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

Three Types of Foreign Direct Investment (FDI)

Foreign Direct Investment can be categorized into three main types:

• Market Seeking: FDI is driven by the desire to be closer to customers. Proximity reduces transportation costs and potentially tariffs. Firms weigh the benefits of FDI against exporting, where production is concentrated in one location.
• Efficiency Seeking: Upstream and downstream products are manufactured in different locations, leveraging factor intensity and factor prices. This strategy aims to optimize production costs.
• Resource Seeking: FDI provides access to scarce resources. Output from resource-seeking FDI is seldom sold in the host country market.

Consequences of FDI for Host Countries

FDI can have several effects on host countries,...

Factors Influencing the Effectiveness of Fiscal Policy

1) The Flexibility of Aggregate Supply:

Aggregate supply must be flexible enough to absorb demand-pull. Otherwise, expansionary fiscal measures may increase production, but at the expense of generating inflation. In rigid situations, fiscal policy may be ineffective in achieving internal balance.

2) The Nature and Flexibility of Intermediate Objectives:

Net external demand is a standalone component that should not be regarded as an intermediate target of budget policy stabilization. By contrast, the behavior of exports and imports is a determinant of economic growth.

[And domestic demand... is it better to act on consumption or investment?]

Private Fixed Capital Formation (FBC) is not raised...

The Corporation: Concept and Characteristics

A corporation is a company comprising one or more partners whose capital, with a minimum of €60,101.21, is divided into freely transferable titles called shares. The partners are not personally liable for the company's debts (limited partnership).

Features:

• It is a capitalist society; the identity of the partners is secondary to their capital contribution.
• The share capital must be fully subscribed at the time of incorporation. This means there must be a commitment from partners to cover the entire capital, with 25% paid upfront.

Social Capital = Nominal Number of Shares

Labor Society: Concept and Characteristics

A labor society is a type of corporation or limited liability company in which the majority...

Item 14: International Trade, Balance of Payments, and Exchange Rates

1. International Trade

International trade is the exchange of goods and services between countries.

2. Barriers to International Trade

Some countries place restrictions on international trade through protectionist measures that restrict or distort trade. This may be done to protect strategic sectors, maintain employment, or compensate for imbalances when imports exceed exports.

• Tariff: A tax on imports of goods from another country.
• Quotas: Limitations on the number of goods that can be imported.
• Measures of equivalent effect: Barriers to imports through complex bureaucratic procedures, eventually reducing imports.
• Dumping: A company sells its products at a loss to eliminate competition.

Understanding Economic Activities

Economic activity refers to any process by which we obtain the products and services that meet our needs. Economic activities encompass three stages: production, distribution, and consumption.

Benefits, Assets, and Services

A benefit is the result of the difference between revenues and expenditures from economic activity. If expenses exceed revenue, losses will occur.

An asset is any object that fulfills a need and possesses value.

A service is a benefit intended to satisfy a personal or social need, but its production does not result in a tangible object.

Investment and Companies

Investment is the allocation of money intended to start a business or maintain and improve an existing one, with the goal of generating...

Request for Offers and Budget

The phase of bids and budget requests within the procurement process is a practice by firms in the following cases:

• When you first start the activity. The company is new and needs to find all types of providers. The first step is to study the market for suppliers of goods and services.
• When it is time to buy a new product. The first time we purchase an item, as in the previous case, we must first find suppliers that manufacture or sell the product.
• When we're not happy with the current vendors. The company wants to introduce some changes because it is not in accordance with suppliers or the business relationship with them.
• To expand the portfolio of suppliers. When the company works with a limited number of suppliers,

SWOT Analysis Example: Direct Distribution

This example is based on an imaginary business-to-business manufacturing company that historically relied on distributors. The company is considering creating its own distribution company to directly reach end customers in sectors not currently covered by its distributors. This SWOT analysis examines that opportunity.

Subject of Analysis

Creation of a direct distribution company to access underserved end-customer segments.

Strengths

• Control and direction over final customer sales
• High product quality and reliability
• Superior product performance compared to competitors
• Excellent product lifetime and durability
• Idle manufacturing capacity
• Some employees have experience with end customers
• Existing customer list

Financial Management Essentials

Key Concepts in Finance

Dividends

Dividends represent the distribution of corporate profits to shareholders based on the number of shares held.

Financial Management Tasks

A primary task of financial management is determining the sources of necessary resources.

Fundraising Sources and Their Uses

The main sources of external funding are equity contributions from owners and debt financing from creditors. Internal sources include cash sales and collections.

Financial Covenants

Financial covenants are indicators used by banks to ensure that borrowers operate prudently to repay their debt.

Financial Management Techniques

Financial Analysis

Financial analysis involves calculating indicators, ratios, and proportions between different...

Profound Societal Shifts in the Late 19th and Early 20th Centuries

• What significant changes occurred in Europe and the USA during the late 19th and early 20th centuries?
  A: Profound changes occurred in social, political, and daily life, impacting the collective behavior surrounding production relations, work, and leisure. Significant population growth occurred as peasants migrated to cities, causing problems related to housing, education, and employment.
• What issues arose from the migration to cities?
  A: Problems related to housing, education, and labor.
• What role did the middle class play in the late 19th and early 20th centuries?
  A: The emergence of a mass market, driven by the middle class, caused significant changes in society (political,

Mandatory Accounting and Tax Books

Required Books for Micro and Small Companies (General Law)

The following books are required for micro and small companies under the General Law:

1. Journal;
2. General Ledger (or "Reason");
3. Inventory Register;
4. Merchandise Entry Register;
5. Services Rendered Register;
6. Services Taken Register;
7. Other registers, for specific cases.

Simplified Chart of Accounts Structure

Consider the Plan of Accounts currently in force:

1. The Chart of Accounts, even simplified, should be prepared taking into account the specific nature, size, and type of activities and operations carried out by micro and small businesses, and in accordance with their information control needs related to fiscal and managerial aspects.
2. The Simplified Chart of Accounts