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

Investment and Financing Plan Fundamentals

The Investment and Financing Plan is a detailed study covering both the necessary business assets (investments) and their corresponding financial structure (liabilities).

Asset Valuation and Depreciation Methods

Regarding investments, we must detail not only the nature of the assets but also how they will be amortized (depreciated). This involves determining the useful life of the asset for the company and establishing a plan to recover the value lost due to the passage of time and usage.

There are many methods of depreciation, but the most commonly used is the linear method, which assumes the asset wears out uniformly throughout its useful life. However, there are also:

• Progressive methods: These consider

Circular Flow of Income and Factor Markets

In the circular flow of income, relationships are established between families and the public sector concerning the allocation of resources. Income allocation represents the value or price of a factor of production in a given period. There are different types of income:

• Income from work (wages).
• Income from natural resources (rent/usufruct).
• Income originating from capital (interest).

Thus, the market is divided into three sub-markets:

Natural Resources Market

Short-term natural resources are considered a constant amount available to a country and are not expected to be exhausted immediately. Income from natural resources is related to its usufruct (rent). Natural resources are allocated according to their...

Macroeconomic Environment Stability

For a foreign investor to decide to establish operations in a country, successful achievement of macroeconomic objectives is necessary.

Fighting Corruption

Fighting corruption is a scourge that represents the fastest way to get rich in countries where earning a living through honest and productive economic activity is replaced by gaining influence in the bureaucracy.

External Accountability

Some theorists argue that the poverty of poorer states is a direct consequence of the behavior of the wealthier nations. The major cause of underdevelopment in many countries today was the severe colonization they were subjected to.

The International Economic Environment

Some states fall into what are called poverty circles....

The Industrial Crisis: 1975-1985 External Causes

External causes: The crisis was driven by higher energy prices and the Third Industrial Revolution. This period saw significant technological innovations, new industrial production methods, and systems. There were new market demands regarding quality and design, which required product innovation and diversification. Furthermore, the globalization of the economy and the international division of labor meant each territory specialized in industrial sectors where they held advantages. This provoked a crisis in industrialized countries whose prices were no longer competitive.

Internal Causes and Consequences

Internal causes: The shortcomings of the Spanish industry included a specialization in mature

Per Capita Income

Per capita income translates the total production of a national economy into the living standards of its citizens. It indicates the portion of national income that corresponds, on average, to each inhabitant of a country. This metric is used to compare living standards between nations and to track the economic development of citizens over time. For per capita income to grow, domestic production must increase at a greater rate than the population.

Formula: RPC = National Income / Number of Inhabitants

Income Distribution

Income distribution illustrates how domestic income is shared among a country's population. This aspect is often compared alongside GDP per capita across different countries, regions, factors of production, and...

Income and Wage Determination in Labor Markets

Income

Income: Total income received by owners of productive factors.

Income Distribution

Income Distribution: How income is distributed among the owners of factors in the form of productive wages. It is conditioned by wage differentials and the distribution of wealth.

Salary

Salary: The price of a job. The company hires workers, and their wages are lower than the value that has been produced.

Labor Demand

Labor demand by firms depends on: wages, productivity, and prices of goods produced.

• Wages: An increase in wages reduces the demand for labor because it is more expensive to hire.
• Productivity: Higher wages can be offset by greater productivity.
• Price: If the price of goods rises, business productivity

GDP and National Product Definitions

The Gross Domestic Product (GDP) represents the total monetary value of all goods and services produced within a country's borders. In contrast, the Gross National Product (GNP) measures the value of output produced by domestic factors, regardless of whether they are located within the country or abroad.

National Income and Personal Income

• National Income: The sum of all remunerations paid to domestic factors of production.
• Personal Income: Derived from national income by subtracting undistributed corporate profits, corporate taxes, and employer contributions to social security.
• Disposable Income: The portion of personal income actually available to individuals for consumer spending and saving.

Theories of Unemployment

Classical

Understanding Macroeconomics: Objectives, Instruments, and GDP

Macroeconomics deals with the study of phenomena that affect the entire economy, among which are inflation, unemployment, and macroeconomic growth. To analyze the performance of the economy, macroeconomics focuses on the study of Gross Domestic Product (GDP) or the general price level to make it easy to set concrete targets and design macroeconomic policy. This integrated set of measures, designed by the government to influence the progress of the economy as a whole, aims for objectives such as the growth of production, employment, and price stability.

Key Objectives of Macroeconomics

• Production Growth

  Having an abundant amount of goods and services is something all countries desire.

Aggregate Demand and Aggregate Supply

Aggregate demand is the sum of consumer spending, businesses, and other factors. Prices depend on the level of monetary policy, politics, discretionary factors, and more. Aggregate demand components include consumption goods that individuals purchase, such as food and clothing, and capital goods like factories, as well as real purchases by the State, such as trains.

Aggregate supply is the total amount of goods and services companies in a country are willing to produce and sell in a given period, given the prices, production capacity, costs, and market conditions.

The Aggregate Demand and Supply Curves

The aggregate demand curve shows the relationship between the general level of prices and aggregate expenditure...

Working Capital: Definition and Financial Stability

Working Capital (FM) is the portion of current assets financed by equity and non-current liabilities. It is a key metric used to measure a company's financial stability. It can be calculated in two ways:

• FM = Fixed Capital - Non-current Assets
• FM = Current Assets (AC) - Current Liabilities (PC)

Working capital can be positive, negative, or zero.

Positive Working Capital

Under normal circumstances, the FM should be positive. If it is not, the company may face difficulties financing its short-term debts (Figure 1). A positive FM has the following consequences:

1. It allows the company to face possible mismatches between the flow of receipts and payments.
2. It permits the company to keep pace with its business