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

Money Demand and Its Determinants

Money demand depends on the price level and the volume of transactions, which is defined as the number of goods and services transacted using money in one year.

Money demand can be represented as: P × T, where T = volume of transactions and P = average price level.

When the money market is in equilibrium, Md = Ms (Money Demand = Money Supply).

Formula: P = (V / T) × M

Assumptions:

1. This theory applies to short-run changes.
2. There is full employment in the economy.
3. The velocity of money and the volume of transactions remain constant.
4. The amount of barter trade remains constant.
5. M, V, and T change independently.

Changes in Velocity of Money (VOM):

• VOM increases: prices decrease = Deflation
• VOM decreases: prices increase =

Key Financial Ratios and Formulas

Understanding key financial ratios is crucial for assessing a company's performance and financial health. Below are common ratios and their formulas:

Accounts Receivable Turnover Ratio

Accounts Receivable Turnover = Sales & Service Revenue / Accounts Receivable Balance

Accounts Receivable Turnover in Days

Accounts Receivable Turnover in Days = 365 / Accounts Receivable Turnover

Inventory Turnover Ratio

Inventory Turnover = Cost of Goods Sold (CGS) / Inventory Balance

Inventory Turnover in Days

Inventory Turnover in Days = 365 / Inventory Turnover

Current Ratio

Current Ratio = Current Assets (CA) / Current Liabilities (CL)

Quick Ratio (Acid-Test Ratio)

Quick Ratio = (Current Assets - Inventory - Prepaid Expenses) / Current

Convergence Criteria (Maastricht Criteria)

Price Stability (Inflation)

Price stability — Inflation: The inflation rate of a given Member State must not exceed by more than 1.5 percentage points the average inflation rate of the three best-performing Member States in terms of price stability during the year preceding the examination of the situation in that Member State.

Government Finances: Deficit and Debt

Public deficit: When drawing up its annual recommendation to the Council of Finance Ministers, the Commission examines compliance with budgetary discipline based on two criteria.

• Annual government deficit: The ratio of annual deficit to GDP must not exceed 3% at the end of the preceding fiscal year. If this is not the case, the ratio must have

Stakeholders in Business

Owners and Stockholders

• Have a monetary or nonmonetary interest in an organization or entity.
• Look for high profit, dividend, and long-term growth, as well as a positive corporate image.
• Example: Mr. XYZ is an owner of company ABC and expects a financial return.

Suppliers

• Companies build a number of small, loyal relationships with suppliers and associates.
• This enables each business to develop shared goals, visions, and strategies.
• Trade buyers and sellers can effectively collaborate to deliver the best value to end customers, which is beneficial to each side.
• Example: Carrefour Market is a distributor and supplier for Nestle products. Lulu aims for satisfactory transactions and revenue from purchases.

Employees

• Expect fair working

1. Market Segmentation: The Foundation of Promotion

The first step in the process of product promotion is Segmentation. Market Segmentation is the division of a broad market into smaller segments comprising individuals who share similar characteristics, needs, and interests, and show inclination towards similar products and brands.

This process involves creating small groups (segments) within a large market to bring together consumers who have similar requirements and interests. The individuals in a particular segment respond to similar market fluctuations and often require identical products. In simpler words, market segmentation can also be called Grouping.

Examples of market segments include:

• Kids form one segment.
• Males can be part of a similar

Social Needs:

• Economic aid to elderly people who aren't able to work.
• Enough food and clothes after losing a husband/wife who was the breadwinner.
• Treatment of illnesses.
• Financial support due to maternity or paternity.
• Financial support due to lack of employment.
• Home.
• Education.

Millennium Development Goals (MDGs):

1. Eradicate extreme poverty and hunger.
2. Achieve universal primary education.
3. Promote gender equality and empower women.
4. Reduce child mortality.
5. Improve maternal health.
6. Combat HIV/AIDS, malaria, and other diseases.
7. Ensure environmental sustainability.
8. Global partnership for development.

Function Utilization and OSHA Standards

Function utilization is calculated as the system rate divided by the function's potential production. OSHA standards cover various aspects of forestry operations, including hand and portable power tools, machines, vehicles, tree harvesting, and training. It's important to note that men are more likely to be involved in fatal accidents than women in this industry.

OSHA Incident and Lost Workday Rates

The OSHA incident rate is calculated as the number of injuries multiplied by 200,000, then divided by the total hours worked. Similarly, the lost workday rate is calculated as the number of lost workdays multiplied by 200,000, then divided by the total hours worked.

Workers' Compensation and Safety Records

Maintaining... Continue reading "Forestry Operations and Timber Sale Management" »

Why Activities Are Directed by Markets or Firms

The fundamental question is: Why are some activities directed by market forces and others by firms?

The answer lies in the high cost of using markets. It is often cheaper to direct tasks internally within a firm than to negotiate and enforce separate contracts for every transaction. Such “transaction costs” are typically low in markets for standardized goods.

The Role of Transaction Costs and Contracts

Economic theory suggests that private bargaining could resolve social problems, such as pollution, as long as property rights are well defined and transaction costs are low (though they rarely are).

Characteristics of Spot Markets

Spot markets cover most transactions. Once money is exchanged for goods,... Continue reading "Essential Business Frameworks: Firm Structure, Customer Loyalty, and Strategic HR" »

Monetary Policy and Transmission Mechanism

Impact on the Economy and Price Level

The transmission mechanism of monetary policy describes how decisions impact the economy and price level. This process involves a chain of cause-and-effect relationships linking policy decisions to price levels.

Key Impacts:

• Lower Interest Rates: Encourage consumption by reducing savings returns and stimulate investment by lowering borrowing costs.
• Asset Prices: Influence consumption and investment through wealth effects and changes in collateral value.

Goal of Monetary Policy: Price Stability

The primary objective of monetary policy in the euro area is to maintain price stability, defined as a year-on-year increase in the Harmonized Index of Consumer Prices (HICP) below... Continue reading "Monetary Policy and Transmission Mechanism in the Euro Area" »

After-Sales Service

It is the set of mechanisms and tasks that the organization uses after the sale is done in order to obtain total customer satisfaction. It is an important source of information and should be considered as an investment. It is easier to sell new products to a satisfied customer than finding new customers.

Advantages:

• It provides greater customer satisfaction.
• It improves the image of the company.
• It improves direct knowledge of the market.
• It involves potential customer loyalty.
• It implies a likely increase in sales.

Disadvantages:

• It involves certain costs.
• It needs to be controlled.
• It can cause a possible increase in the number of claims.
• It implies a greater demand for service and quality.
• It causes more staffing needs.

Types of After-