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

Key Economic Terminology and Definitions

Core Concepts in Macro and Microeconomics

Macroeconomics

The study of the economy as a whole.

Microeconomics

The study of individual parts of the economy.

Macroeconomics Objectives

The aims of a government relating to key economic performance indicators such as economic growth, inflation, and unemployment.

National Income

The value of income, output, or expenditure over a period of time.

GDP (Gross Domestic Product)

An internationally recognized measure of national income.

Understanding Economic Cycles and Output

Economic Growth

The increase in national income over time.

Downturn

A period in the economic cycle where GDP grows, but more slowly.

Recession

A less severe form of depression.

Depression or Slump

The bottom of

BIC

Define global strategy:A global corporation views the world As a single marketplace and has as its primarygoal the creation of a standardized goods and services that will address The needs ofcustomers worldwide. The global strategy is almost the exact opposite of the multidomestic strategy. Whereas The multidomestic firms believes that its customersin every country are fundamentally different and must be approached from Thatperspective, a global corporation Assumes that customers are fundamentally the sameregardless of their nationalities

How does BIC’s matrix structure enable it to Target geographic markets more effectivelyBy using geographical area as one part of the Matrix, BIC is able to create a marketing mix that is both appropriate

Strategic Management: Analyses, Decisions, and Actions

Strategic management involves the analyses, decisions, and actions an organization undertakes to create and maintain competitive advantages.

Strategic Management Process

• Strategy analysis
• Strategy formulation
• Strategy implementation

Strategic Levels

• Corporate level
• Business level (Cost leadership, differentiation, specialization)
• Operational level

Mission and Vision

• Mission: Current picture of the company.
• Vision: Goal of the company in the long term.

Criteria for Selecting Meaningful Objectives

• Timely: Defined time frame.
• Realistic: Achievable goals.
• Appropriate: Consistent with the mission and vision.
• Measurable: Includes key performance indicators (KPIs).
• Specific: Clear and concise message.

Organizational

Financial Market Fundamentals

Core Concepts

• Objectives: Facilitate capital flow between lenders and borrowers.
• Key Elements:
  • Risk: Inherent uncertainty in financial transactions.
  • Governmental Intervention: Policies to ensure system health and stability.
  • Liberalization: Deregulation and changes in government rules.

Bonds Explained

• Characteristics: Nominal value, amortization schedule, associated risk, fixed interest rates.

Market Types

• By Term: Short-term or long-term.
• By Issuance: Primary (new issues) or secondary (trading existing securities).
• By Geography: Domestic or international.

Global Financial Regulation & History

Post-Recession Regulation

• International Regulation: Efforts to stabilize the global financial system after the Great Recession.
• United

1. Economic Growth Rate

The economic growth rate is the percentage increase in the Real GDP:

[(New Real GDP - Old Real GDP) / (Old Real GDP)] x 100

Example: If the Real GDP grows from 80 to 100, then the:

Economic Growth Rate = [(100 - 80) / 80] x 100 = (20 / 80) x 100 = 0.25 x 100 = 25%

2. Unemployment Rate

The components are defined as:

• Labor Force = Employed + Unemployed
• Unemployment Rate = [Unemployment / Labor Force] x 100

Example: If Employment = 95 and Unemployment = 5, then:

Labor Force = 95 + 5 = 100

Unemployment Rate = [5 / 100] x 100 = 5%

3. Industrial Capacity Utilization Rate

This rate measures:

[(Actual Production Level) / (Maximum Possible Production Level)] x 100

Example: If a factory can produce at most 1,000 units a month and it is actually... Continue reading "Key Economic Indicators and Calculation Formulas" »

What is not strictly foreign currency?

b) Bills of exchange, promissory notes, and bank notes in foreign currency.

How can a foreign currency market maker orient quotes?

a) Orient USD/EUR quotes towards selling EUR, buying them and selling them cheaper than competitors.

In the formula i F = (T F - T 0 / T 0 ) * (360 / t):

b) T 0 = cash exchange rate, T F = forward exchange rate, t = time in days.

What does Interest Rate Parity Theory establish?

c) Equality between the appreciation or depreciation of a currency's future exchange rate relative to a reference currency, and the interest rate differences between those currencies.

Currency SWAP operations:

b) Principal amounts are exchanged at the beginning and end, or only at the end of the swap.

Differences

In my particular case, I found it interesting to understand How in certain areas of the production of society, appears a phenomenon (due to The increasing returns on a scale) where the demand does not admit more than One company in the market without it being resent social welfare for the Increase in costs. Therefore a situation of natural monopoly is given.

On the scenario of our project, we see that we are an Electric company, (Company Victor SA), the structure of increasing returns to Scale allows us, to produce more, and be more productive, in addition, we will Attract more public, and the cost unit of the product will be less. Instead, in This scenario we will have to make a great initial investment, such as Infrastructure, this will be... Continue reading "Natural Monopoly and Pricing Strategies in the Spanish Electricity Market" »

Monopolistic Short Run:

Profit: If firms are making profits in the short run, new firms will be attracted to enter the market. Since there are no barriers to entry, they can do it easily. As they enter, they will take business away from existing firms, whose demand curve will start shifting to the left.

Losses: If firms are making losses, some firms in the industry will leave the market. The firms that remain will find that their demand curve starts shifting to the right as they pick up trade from the leaving firms.

Long Run: Firms will end up with normal profit. Each firm is exactly covering its costs, including opportunity costs, and so there is no incentive for firms to leave the industry. Firms outside the industry will not enter since they... Continue reading "Understanding Monopolistic and Oligopolistic Market Structures" »

Understanding Minimum Efficient Scale (MES)

The Minimum Efficient Scale (MES) represents the level of production where economies of scale are fully realized, and unit costs are at their lowest possible point. For production levels lower than q*, unit costs are not at their minimum. If production increases, businesses can still benefit from economies of scale.

MES and Economies of Scale

Gains from an integrated market, which are closely related to MES, depend on:

• The difference between production before integration (q) and MES (assuming q > q*). The larger this difference, the greater the potential gain.
• The fall in unit cost as production moves towards MES.

Optimal Firms and Product Differentiation

The optimal number of firms in an integrated market... Continue reading "Minimum Efficient Scale, Exchange Rates, and Purchasing Power Parity Explained" »

The Law of Variable Proportions

The law of variable proportions states that as the quantity of one factor is increased, keeping the other factors fixed, the marginal product of that factor will eventually decline. This means that up to the use of a certain amount of variable factor, the marginal product of the factor may increase and after a certain stage, it starts diminishing. When the variable factor becomes relatively abundant, the marginal product may become negative.

Perfect Competition

Perfect competition is a market structure where a large number of buyers and sellers are present, and all are engaged in the buying and selling of homogeneous products at a single price prevailing in the market.

In other words, perfect competition, also referred... Continue reading "Economics Basics: Markets, Revenue, and Costs" »