Economy

Credit cycles vs business cycles

• business cycles mostly use GDP as a measure of economic activity

• Credit cycles describe the changing availability—and pricing—of credit.

• credit cycles tend to be longer, deeper, and sharper than business cycles

qualified audit opinion

some scope limitation or exception to accounting standards.

adverse audit opinion

the financial statements materially depart from accounting standards and are not fairly presented

disclaimer of opinion

cannot give an opinion

automatic stabilizer

Government expenditure on unemployment benefits

Event risk

evolves around set dates, such as elections, new legislation, or other date-driven milestones, such as holidays or political anniversaries, known in advance.

Exogeneous risk

a sudden or unanticipated risk that affects either a country’s cooperative stance, the ability of non-state actors to globalize, or both (Exhibit 12). Examples include sudden uprisings, invasions, or the aftermath of natural disasters.

Thematic risk

risks that evolve and expand over a period of time. Climate change, pattern migration, the rise of populist forces, and the ongoing threat of terrorism, cyber threats

structural budget deficit

the deficit that would exist if the economy was at full employment (or full potential output).

Multiplier effect

1/(1-c)

c = marginal propensity to consume (after tax)

tariffs, quotas, export subsidies, voluntary export restraint

tariffs quotas, etc. impact on price