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

Scarcity and Conflicting Needs

Economic science addresses the conflict of allocating scarce resources to satisfy unlimited human needs.

The fundamental problem is economic scarcity: the limited availability of resources. This includes poverty and the lack of basic necessities.

A need is the desire for sufficient means to alleviate feelings of dissatisfaction, a sense of lacking something and the desire to fulfill it.

Types of Needs

Primary needs are essential for human survival. Secondary needs are those felt after primary needs are met.

Safety needs relate to physical protection, order, and security. Belonging and love needs involve integration and acceptance within a social group. Esteem needs are related to social valuation and recognition. Finally,...

Aggregate Demand and Supply Fundamentals

Aggregate demand (AD) and aggregate supply (AS) are fundamental macroeconomic concepts for understanding a country's production, prices, and employment levels.

Understanding Aggregate Demand (AD)

Aggregate demand is the total expenditure on goods and services in an economy at a given price level. It represents the combined spending of households, businesses, the public sector, and the foreign sector.

Components of Aggregate Demand

• Private Consumption: Spending by households on goods and services.
• Business Investment: Spending by companies on capital goods.
• Government Expenditure: Spending by the public sector.
• Net Exports: The value of a country's total exports minus the value of its total imports.

Understanding

Circular Flow Mechanism

In any economy, there are many transactions and exchanges. The circular income flow expresses the relationships between simplified economic actors. We consider an economy where only two economic agents are considered:

• The domestic economy: They own the factors of production, which they provide to businesses, and earn an income with which to purchase goods and services.
• Businesses: They produce goods or services sold in the market, and with the income they get, they pay for the productive factors.

Companies provide families with goods and services that they demand. There are two types of flow:

• The real flow: This reflects the goods and services produced by businesses. The sum of the production of all companies is called the

Factors of Production

Goods and services are produced from the following factors:

• Work: The capacity people have to generate wealth with their effort.
• Capital: Goods used to produce other goods.
• Human Capital: Knowledge-based production capacity that people possess.
• Natural Resources: Raw materials provided by nature.
• Business Capacity: The ability to organize all factors of production to create goods and services.

Note: The term 'resources' is often used for inputs, while 'outputs' refers to goods and services.

Market Economy

A market economy is an economic system based on markets to make decisions regarding what, how, and for whom to produce. Trade occurs through the interaction of supply and demand. Prices act as signals to transmit information to...

Classification of Financing Sources

Financing sources are the liquid resources or means of payment available to a company to meet its cash needs. These are classified as follows:

By Repayment Plan

• Short term: Less than one year.
• Long term: More than one year.

By Source

• External: Social capital, lending, and operating funds.
• Internal: Undistributed profits, depreciation, and provisions.

By Financing Media

• Own: Capital and reserves.
• External (Alienated): Loans, credits, and borrowings of all kinds in the short or long term.

Own Resources and Internal Financing

Own resources (or financing of one's own) are the most stable resources available to the company and do not have to be repaid during its lifetime. They consist of:

• Capital: Formed by contributions from

Communication Channels

Effective communication channels: The communication must be effective and not distorted. According to Koontz, an agent is not needed as much as information. The established channels and command levels are a consequence of the leadership styles:

• Descending communication: Management transmits the information the company believes is desirable for the institutions and to carry out the company's orders and policies. It occurs through the hierarchical line of direction, mediante meetings with middle management. It is self-communication of authoritarian styles.
• Upward communication: Reflecting the situation of subordinate levels while collecting aspirations and concerns of their own. It uses various means of participation: meetings,

Own Resources and Equity

Own Resources (REC.PROP): These are stable and not repayable (not back of shank). They are the last to be charged in case of bankruptcy risk by partners.

• Capital: Partner contributions formed in the society to produce capital and extensions.
• Reserves: Distributed profits for internal financing.
  • Legal: Terms set by law.
  • Statutory: Fixed by the company status.
  • Voluntary: Obtained from benefits.
  • Extraordinary: State and private subsidies.
• Amortization (Leak): The value that fixed assets (immobilitzat) lose in the production process due to use or obsolescence.
• Provisions: Part of the company results established as a fund to meet losses that have been produced or future expenses (indemnities, taxes).

Long and Medium-Term External

Spain's 1959 Stabilization Plan

The government aimed to adapt the Spanish economy, stabilize prices, and revive industry. The International Monetary Fund (IMF) and U.S. funders supported the new government's economic policy.

Through the Decree-Law of July 21 and July 27, 1959, on foreign investments, and the banking reform of 1962, the following steps were implemented:

• Cutting public expenditure.
• Reforming the Bank of Spain, placing it under the control of the Ministry of Finance.
• Increasing taxes on gasoline and tobacco.
• Devaluation of the Peseta (Pst.).
• Liberalizing trade.
• Limiting credit to private banks.
• Implementing new regulations for foreign investment.
• Creating official credit institutions: the Official Credit Bank, Mortgage Bank, Construction

Bank of Spain and the European Central Bank

The European Monetary Union (EMU) is formed by countries using the euro. The European Central Bank (ECB), alongside the national central banks of member states, constitutes the European System of Central Banks (ESCB). The Bank of Spain operates autonomously, with its governor appointed by the government.

Functions of the Bank of Spain

• Management of gold and foreign exchange reserves.
• Supervision and monitoring of the banking system.
• Ensuring the smooth operation of payment systems.
• Acting as the state bank.
• Conducting monetary policy.
• Issuing currency in Spain.

Central Bank Balance Sheet

Assets: Gold, foreign exchange, credit to the banking system, financial securities, and other assets.

Liabilities: Cash held...

Business Cycles: Causes and Phases

Causes:

• Endogenous cycles: Causes arising from the internal logic of economic variables.
• Exogenous cycles: Circumstances external to the economy, such as political events or scientific discoveries.

Duration: Short-term cycles: Between 40 and 80 months.

Phases of the Business Cycle

• Expansion or Recovery: An upswing characterized by increased investment, consumer demand (NSF), and GDP. This phase benefits companies, reduces unemployment, and causes consumer prices to rise.
• Boom or Peak: The maximum level of investment and consumption where aggregate demand and GDP reach their peak. Company benefits are maximized, full employment is achieved, and the price index may increase significantly.
• Contraction or Recession: Characterized