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

Financial System Fundamentals

Functions of Money

• Medium of Exchange: Facilitates transactions without the need for bartering.
• Store of Value: Allows wealth to be held over time.
• Unit of Account: Provides a common measure of value for goods and services.

Kinds of Money

• Legal Tender (Fiat Money): Money declared by a government to be legal tender, often with a monopoly on its manufacture by a central institution.
• Bank Money (Deposit Money): Money created by commercial banks through lending activities.

The Financial System

The financial system is an intermediary set of institutions that connects those who demand financial resources with those who offer them.

Financial Assets

A financial asset is any asset with a market value.

• Real Assets: Tangible, physical

Understanding Public Goods and the Free Rider Problem

Public goods are goods where the cost of extending the service to an additional person is zero and whose enjoyment is impossible to exclude from anyone. A public good is also one whose enjoyment cannot be excluded from the population, regardless of who pays. Furthermore, consumption by one individual does not reduce the amount available for another; in other words, they are non-rival in consumption.

A consumer parasite (often referred to as a free rider) is a person who receives the benefit of a good but avoids paying for it. When the consumption of a good cannot be excluded, individuals have an incentive to act as parasites, letting others pay for the goods while they enjoy them without contribution....

International Trade

International trade is a set of trade and capital flows between different countries. There has always been international trade. In the twentieth century, with the development of transport, trade became more intense and thus was a source of expertise in those countries.

Main Background

No country can survive an autarky regime because they don't have enough natural resources, or resources are more expensive to produce domestically, and/or there is a lack of technology.

As a result, developed countries (North America, European Union, Japan) specialize in the production of manufactured goods and high technology.

Spain

In the case of foreign trade, Spain has a persistent trade deficit. The value of exports represents only 78% of the...

Understanding the Public Sector

The public sector encompasses a nation's economic activities that fall within the governmental sphere.

Key Functions of the Public Sector

• Legislation: Regulating the activity of economic agents through the issuance of legal rules.
• Provision of Goods & Services: Producing or providing essential goods and services.
• Taxation: Exercised through the fixing and collection of taxes.
• Redistribution: Adjusting the distribution of income among people.
• Stabilization: Smoothing fluctuations in macroeconomic variables.

Structure of the Public Sector

Spatial Approach (EU Context)

Considering a spatial approach, especially within the EU, the public sector includes four levels:

• Supranational level
• National or central level
• Regional level
• Local

Indicators of Consumption Evolution

The ongoing survey of family budgets collects household spending expectations, as well as the degree of optimism or pessimism regarding the future.

• Automobile registrations: Within consumer spending, buying cars is a highly reliable indicator of a country's consumption evolution.
• Large-scale retail sales: The evolution of sales in large stores and hypermarkets provides data useful for measuring food consumption and mass-market items.
• Additional indicators: These include gasoline consumption, retail trade surveys, and imports of consumer goods.

Confidence as a Determinant of Consumption

A privileged indicator of expected future consumption is the Consumer Confidence Index. When consumers are confident that the future...

Understanding Economic Concepts and Indicators

Microeconomics vs. Macroeconomics

Microeconomics studies the economy from the standpoint of basic economic units, such as individuals, households, and firms.

Macroeconomics studies the economy as a whole, focusing on broad aggregates and phenomena like economic cycles, growth, inflation, and employment.

Macroeconomic Objectives

• GDP growth
• Low unemployment
• Controlling inflation
• Reducing public deficit
• Balancing the Balance of Payments (BOP)
• Stabilizing exchange rates

Key Economic Indicators

Gross Domestic Product (GDP)

GDP is the market value of all final goods and services produced within a country during a certain period of time. It can be measured in two main ways:

1. As the flow of final production costs.
2. As

Economic Concepts and Market Structures

Market Competition Types

• Competition: Notifies several companies rivaling to offer the same class of goods or services to market demanders.
• Perfect Competition: A market type where many small companies exist, producing a unique product which differentiates producers, but they cannot influence the product's market price.
• Monopolistic Competition: A market structure with many suppliers due to low entry barriers, offering differentiated but similar products.
• Oligopoly: A market structure with a reduced number of suppliers offering similar production.
• Cartel: A formal agreement used by several major companies in an oligopolistic market to achieve benefits through joint price fixing.
• Market Share: The overall production

Macroeconomic Forces: Demand, Supply, and Consumer Drivers

The internal forces are determined by the market behavior of economic agents in a country, and are expressed through the free play of aggregate demand and aggregate supply. The average level of prices is the weighted average of prices of all goods and services in an economy. It is difficult to change the productive capacity of a country in the short term, so aggregate supply is often constrained by aggregate demand. Aggregate supply is subject to the behavior and expectations of economic agents, and can change from one moment to another.

Aggregate Demand (DA)

Aggregate Demand (DA) is the total expenditure, at a determined average price level, performed in an economy by families, businesses,...

Balance Sheet Components and Structure

Assets Classification

• Non-current Assets (Intangibles)

  Definition: Industrial Property, APIs, Development Costs.

• Non-current Assets (Tangibles/Equipment)

  Definition: Buildings, Furniture, Machinery, Real Estate Investments.

• Current Assets (Inventory)

  Definition: Goods (Stocks).

• Current Assets (Receivables)

  Definition: Customers, Financial Investments, Trade Receivables, Debtors, Public Administration Debtors.

• Current Assets (Available Cash)

  Definition: Banks (Cash).

Equity and Liabilities

• Equity (Net Assets)

  Definition: Capital, Reserves, Income, Profits.

• Non-current Liabilities

  Definition: Suppliers of Non-current Assets, Bills Payable, Debts to Credit Institutions (Long-Term).

• Current Liabilities

  Definition: Suppliers,

Economic Agents

Economic agents are categorized as follows:

• Consumers: Families and households that decide to consume goods and services necessary to meet their needs.
• Production and Business: Entities making decisions on the distribution of goods and services in exchange for a benefit.
• The Public Sector: Various public administrations.

Consumers

When two or more goods or services meet the same characteristics and the same necessity, which one does the consumer choose? This depends on the tastes and preferences of the person.

Income Level: Even if preferences are set, one cannot satisfy an economic necessity due to the unavailability of funds.

Income and Family Composition

Income: Represents the value or price paid for using a productive resource in...