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Managerial Economics
| Question | Answer |
|---|---|
| What is the best way for a manager to determine which projects to undertake? | NPV |
| What are the most important statistics we use to evaluate the economic environment? | GDP |
| What are the parts of the business cycle? | Peak, recession, trough, recovery |
| Suppose the government wants to boost the economy by increasing spending without increasing taxes. How effective will this be? Are there any problems with this approach? | Government spending will improve GDP GDP = C+ I+ G + NX Bad, because this will crowd investments. |
| What are the primary tools used by the Federal reserve in its attempt to stabilize or boost economic activity? Which of these tools do they use most frequently? | Open Market Operations - buying / selling US treasuries in the open market. Feds Funds Rate |
| What types of firms would you classify as growth or value? In what economic environment would you want to be (or invest in) a growth firm versus value? | Growth: TSLA, NFLX, AAPL Value: WMT, KO on recovery --> Growth. on recessing : value |
| What attributes do cyclical industries have? | Strongly affected by business cycle, Recession. |
| What's CPI | Consumer Price Index |
| Nominal interest Rate? | real rate * interest rate |
| What is the specific relationship between real and nominal interest rates? | 1 + nominal rate = (1+real)(1+inflation) |
| What is a Pareto improvement in the context of game theory? | Moving from bad equilibrium to one that is better (or the same) for everyone |
| What is a Pareto optimal | situation in game where there is no better Nash equilibria |
| What factors would case the demand curve to shift to the right? | increase in demand |
| What factors would case the demand curve to shift to the left? | decrease in demand |
| What factors would case the supply curve to shift to the right? | change in other factors but price |
| What is the law of supply | change of price only as price of good rises, quantity supplied also rises. everything else is constant. |
| What is the law of demand | Quantity purchased increases as price falls |