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

The Gold Standard: A Historical Overview

The gold standard is a monetary system in which money is freely convertible into a fixed amount of gold. It evolved from the variety of commodity money there was before the development of paper money and fractional reserves banking. It started to function in 1871. As we know, this century was characterized by globalization and an increase in international trade. Therefore, all trade imbalances between nations were settled with gold. The main priorities of the government were to maintain gold reserves and exchange rate stability.

The Trilemma of the Open Economy

If you had the Gold Standard you had fixed exchange rates and unrestricted capital mobility but Not Monetary Autonomy. As a result, countries always... Continue reading "The Gold Standard: History, Impact, and Challenges" »

T1: Economic Choice and Behavioral Models

The fundamental economic problem involves limited resources and unlimited wants.

Principles of Economic Choice

• Marginal Analysis
• Cost-Benefit Analysis

Models of Behavior

Behavioral models often contrast:

• Monetary Compensation (Only money matters)
• Intrinsic Motivation (Happy is productive)

Risky Outcomes and Utility

Individuals react differently to risk, defined by their utility function:

• Risk Averse
• Risk Neutral
• Risk Lover

T2: Market Economies Versus Central Planning

The Market Economy Framework

Key components of a market economy include:

• Property Rights: Alienable rights and use rights.
• Organization: Composition, social rules, and gains from trade.
• Generalization: Demand curve, supply curve, and the market-clearing price.

Reconstructing the Gold Standard

After World War I, there was a widespread willingness to return to stable currencies through a gold standard or an equivalent system. This led to the Gold-Exchange Standard, where currencies were backed not only by gold but also by "hard currencies" (like the British Pound Sterling and the US Dollar) that were convertible into gold. A central question was at which parity to return. Significant differences in wartime inflation had left various currencies at different distances from their pre-war parity with gold.

The Challenge of Setting Parity

If a country wanted to return to its pre-war parity but its currency was inflated, it had to revalue its currency upwards. This required deflating the economy to attract... Continue reading "The Interwar Gold Standard: Policy Choices and Consequences" »

Policy as Institutional Output

• Governments bestow legitimacy, universality, and mandatory policies.
• The characteristics of government organizations and institutions influence the types of public policies embraced by officials.
• Certain issues, problems, and interest groups have more weight than others in government.

Process Model

• It conceives the political process as a series of political activities: identification of the problem, establishment of the agenda, formulation, legitimation, implementation, and evaluation.

Group Theory Model

• Policies are the efforts of groups to influence and modify public policies.

Theory of the Elite

• Public policy reflects the interests and values of the elite rather than the demands of the people.
• Change in public policy

Arguments For and Against Protectionism

Infant Industries

For: Industries in their early stages of development are unlikely to experience large economies of scale, placing them at a disadvantage when competing with established foreign firms. However, some industries have the potential to become world-class. Thus, governments may need to support the growth of these young industries.

Against: Protectionist measures shield inefficient firms from foreign competition, reducing the motivation to improve productive efficiency. Moreover, it is difficult for governments to identify which industries have true potential, and protectionist measures often carry high opportunity costs and tend to become permanent.

Anti-Dumping Measures

For:

• Protects the stability

Executive Summary

Corporate Social Responsibility (CSR) is a way of managing companies based on the management of the impacts that their activity generates on their customers, employees, shareholders, local communities, the environment, and society in general.

Introduction to CSR Practices

This report will examine different ways a company practices CSR, focusing on three key pillars:

• Employment & Community (People)
• Environmental Protection (Planet)
• Ethical Business Growth (Profit)

Employment and Community Engagement

Companies must pay attention to factors affecting the well-being of everyone, not just their employees, in areas where the company has its plants and offices.

Collaboration with local sports, cultural, or economic activities can improve... Continue reading "Corporate Social Responsibility: Impact & Strategy" »

Human Resource Management in Small Businesses

The Small Business Administration (SBA) defines a small business as one that is independently owned and operated.

Country Culture in Global Business

A country's culture is the set of values, symbols, beliefs, languages, and norms that guide human behavior within that country.

The Strategic Planning Process

Corporate Mission

A company's mission is its continuing purpose or reason for being. The corporate mission is the sum total of the organization’s ongoing purpose.

Objective Setting

Objectives are the desired end results of any activity. Objectives should have four basic characteristics:

1. They should be expressed in writing.
2. They should be measurable.
3. They should be specific as to time.
4. They should be challenging

CHAPTER 9: MERGERS AND ACQUISITIONS

1. The Basic Forms of Acquisitions

• Merger or Consolidation
• Acquisition of Stock
• Acquisition of Assets

Merger vs. Consolidation

Merger

• One firm is acquired by another
• Acquiring firm retains name and acquired firm ceases to exist
• Advantage – legally simple
• Disadvantage – must be approved by stockholders of both firms

Consolidation

• Entirely new firm is created from combination of existing firms

Acquisition

A firm can be acquired by another firm or individual(s) purchasing voting shares of the firm’s stock

• Tender offer – public offer to buy shares
• Stock acquisition
  • No stockholder vote required
  • Can deal directly with stockholders, even if management is unfriendly
  • May be delayed if some target shareholders hold out for more

Finance Concepts: Ratios, Markets, and Risk

1. 1. Types of work in finance subareas

   Be able to recognize the types of work in subareas of finance such as investments, financial management, international finance, etc.

2. 2. Basic ratio categories to know

   Know the basics of the different ratio categories (e.g., liquidity, asset management, profitability).

   Liquidity — a ratio that measures the relationship between a firm's current assets and current liabilities.

3. 3. Average collection period ratio

   Know what the average collection period ratio measures.

   The average number of days between the date a credit sale is made and the date the purchaser pays for that sale.

4. 4. Time value of money concept

   Know that money in the future is worth less than money today.

   (Time