outstanding
Earnings per Share (EPS)
An earnings which are calculated before the company's annual earnings
have been calculated.
Interim Earnings
Revenues minus cost of sales, operating expenses, and taxes, over a given period
of time.
Earnings
A stock's market capitalization divided by its after-tax earnings over a 12-
month period
Price/Earnings Ratio
The number of shares outstanding by their
current price per share
Market capitalization
Compares a company's book value to its current market price. (Book
value denotes the portion of the company held by the shareholders; the company's total assets less its total liabilities)
Price/Equity Ratio
Dividends paid divided by company earnings over some period of time, expressed as a percentage
Payout Ratio
A debt security, in which the issuer owes the holders a debt and is obliged to
repay the principal and interest (the coupon) at a later date, termed maturity.
Bond
That which is owed; usually referring to assets owed or other obligations.
Debt
The amount over which the issuer pays
interest, and which has to be repaid at the end.
Nominal, principal or face amount
The price at which investors buy the bonds when they are first issued. The net proceeds that The issuer receives are calculated as the issue price, less issuance fees, times the nominal amount.
Issue price
The date on which the issuer has to repay the nominal amount.
Maturity date
The interest rate that the issuer pays to the bond holders. Usually this
rate is fixed throughout the life of the bond. It can also vary with a money market index.
Coupon
The dates on which the issuer pays the coupon to the bond
holders.
Coupon dates
A document specifying the rights of bond holders
Indenture or covenants
A bond may contain an embedded option; that is, it grants option like features to the buyer or issuer:
Optionality
Some bonds give the issuer the right to repay the bond before the maturity date on the call dates
Callability
Lets a bondholder exchange a bond to a number of shares of the issuer's common stock.
Convertible bond
provision of the corporate bond indenture requires a certain portion of the issue to be retired periodically.
Sinking fund
Some bonds give the bond holder the right to force the issuer to repay the bond before the maturity date on the put dates.
Puttability
Allows for exchange to shares of a corporation other than
the issuer.
Exchangeable bond
An instrument that signifies an ownership position (called equity) in a corporation, and represents a claim on its proportional share in the corporation's
assets and profits.
Stocks
Capital stock which provides a specific dividend that is
paid before any dividends are paid to common stock holders, and which takes precedence over common stock in the event of a liquidation.
Preferred stock
United States government agency having primary responsibility for enforcing the federal securities laws and regulating the securities industry/stock market.
Securities Exchange Commission (SEC)
To make a decision where the validity of your decision depends on a
future event
Gambling
The most important rule
Always take a small loss
When the provider of the gamble gets paid, many times casinos add double 00s to increase this
Vigorish
Paying a premium to another party (e.g. insurance company) to bear or absorb a risk
Hedging
A simultaneous transaction in two or more markets, buying in the cheap (low price) market and selling in the dear (high price) market.
Arbitrage
A stock market for trading in securities not listed on the NYSE. e.g. AMEX
Curb Market
A way to profit from the decline in price of a security, such as stock or a bond. Used as a blanket term for all those strategies which allow an investor to gain from the decline in price of a security.
Selling short
Any market in which the supply and demand are reasonably equal. They don't have volatile price swings and prices are competitive, reflecting the true value of the good or service.
Orderly Market
A stock exchange member who makes a market for certain exchange-traded securities, maintaining an inventory of those securities and standing ready to buy and sell shares as necessary to maintain an orderly market for those shares.
Specialist
Trade financial instruments such as stocks, bonds, commodities or derivatives directly between two parties. A bi-lateral contract in which two parties agree on how a particular trade or agreement is to be settled in the future.
Over the counter (OTC)
An order placed with a broker to sell a security when it reaches a certain price. It is designed to limit an investor's loss on a security position.
Stop sell order
100 shares
Round lot
Quantities that differs from a standard trading unit, especially an amount of
stock of fewer than 100 shares. Less than 100 shares of a stock; or less than 10 shares of a very thinly traded stock.
Odd lot
A prolonged period in which investment prices rise faster than their historical average
Bull market
A prolonged period in which investment prices fall, accompanied by widespread
pessimism
Bear Market
An order to a broker to buy a specified quantity of a security at or below a
specified price.
Limit Orders
One of several stock market indices created by Wall Street
Journal editor and Dow Jones & Company co-founder Charles Dow. The index is used to gauge the performance of the companies in America's stock markets.
Dow Jones Industrial Average
A technical analysis term referring to a chart formation in which a price exhibits three successive rallies, the second one being the highest.
Head and Shoulders Formation
A quantitative measure of the volatility of a given stock, mutual fund, or portfolio,
relative to the overall market, usually the S&P 500.
Beta
Behavior that moves price of stock towards moving average
Anti-cyclical
Behavior moves price of stock away from moving average
Pro-cyclical