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

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" »

Explain the differences and concerns with performance measures

Different types of Performance Measures. 2 types of measures:

• Objective Measures: quantitative and based on counts of behaviors or outcomes. Ex: number of students in a class, multiple choice exam.
• Subjective Measures: qualitative and based on judgments from raters.

Explain the value of using multiple sources for performance appraisal ratings

Common Problems with Performance Measures (1/2) Rater Errors. Rating errors occur when:

1. Raters provide assessments that follow an undesirable pattern.
2. The rater does not properly account for factors that might influence assessments.

A common error is central tendency error, which is the pattern of placing almost everyone in the middle of the scale.... Continue reading "Performance Measures, Appraisals, and Compensation Practices" »

Fundamental Business Concepts

The primary purpose of a business: A business seeks to make a profit by selling goods or services to others.

For-Profit vs. Non-Profit Organizations

A for-profit business is an organization formed to make money, or profits, by selling goods or services.

• A non-profit organization's purpose is not to distribute its surplus funds, or profits, to owners but rather to further its goals.

Key Business Terminology

Revenue: The total amount of money that the selling of goods or services produces for a business during a defined period of time.

Goods: Tangible products (items you can touch).

Services: Intangible products (items you cannot touch).

Profit: The amount of money a business makes after paying for its salaries and all other... Continue reading "Business Fundamentals and Social Responsibility Models" »

1. Price Regulation

The objective is to avoid excessive pricing for consumers while ensuring:

• Cost recovery and investment recoupment over a period.
• Fostering forthcoming investments.

Options include:

• Cost-Plus Pricing: Calculating Average Cost (AC) and granting a markup. Caution: May dilute incentives for efficiency gains and cost cutting.
• Price Capping: Setting an absolute pricing level as a threshold. Caution: May dilute incentives for furthering investments if the time frame is insufficient.

2. Non-Discriminatory Access

Aimed at enabling non-network carriers access to the network on fair, transparent, and non-discriminatory terms.

3. Corporate Unbundling

Guarantees the healthy functioning of competitive markets by curbing the competitive advantage... Continue reading "Market Regulation Tools and Public Service Obligations" »