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

Impact of Rising Interest Rates on Demand

Rising interest rates often generate negative economic expectations. A rate hike affects consumer investment and encourages saving, leading to a significant decrease in consumption.

Furthermore, companies tend to postpone new investment projects.

• The variability of investment (Inv) is higher because it is volatile.
• However, the total impact on aggregate demand is very similar, as consumption (C) carries a much greater weight in demand than investment.

Exchange Rates and International Investment

The relationship between exchange rates (tc) and investment flows is crucial:

If the exchange rate is low, the dollar ($) depreciates, meaning the Euro (€) gains purchasing power. Consequently, investors prefer to...

Market Share and Socioeconomic Status

Market share: Market share, sales = + real market.

Socioeconomic Status (SES) Breakdown

High SES:

• A: High rents in the community, given all the luxuries and amenities.
• B: High income; possess almost all the luxuries and modern amenities.
• C-1: Perimeter income sufficient to cover needs without problems.

Medium SES:

• C-2: Cover basic needs and only some additional needs.
• C-3: Cover basic needs and few amenities.

Low SES:

• D: Fixed and stable but reduced income; live very narrowly.
• E: Do not have steady income and experience extreme human poverty.

Company Size Classification

Company size is classified based on Unidades de Fomento (UF):

• Micro: Less than UF 2,400.
• Small: UF 2,400 to UF 25,000.
• Medium: UF 25,001 to UF 50,000.
• Large:

Business Classification Criteria

Companies are categorized based on several key factors to better understand their structure and operations:

1. Classification by Purpose

• Profit-seeking: Aimed at generating profit.
• Non-profit: Aimed at a social purpose or managing a surplus (excedente).

2. Classification by Capital Source

• Private: Owned by private individuals or entities (e.g., Jumbo, Falabella, Ripley).
• Public: Owned by the state (e.g., public banks).
• Mixed: Combined ownership (e.g., certain schools or foundations).

3. Classification by Number of Workers

• Micro-enterprise: Fewer than 5 workers.
• Small business: 6 to 50 workers.
• Medium enterprises: 51 to 200 workers.
• Large company: More than 200 workers.

4. Classification by Sales Volume

• Micro-enterprise: Less

Core Economic Doctrines

Liberalism

Liberalism states that the source of wealth comes from the regulation of the national trade balance. (Note: This definition is often associated with Mercantilism.)

Mercantilism (Bullionism)

The source of wealth is caused by the entry of metals.

The Three Laws of Liberalism

1. Law of Initiative: Identify a need in society and, for profit, create a product that meets that need.
2. Law of Competition: This is an initiative in which others begin to compete by making the same product as the original initiator. Competition generates money. The positive outcome is that products are leveled; the negative outcome is excess production and low quality.
3. Market Law: Comprising the law of supply and demand.

Comparative Advantage

Comparative...

Post-EMU Money Market Structure

Following the creation of the EMU:

• Governance: The European Central Bank (ECB) became the governing body for money markets.
• National Status: National financial markets continue to maintain their status within the Eurozone.

Money Market Assets: Cash markets focused on the regulation and management of liquidity.

Money Market Intervention

The first goal of the EMU, represented by the Eurosystem and the ECB, utilizes the European wholesale payments system, TARGET. The interbank market allows lenders across the euro area to conduct liquidity management operations, including those from non-EMU participating institutions.

Common Characteristics

• Core reference markets independent of each other.
• Revolve exclusively around the

ESCB Standing Facilities

Entities that operate with the European System of Central Banks (ESCB) have access to two standing facilities:

Marginal Lending Facility

Counterparties can use the marginal lending facility to obtain overnight liquidity against collateral. Under normal circumstances, there are no credit limits or other restrictions on access to this facility for entities, apart from the requirement to provide adequate collateral.

Deposit Facility

Counterparties can use the deposit facility to make overnight deposits. Under normal circumstances, there are no limits or other restrictions on these deposits. The interest rate on the deposit facility normally provides a floor for the overnight market interest rate.

Interest Rate Corridor

Interest

Supervisory Tasks of the Bank of Spain

The supervisory tasks undertaken by the Bank of Spain are as follows:

• Monitoring and Inspection: The Bank monitors and inspects credit institutions, including all offices or facilities within or outside national territory. Responsibilities include:
  • Granting administrative licenses and maintaining official records.
  • Conducting regular and extraordinary inspections.
  • Preparing case files and imposing sanctions for minor and serious breaches.
  • Intervening in the event of an acute crisis within a credit institution.
• International Cooperation: Cooperating with foreign authorities by sharing information regarding management, facilities, and property to facilitate solvency monitoring.
• Mortgage Market Oversight: Monitoring

The Eurosystem and ESCB Definitions

The term Eurosystem refers to the group comprising the European Central Bank (ECB) and the National Central Banks (NCBs) of the eleven countries that have adopted the single currency. When all member states of the European Union participating in the euro area are included, the Eurosystem will be synonymous with the European System of Central Banks (ESCB).

Tasks of the ESCB

Primary Objective

The primary objective assigned to the ESCB by the Treaty is to maintain price stability. Without prejudice to this objective, the ESCB shall support the general economic policies in the Community.

Basic Functions

• Define and implement the single monetary policy.
• Conduct foreign exchange operations consistent with the exchange

Definition of Sale

• a) Any action for consideration which involves the transmission of taxable goods.
• b) The transfer of goods made by brokers and others that are performed for third parties.
• c) The removal of goods carried out by the shareholder, owner, or operator of the same company or enterprise.

Definition of Goods

It is understood as such to be the body that can be moved from one place to another, including the rights relating thereto, warehouses, aircraft, distinctive signs, inventions, rights, and key-like items, as well as documents and titles which involve the transfer of any of such property.

Tax Subjects

C ontribuyentes: One who engages in taxable activity, i.e., one who sells goods, provides services, or imports goods.

Incidental Nature

When,...

IAS 7: Reporting Cash Flows

Net Cash Flows

Cash flows from operating, investing, and financing activities may be presented on a net basis for the following:

• Receipts and payments on behalf of clients: Provided the cash flows reflect the customer's activity rather than the company's.
• High-turnover items: Cash receipts and payments for items with high turnover and short maturities.

Financial institutions may report the following on a net basis:

• Receipts and payments for the acceptance and repayment of deposits with a fixed maturity date.
• Allocation and collection of deposits in other financial institutions.
• Advances and loans made to customers, including the reimbursement of these items.

Interest and Dividends

Cash flows for interest received, interest...