# IMC Exam 2 5-6

### Card Set Information

 Author: eriklnelson ID: 140067 Filename: IMC Exam 2 5-6 Updated: 2012-03-09 15:00:21 Tags: Formulas Folders: Description: formulas Show Answers:

Home > Flashcards > Print Preview

The flashcards below were created by user eriklnelson on FreezingBlue Flashcards. What would you like to do?

• = total risk of a security or investment
• = systematic risk or market risk
• = unsystematic risk or specific idiosyncratic risk
• = the correlation coefficient
• = the covariance of 2 investments
• = risk of x times risk of y
• Effectiveness of any diversification depends on the correlation between securities
• - high negative correlation = good diversification
• = investments systematic risk
• = the investments total risk (systematic & unsystemtic)
• = correlation coefficient between the returns of he investment and those of the market portfolios
• Beta indicates whether the investment moves with the market
• = risk of the market portfolio
• r = expected rate of return of an investment
• rf = risk free return
• rm = market return
1. elasticity
• percentage change in quantity demanded (Q2-Q1)/Q1
• /
• percentage change in demand factor (P2-P1)/P1

measures the sensitivity of demand or supply to changes in factors such as price and income
2. price elasticity of demand
• % change in quantity demanded
• /
• % change in price
3. income elasticity of demand
• % change in quantity demanded
• /
• % change in income
4. cross-elasticity of demand
• % change in quantity demanded
• /
• % change in price of other goods
5. elasticity of supply
• % change in quantity sold
• /
• % change in price
6. demand may b e affected by
substitutes and complements
7. an increase in supply shifts the supply curve to the
right, moving the equilibrium point along the demand curve
8. MC=MR
profits are maximized
9. relationship between GDP, GNP and national income
• GDP
• minus NET PROPERTY INCOME FROM ABROAD
• equals GNP
• minus CAPITAL CONSUMPTION
• equals NATIONAL INCOME (NET)
10. Y = C + I + G + (X-M)
• Y = national income
• C = consumer expenditure
• I = Investment expenditure
• G = government expenditure
• X = expenditure on our exports by foreigners
• M = expenditure by us on imports
11. C = a + bY
• C = Consumption
• a = level of autonomous consumption
• b = marginal propensity to consume, the proportion of any increase in income, which results in increased expenditure
• Y = national income
12. autonomous consumption
• keynes believed that the consumers demand for goods is made up of 2 elements
• a = the level of goods they must consume to stay alive
• b = discretionary consumption or marginal propensity to consume
13. Keynes Simple Multiplier
= 1/ (1-MPC)
14. money multiplier
1/reserve ratio
15. philips curve shows
relationship between inflation and unemployment
16. inflation
• -erodes the real value of nominal assets (cash bonds)
• -results in price increases for real assets (index linked bonds, equities, property)
17. possible causes of unemployment
• -classical
• -structural
• -seasonal
• -frictional
• -keynesian
18. MO, M1, M2, M3, M4
• M0 = notes and coins in circulation (narrow money)
• M1 = M0 +private instant access account deposits
• M2 = M1 + private term deposits and CDs
• M3 = M2 + institutional term deposits and CDs
• M4 = M3 + private holdings of building society retail shares and deposits (broad money)

What would you like to do?

Home > Flashcards > Print Preview