2009 B-2 Class Notes

2009 B-2 Class Notes - Becker CPA Review Business 2 Class...

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Becker CPA Review – Business 2 Class Notes 1 © 2009 DeVry/Becker Educational Development Corp. All rights reserved. BUSINESS 2 CLASS NOTES Economic Concepts is the topic of BEC 2. The CPA exam Content Specification Outline assigns a range of 8%-12% of the points to the area, making it the least tested area of the BEC exam. However, any point is important and the key topics in Economics are: Business cycles and reasons for fluctuations, Economic measures and reasons for changes in the economy, Market influences on business strategies, and Implications to business of dealing in foreign currencies. I. BUSINESS CYCLES AND REASONS FOR BUSINESS FLUCTUATIONS A. Gross Domestic Product (GDP) is a measurement of economic activity within a country's borders. Real GDP is Nominal GDP adjusted for changing prices. B. Fluctuations in economic activity are known as business cycles. These concepts of expansion, contraction and recovery are illustrated in Graph A on page B2-5 . C. Economic Indicators help to predict business cycles. D. The Laws of Supply and Demand are the primary drivers of changes in economic activity. E. Many factors affect aggregate supply and demand. The government may employ fiscal or monetary policy to attempt to dampen the fluctuations in the economy. II. ECONOMIC MEASURES AND REASONS FOR CHANGES IN THE ECONOMY A. GDP can be measured using the Expenditure Approach (GICE) or the Income Approach (IPIRATED). B. Variations on GDP are computed by removing, or changing, components of its measurement. These are (by acronym) NDP, GNP, NNP, NI, PI and DI. C. The Unemployment Rate measures the ratio of the number of unemployed to the total labor force. As this rate rises, GDP tends to contract - and vice versa. Unemployment may be Frictional, Structural, Seasonal or Cyclical. D. The Consumer Price Index (CPI) assists in measuring the change in prices, inflation or deflation over a period of time. Since inflation decreases the purchasing power of money, it is one of the key elements of the economy to control. E.
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2009 B-2 Class Notes - Becker CPA Review Business 2 Class...

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