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

A financial system is the network of institutions, markets, instruments, and services that facilitates the transfer and allocation of funds between savers and borrowers, fostering economic growth. It plays a critical role by mobilizing savings, allocating resources efficiently, managing risks, and providing liquidity to support productive investment.

Meaning

The financial system connects those with surplus funds to those in need of funds, ensuring smooth monetary exchanges and supporting broader economic activity.

Importance

It mobilizes individual and institutional savings, channels them into investments, enables risk management through insurance and derivatives, provides a payment mechanism, and supports economic stability and development.

Functions

• Mobilization

The external environment significantly influences a company's operations and strategic direction. In Bosnia and Herzegovina (BiH), businesses like the retail giant Bingo are particularly susceptible to shifts in the political, economic, and social landscape. These external factors are crucial considerations in strategic planning, often analyzed through a PEST framework.

Political Factors and Business Impact in BiH

Changes in government and political leadership in BiH have a profound impact on businesses, especially those in the private sector. Given the country's complex political situation, even minor shifts in leadership can ripple through the business community. Governments establish the rules and frameworks within which businesses operate... Continue reading "Bosnian Business Environment: Bingo's Strategic Adaptation" »

Entrepreneurship Fundamentals

1. Define Entrepreneurship and Explain Its Key Characteristics.

Answer:
Entrepreneurship is the process of identifying, developing, and bringing a vision to life by taking risks to create and manage a business. It involves organizing resources, innovating, and making strategic decisions to establish and grow a venture.

Key Characteristics of Entrepreneurship:

1. Innovation – Developing new products, services, or processes.
2. Risk-Taking – Willingness to bear financial, operational, and market risks.
3. Leadership and Vision – Ability to guide a team and foresee future trends.
4. Decision-Making – Making crucial choices regarding investments, operations, and strategy.
5. Resource Management – Efficiently utilizing land, labor,

Functions of a Financial Market

• Connecting Buyers and Sellers: Facilitates the meeting of buyers and sellers of financial assets without needing a physical location.
• Issuance and Exchange of Assets: Supports the creation (primary markets) and subsequent trading (secondary markets) of financial assets.
• Price Determination: Establishes the prices of financial assets through various pricing mechanisms, such as supply and demand or predetermined conditions.
• Public Information: Disseminates information about asset prices, trading mechanisms, and pricing systems.
• Providing Liquidity: Ensures that assets can be easily converted into cash without significant loss of value.
• Reducing Transaction Costs: Lowers the costs related to finding counterparts and determining

Sole Proprietorship

A sole proprietorship is a business structure where an individual owns and operates the business. The owner contributes the capital, manages operations, and is solely responsible for the business's outcomes. They may work alone or employ others. This structure is the easiest to form and simplest to organize. The sole proprietor can borrow funds or utilize others' money for business purposes.

Advantages of Sole Proprietorship

Easy to Start

Forming a sole proprietorship is easier than partnerships or corporations. There are no legal formalities like agreements, memorandums of association, or articles of association.

Easy to Dissolve

Dissolving a sole proprietorship is simple, as the owner doesn't need permission from shareholders... Continue reading "Sole Proprietorship: Advantages, Disadvantages, and Characteristics" »

The Importance of Savings

Saving is important because it provides a financial backup for emergencies, helps you reach long-term goals like buying a house or retiring, and creates greater economic stability. Additionally, it promotes financial discipline and helps you face unexpected expenses more securely.

How to Start Saving

The most important step is to establish a fixed amount to save each month, no matter how small. Open a dedicated savings account and set up automatic transfers so the money is set aside before you can spend it. Start with achievable goals and gradually increase the amount over time.

Effective Savings Tips

• Avoid unnecessary expenses: Cut back on non-essential purchases.
• Take advantage of offers and discounts: Look for sales and

The Washington Consensus: Policies and Origins

The concept and name of the Washington Consensus were first presented in 1989 by economist John Williamson, who used the term to summarize policies advised by Washington-based institutions such as the International Monetary Fund (IMF), World Bank, and U.S. Treasury Department. These policies were believed to be necessary for the recovery of countries in Latin America from the economic and financial crises of the 1980s. These key policies include:

• Downscaling of government
• Deregulation
• Trade liberalization
• Liberalization of capital flows
• Privatization

Foreign Direct Investment: Drawbacks for Developing Nations

Foreign Direct Investment (FDI) refers to a company's physical investment into building a plant... Continue reading "Washington Consensus & FDI: Impact on Developing Economies" »

Switzerland's poverty and inequality policies strive for an equitable society, focusing on tailored aid like social assistance and housing support. Despite a low official poverty rate, certain groups, like single-parent households and immigrants, face vulnerability due to high living costs and limited job prospects. To address these challenges, a multifaceted approach is crucial, encompassing better education access, economic growth, and reinforced social safety nets. Additionally, policymakers must confront systemic barriers and invest in affordable housing, healthcare, and education to foster inclusive development.

Social Safety Nets and Support Programs

Switzerland helps people who need support through different programs and guarantees. These... Continue reading "Poverty and Inequality Policies in Switzerland" »

Financial Goals: Profit vs. Wealth Maximization

The basic dictum of financial planning is “the earlier, the better.” According to this principle, Project ‘B’ is often preferable in investment scenarios.

Profit Maximization: Limitations

The profit maximization goal often overlooks critical factors, including the time value of money and the quality of benefits. If predicted earnings are more assured, the quality is high because the range of fluctuation is small. Profit maximization ignores the true value of benefits and does not consider the risks associated with profits.

The following table demonstrates the concept of Quality of Benefits based on Profit per Annum:

Ad Valorem Tax Calculation

The annual ad valorem tax is calculated by multiplying the assessed value of a property by its tax rate: assessed value x tax rate = annual tax.

To determine the daily tax, divide the annual tax by the number of days in the year: annual tax / days in year = daily tax.

Finally, the ad valorem tax owed is calculated by multiplying the daily tax by the number of days the property was owned: daily tax x # of days property owned = ad valorem tax.

Annual Property Tax

The annual property tax is determined by: assessed value x tax rate.

Financial Calculations

• Part/Percentage: part / percentage = total
• Total x Percentage: total x percentage = part
• Percentage: part / total = percentage

Measurements

• 1 yard = 3 feet
• 1 mile = 5,280 feet
• 1