Notes, summaries, assignments, exams, and problems for Economics

Functions of Money

1. Store of value

2. Medium of exchange

3. Unit of account

Changes in banking laws

Transactions demand to money is closely related to money functioning as medium of exchange

Primary purpose of the legal reserve ratio: provide a means by which the monetary authorities can influence the lending ability of commercial banks.

Money is destroyed when loans are paid off

Securities held as assets by the Federal Reserve Bank consist mainly of Treasury bills and Treasury bonds

What happens when FRB buys bonds from public in open market and amount held by the public doesn't change: Commercial bank reserves will increase

When central bank borrows from FRB, the commercial bank's lending ability is increased.

The simple multiplier 1/mps

Reserve ratio...

Chapter 8- NPV

Opportunity Cost of Capital: expected rate of return given up by investing in a project

Net Present Value: Present value of cash flows minus initial investment--> difference between value and cost.-->reflects time value of money

Risky dollar worth less than safe one

Capital Budgeting Decision: is concerned with finding out investments that maximize value of the firm

IRR: the discount rate at which project NPV = 0 --> accept project if IRR is greater than opportunity cost of capital

Payback Period- time until sum of project cash flows equals the initial investment--> accept if payback period is less than some specified number of years

Discounted Payback Period - Accept project if discounted payback period is less than some...

Niche market - It is a small market that aims to meet specific user needs.

Segmenting Business Markets

Business buyers can be segmented geographically, demographically or by benefits sought, user status, usage rate and loyal status. Almost every company serves at least some business markets. (Ex. Starbucks has developed marketing programs for coffees and for food).

Segmenting International Markets

Few companies have the resources to operate in all, or even most of the countries of the world. Some large companies, sell products in more than 200 countries, but most international firms focus on a smaller set of countries. Different countries, can vary greatly in their economic, cultural and political make up. Companies can segment international markets using one or a combination of several variables. They can segment by:...

1. Economic Growth Rate

The economic growth rate is the percentage increase in the Real GDP:

[(New Real GDP - Old Real GDP) / (Old Real GDP)] x 100

Example: If the Real GDP grows from 80 to 100, then the:

Economic Growth Rate = [(100 - 80) / 80] x 100 = (20 / 80) x 100 = 0.25 x 100 = 25%

2. Unemployment Rate

The components are defined as:

• Labor Force = Employed + Unemployed
• Unemployment Rate = [Unemployment / Labor Force] x 100

Example: If Employment = 95 and Unemployment = 5, then:

Labor Force = 95 + 5 = 100

Unemployment Rate = [5 / 100] x 100 = 5%

3. Industrial Capacity Utilization Rate

This rate measures:

[(Actual Production Level) / (Maximum Possible Production Level)] x 100

Example: If a factory can produce at most 1,000 units a month and it is actually...

The role of price in the marketing mix

When pricing a product, a business needs to choose one that fits with the rest of the elements in the marketing mix

Price determination in a free market

People think that prices are determined by the seller of the product, but that is not quite so. Prices are driven by market forces called demand and supply.

Demand

Demand is not only that people want to buy a product, but that they want it and are willing to pay for it. Prices can affect how much demand there is for a product. Normally, if the price goes up, demand goes down, and vice versa.

Supply

Supply also varies with price. However, it is different. If the price goes up, then the owners would want to be supplied with more products to take advantage of the...

What Drove the Progressive Era Movement?

A general belief that government reforms were needed to help end social problems and disorder.

Why Did Many Progressive Reformers Support Prohibition Legislation?

They believed alcohol was a cause of poverty and many other social problems.

What is the Nineteenth Amendment?

Gave women the right to vote.

What Did the Use of Initiative Allow Reformers to Do?

Propose issues and legislation directly to voters.

What Did Major Policies of Theodore Roosevelt's Presidency *Not* Include?

Using subsidies (government payments) to bolster the failing Standard Oil Company.

What Were Woodrow Wilson's New Freedom Platform and Proposals Directly Countering?

Roosevelt's New Nationalism ideas.

What Act Did Woodrow Wilson Seek to Reform

Governments must combine their Discretely presented component units into both the fund and the Government-wide statements. F

 A related organization is a Contractual arrangement whereby two or more participants agree to Carry out a common activity and share its risks and rewards. F

 A primary government can impose Its will on a potential component unit if it has the authority to Modify or approve the unit’s budget. T

 The comprehensive annual financial report (CAFR) is divided into three main sections: the Table of contents section, the auditors’ report section, and the Financial section. F

The typical audit is designed to Cover all...

Professional Personality Traits

Understanding key adjectives used to describe professional characteristics is essential for effective business communication.

Defining Key Personality Adjectives

Sociable

Likes to spend time with other people.

Ambitious

Wants to reach the top in their career.

Creative

Has a lot of new ideas.

Reliable

Does what they promise to do.

Relaxed

Is usually calm.

Hard-working

Spends a lot of time doing a good job.

Punctual

Likes to be on time.

Motivating

Encourages other people to work well.

Helpful

Is good at making things work.

Practical

Likes to do things for other people.

Applying Personality Traits: Maria's Profile

Maria is good in a team and she gets on well with her colleagues. She is extremely sociable. She is never late for meetings—she...

Essential Definitions in Economics

Economics

The study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided.

Scarcity

All economic questions arise because we are unable to satisfy all our wants.

Marginalism

The process of analyzing the additional or incremental costs or benefits arising from a choice or decision.

Sunk Costs

Costs that cannot be avoided, regardless of what is done in the future, because they have already been incurred.

Efficient Market

A market in which profit opportunities are eliminated almost instantaneously.

Opportunity Cost

The process of choosing a good or service over another. The item that you don't pick is the opportunity cost.

Specialization

When an individual or...