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

Understanding the Balance of Payments

The Balance of Payments of [country] provides a record of all economic transactions between the country and the rest of the world during [year or period].

Current Account Performance

According to IMF data, the current account shows a [surplus/deficit] of around [X]% of GDP, mainly explained by [a strong/weak trade balance, higher/lower exports of goods and services, or income flows]. This suggests that the country [is a net lender/net borrower] to the rest of the world. Within the current account, [goods, services, or primary income] play a significant role, reflecting [tourism revenues, high import demand, or remittances from abroad].

Capital and Financial Accounts

The capital account remains [small/moderate]

Key Economic Indicators & Labor Market Concepts

Macroeconomic Goals & Measures

Monetary Policy: Changes in the money supply, or the rate of growth of the money supply, to achieve particular macroeconomic goals.

Consumer Price Index (CPI): A widely cited index number for the price level; the weighted average of prices of a specific set of goods and services purchased by a typical household.

Unemployment & Employment Metrics

Unemployment Rate: The percentage of the civilian labor force that is unemployed.

Formula: Number of unemployed persons / Civilian labor force

Employment Rate: The percentage of the civilian non-institutional population that is employed.

Formula: Number of employed persons / Civilian non-institutional population

Labor

What is Economic Growth?

Economic growth refers to the increase in the production of goods and services within an economy, typically measured over a long period, such as a year. It is expressed as a percentage increase in the real gross domestic product (GDP), which accounts for inflation.

Calculating GDP

There are two primary methods for measuring an economy's total production:

1. Expenditure Approach: This method sums up all spending on goods and services by households, businesses, governments, and foreign entities. The formula is GDP = C (consumer spending) + I (investment spending) + G (government spending) + (X - M) (net exports).
2. Income Approach: This method calculates the total income earned by all households within a nation.

The Expenditure

Essential Financial and Business Vocabulary

Market Trends and Movements

• Go up: Goes through the roof, rally, stage a comeback.
• Go down: Slide, tumble, drop.
• Synonyms: Drop = went down; Rise = grow; Plunge = drop; Stock = shares = equity; Profit = income = markup = earnings.

Corporate and Financial Terms

• Fine: A monetary penalty for breaking the law.
• Conglomerates: A firm engaged in two or more unrelated businesses.
• Underwriting: The act of undertaking to purchase at an agreed price any unsold portion of a public issue of shares.
• Depositors: A person or entity that deposits money in a bank.
• Merger: A decision by two companies to combine all operations, officers, structure, and functions.
• Takeover: When a company gains control of another by buying its stocks.

Exam 04 Review: Key Concepts

1. Bond Issuers

   • Government (Treasury bonds)
   • Corporations (Corporate bonds)
   • Cities (Municipal bonds)

2. Bond Terminology

   • Call: Issuer's ability to pay off early.
   • Call Premium: Extra amount paid when calling a bond.
   • Par/Face Value: Amount of debt borrowed to be repaid.
   • Indenture: Bond agreement.

3. Asset-Backed Securities

   Debt securities from other loans, e.g., credit card debt, auto loans, home equity loans.

4. Zero Coupon and Discount Bonds

   • Zero Coupon Bond: No interest payments.
   • Discount Bond: Sells below par value.

5. Interest Rate and Reinvestment Risk

   • Interest Rate Risk: Capital loss due to interest rate changes.
   • Reinvestment Risk: Future interest reinvested at lower rates.

6. Current Rate Calculation

7. Junk Bonds

   Low credit quality corporate bonds.

Outsourcing

Outsourcing is a business practice in which a company hires another company or an individual to perform tasks, handle operations, or provide services that were either usually executed or previously done by the company's own employees.

Marketing Mix (MX)

Essential to the set of actions, or tactics, that a company uses to promote its brand or product in the market. The 4 Ps make up a typical marketing mix: Price, Product, Promotion, and Place, including packaging, positioning, people, and even politics.

Raw Materials

Raw materials are materials or substances used in primary production or manufacturing.

Trade Union

A trade union is an organization whose membership consists of workers and union leaders, united to protect and promote their...

Why Activities Are Directed by Markets or Firms

The fundamental question is: Why are some activities directed by market forces and others by firms?

The answer lies in the high cost of using markets. It is often cheaper to direct tasks internally within a firm than to negotiate and enforce separate contracts for every transaction. Such “transaction costs” are typically low in markets for standardized goods.

The Role of Transaction Costs and Contracts

Economic theory suggests that private bargaining could resolve social problems, such as pollution, as long as property rights are well defined and transaction costs are low (though they rarely are).

Characteristics of Spot Markets

Spot markets cover most transactions. Once money is exchanged for goods,...

Business Financing

Companies have various ways of being financed nowadays, whether through traditional banks or companies that offer credit via the internet. Crowdfunding is one of the primary methods for financing enterprises online.

What Is Crowdfunding?

Crowdfunding is a collective cooperation financing model in which freelancers and small-to-medium-sized enterprises (SMEs) form a network online to finance their efforts and support others' initiatives. This high-volume financing is wide-reaching due to its digital nature. However, it is not a continuous source of funding, which can make long-term planning difficult.

Types of Crowdfunding

Currently, there are five main types of crowdfunding:

• Rewards-based
• Donation-based
• Equity-based (shares)
• Loan-

Market Structures & Strategic Interactions

Monopolistic Competition

A market in which firms can enter freely, each producing its own brand or version of a differentiated product.

Characteristics of Monopolistic Competition

• Firms compete by selling differentiated products that are highly substitutable for one another but not perfect substitutes. In other words, the cross-price elasticities of demand are large but not infinite.
• Free entry and exit.

Oligopoly

A market in which only a few firms compete with one another, and entry by new firms is impeded. In some oligopolistic markets, some or all firms earn substantial profits over the long run because barriers to entry make it difficult or impossible for new firms to enter.

Cartel

A market in which...

Entrepreneur is a person who recognizes opportunities and takes risks while operating a business.

Free Enterprise freedom of private business to organize and operate for profit in a competitive system without interference by government

Capital is the money or property owned or used for business

Opportunity Cost is the value of what must be given up to get something else

Business Plan Elements :

• Idea/product : Know what the product is and what it does, Is it realistic or practical? Will it fill a gap in the market?
• Market Research : How can you use customer feedback? You can use that to implement changes to be successful.
• Production : What is the production cost? How will you test the quality of the product? How will you make it ?
• Finance : Know the