Notes, summaries, assignments, exams, and problems for Economics

Key Business & Finance Terms

1. Bargain

Something that is of very good quality but relatively inexpensive.

2. Change

The money that someone gives back to you when you pay more than something actually costs.

3. Currency

The system or type of money that a country uses.

4. Discount

Something you buy that costs much less than normal.

5. Entrepreneur

Someone who starts a new business or arranges business deals in order to make money, often in a way that involves financial risks.

6. Fair Trade

The activity of making, buying, and selling goods in a way that is morally right.

7. Loan

An amount of money that you borrow from a bank, etc.

8. Mortgage

A legal arrangement by which you borrow money from a bank or similar organization in order to buy a house, and pay...

The salary structure encompasses various concepts a worker receives monthly. This includes the base salary, the principal amount for work performed. Bonuses are also part of the compensation, often based on personal characteristics such as age or years of service. Job characteristics also influence rewards and goals. In Spain, workers are entitled to two extra payments annually: one in summer and one at Christmas. The summer bonus, paid in July, covers the first six months, while the Christmas bonus, paid in December, covers the second half of the year. Each extra payment equals 30 days of salary. All of this is regulated by the collective agreement of each sector. These agreements, between employee representatives, unions, and business representatives,...

Annual Accounts

A. Model Structure and the Annual Accounts

These should be prepared in accordance with the Commercial Code, the Revised Corporate Law, and the Law of Limited Liability Companies as provided in the General Accounting Plan.

They should be formulated within a maximum of three months after the end of the fiscal year.

The General Accounting Plan provides two different models of annual accounts:

• Normal
• Abbreviated

Abbreviated annual accounts facilitate this requirement for individual entrepreneurs and small and medium-sized corporate businesses.

B. Depositing Accounts in the Commercial Register

Once developed, the annual accounts may be filed and advertised in the Commercial Register.

Sole proprietors are not required to deposit their annual...

Understanding Purchasing Power Parity

General Idea

A country's currency value, with respect to another, is determined by its purchasing power.

Two Applications of Purchasing Power Parity

1. To determine the exchange rate parity of purchasing power and use it for comparisons of social accounting.
2. As a theory that explains the relationship between price levels and the exchange rate.

Factors Influencing Exchange Rate Fluctuations

Parity Adjustments

Persistent or fundamental imbalances in the balance of payments can lead to changes in monetary parity, or the external exchange value of a currency. Parity can be adjusted upwards (revaluation) or downwards (devaluation), depending on whether there is a surplus or a deficit.

Devaluation allows exporters to receive...

Reserve System

Market: The Intersection of Supply and Demand

• Job Market:

  This comprises job offers from organizations in a specific location and time. Increased organizational presence leads to higher employment rates.

• Human Resources Market:

  This encompasses individuals employed in a specific location and time, categorized by specialization (e.g., lawyers, engineers, skilled workers).

Therefore, the Human Resources Market reflects the Labor Market; when one is abundant, the other is in demand, and vice versa.

Recruitment: A Proactive Approach

Recruitment involves actively inviting individuals from various organizations to participate in the selection process. This ensures a wider pool of applicants, leading to better choices.

External Recruitment:

International Trade

No country can provide everything its inhabitants want or need. To address these needs, countries engage in international trade.

Imports and Exports

Imports: A country buys goods and services that it either lacks or can obtain more cheaply from elsewhere.

Exports: To pay for imports, a country sells goods and services it has a surplus of or can produce more cheaply than other countries.

Trade Surplus and Deficit

Trade Surplus: A country earns more money from exports than it spends on imports.

Trade Deficit: A country spends more on imports than it earns from exports.

Interdependence

Interdependent Countries: Nations that engage in trade with each other.

LEDCs and MEDCs

LEDCs: Typically export cheap foodstuffs (e.g., tea, coffee) and...

Criteria for Classifying Financial Sources

Companies require financial resources both during their inception and throughout their operational activities to facilitate investments. These financial sources can be classified based on ownership, time, and origin.

Classification Based on Ownership

• Self-Financing: Capital provided by partners and retained earnings (reserves).
• External Financing: Resources obtained from external sources, typically debt.

Classification Based on Time

• Fixed Liabilities: Long-term obligations.
• Current Liabilities: Short-term obligations.
• Permanent Capital Resources: Resources that remain within the company for the long term.
• Short-Term Financial Resources: Resources that remain within the company for the short term.

Classification

Assets

Current Assets

Cash

Money in the form of bank notes, coins, checks, credit card receipts, bank drafts, postal orders, etc.

Bank Deposits

Value of deposits held in financial institutions.

Inventory

Goods purchased for resale.

Accounts Receivable

Amounts owed to the business by customers for goods sold on credit.

Notes Receivable

Written promises to pay a specific sum of money, such as bills of exchange and promissory notes.

Other Receivables

Amounts owed to the business by individuals or entities other than customers.

Non-Current Assets

Land

Property owned by the business.

Buildings

Structures owned by the business.

Furniture and Equipment

Desks, chairs, tables, bookcases, scales, display cases, etc.

Computer Equipment

Central processing units, monitors, keyboards,...

The Prisoner's Dilemma

The Prisoner's Dilemma is a concept in game theory based on two assumptions:

1. Each player has an incentive to choose an alternative that benefits them but hurts the other player.
2. When both players act in that way, they end up in a worse situation than if they had chosen different alternatives.

Dominant Strategy

A dominant strategy is the best decision an individual can make, regardless of the decision taken by the other player. Not all games have a dominant strategy; it depends on the game's payoff structure. In the Prisoner's Dilemma, a dominant strategy exists (to confess). As long as the two prisoners cannot agree *not* to confess (something that cannot be maintained while incommunicado), they will both act against each...

Financial Assets

A financial asset is any asset that is: cash, an equity instrument of another enterprise, or involves a contractual right to receive cash or another financial asset, or to exchange financial assets or liabilities with another party under potentially favorable conditions. They are also classified as a financial asset, any contract that may be or will be settled with equity instruments themselves, provided that:

• a) If it is derived, or may require the entity to accept a variable number of its own equity instruments.
• b) If it is derived, it cannot be, or will not be, settled by a fixed price for a fixed number of its own equity instruments.

Financial assets include obligations, bonds, notes, and other debt securities acquired; stocks,...