Notes, summaries, assignments, exams, and exercises for Economics for Baccalaureate

Economic Sectors and Services

• Tertiary Sector: A set of activities whose purpose is to provide services to society, such as transportation, commerce, and health care.
• Third-Economic Sector: The process by which the tertiary sector of the economy (transport, communications, commerce, tourism, etc.) gains weight relative to the primary and secondary sectors. It becomes the leading sector in terms of workforce employment and contribution to GDP.
• Production Services: Activities that support tertiary industrial production, both pre- and post-production, including research, design, management, and marketing.

Transport and Infrastructure

• Transport System: All resources and infrastructures that allow for the displacement of people and goods between geographic

Understanding Inflation

Inflation: the general increase in prices across an economy. This concept is often measured using the Consumer Price Index (CPI).

Causes of Inflation

• Excess Demand: Occurs when overall demand for goods and services significantly exceeds the economy's production capacity. If producers cannot increase production volumes to meet this demand, prices will rise. This can also be caused by an excess of money in circulation.
• Increased Production Costs: If the costs of production (e.g., raw materials, labor) increase, businesses often pass these higher costs on to consumers by raising their prices to maintain profit margins.
• Structural Causes: Economic sectors may not be able to respond quickly to increases in demand. This can be

Gross Domestic Product (GDP), calculated using the cost factors method, sums the factors of all firms in the economy. This equals the income generated by that economy.

GDP at current prices, or nominal GDP, is measured using the prices of the period when production takes place. GDP at constant prices, or real GDP, is measured using prices from a specific base year, thus eliminating the effect of inflation.

The price indices are weighted measures of prices for each period, where each good or service is valued according to its 'weight' or importance in total output.

The Consumer Price Index (CPI) represents the costs of a basket of goods and services consumed by a representative household. It is calculated as a weighted average of final consumer...

The Banking System and Money Creation

Banks

Banks are a set of entities forming the core of the banking system, often operating in addition to savings and credit cooperatives.

Core Banking Functions

The primary function of banking is to capture lawful money from savers to lend to economic agents that need funding. Banks perform several key activities:

• Managing immediately available funds.
• Lending money in exchange for interest.
• Maintaining emergency stocks of funds (reserves) to tackle any withdrawal of deposits.

Reserve Ratios and Liquidity Management

These ratios dictate the amount of cash banks must hold inactive:

• Cash Ratio (Reserve Ratio): This is the percentage of total deposits received that the bank maintains in an inactive state (cash reserves)

Working Capital (Capital de Trabajo)

Working capital is the set of resources a company needs to finance the period between when payments are made to suppliers and when collections are received from customers. The shorter that period, the lower the required working capital. It is also referred to as net working capital, current capital, or capital de trabajo.

Working capital is the difference between current assets (activos corrientes) and current liabilities (pasivos corrientes). Working capital has a double meaning:

• Current assets necessary to sustain business activity — the resources required to operate the company continuously.
• Permanent resources available for stability — the amount of long-term or permanent resources the company has available

Financial System

A set of institutions that mediate between claimants and suppliers of financial resources.

Assets

Any asset with a market value is considered real wealth. Physical assets include homeownership, which provides property titles eligible for rent.

Financial Intermediaries

• Banking Institutions: Primarily banks and savings banks, empowered to create money.
• Non-bank Brokers: Insurance companies, leasing agencies, and factoring firms. These are not empowered to create money.

Objectives

• Promote private savings.
• Efficiently allocate financial resources to the needs of the economy, whether for individuals, companies, or public administrations.

Functions

1. Resource Collection: Managing savings, current accounts, and deposit accounts.
2. Lending: Providing

Market Fundamentals and Dynamics

The market is a fundamental outcome of the division of labor. As noted by Adam Smith, there's a direct relationship between a company's degree of specialization and the breadth of its market. The primary function of any market is to connect buyers and sellers, facilitating the exchange of goods and services, and regulating this exchange through prices.

Market Classification Criteria

Markets can be classified based on several key criteria:

• By Country's Legal Framework

  • Free Market: Characterized by freedom of transactions, where prices and quantities are determined by supply and demand without external imposition.
  • Intervened Market: Prices and/or negotiated quantities are imposed or significantly influenced by external

Understanding Unemployment

Unemployment is the situation where workers, despite being able and willing to work, cannot find gainful employment. It represents a significant economic, social, and human problem.

Key Economic Indicators

• Unemployment Rate: (Number of Unemployed / Active Population) x 100
• Employment Rate: (Employed Population / Population 16 years and over) x 100
• Activity Rate: (Active Population / Population 16 years and over) x 100

Types of Unemployment

• Seasonal Unemployment: Occurs when jobs associated with a particular time of year conclude.
• Structural Unemployment: Arises from reductions in company workforces, often due to technological changes or shifts in industry structure.
• Frictional Unemployment: The temporary period between jobs

Accounting and Public Accounting Basics

What is Public Accounting (Contaduría)?

It is the professional discipline of a scientific nature that, based on a specific theory and through a process, obtains and verifies information on financial transactions conducted by economic entities.

What is Accounting?

The art of recording, classifying, and summarizing in a significant way, and in terms of money, transactions and events that are at least partly financial, and interpreting their results.

Purpose of Accounting

The purpose of accounting is to provide financial information at specific points in time or through technical records, based on classifications established by an institution. Accounts should adhere to established principles.

Stages of the Accounting