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

International Trade

No country can provide everything its inhabitants want or need. To address these needs, countries engage in international trade.

Imports and Exports

Imports: A country buys goods and services that it either lacks or can obtain more cheaply from elsewhere.

Exports: To pay for imports, a country sells goods and services it has a surplus of or can produce more cheaply than other countries.

Trade Surplus and Deficit

Trade Surplus: A country earns more money from exports than it spends on imports.

Trade Deficit: A country spends more on imports than it earns from exports.

Interdependence

Interdependent Countries: Nations that engage in trade with each other.

LEDCs and MEDCs

LEDCs: Typically export cheap foodstuffs (e.g., tea, coffee) and... Continue reading "International Trade and Aid: A Global Perspective" »

Understanding Business Entities and Company Structures

Choosing the right legal form for your business is a crucial decision. This document outlines various types of business entities and company structures, detailing their characteristics, liabilities, and capital requirements.

Sole Proprietorship (Empresario Individual)

A Sole Proprietorship is a business entity where an individual operates in their own name and through their commercial, industrial, or professional enterprise.

Key Characteristics:

• Legal Age: The individual must be of legal age.
• Total Control: The proprietor has complete control over the enterprise.
• Unlimited Liability: The proprietor's personal assets are not separate from the business assets, meaning their liability is unlimited.

Net Working Capital and Stable Funding

Regarding Net Working Capital (NWC), the stable portion requires permanent funding and should, therefore, be sought from sources of a similar long-term nature. Conversely, if business activity presents seasonal or temporary instabilities, the variable portion of NWC should be financed by short-term sources.

Covering Business Needs with Capital

Needs must be covered with permanent equity or long-term debt, and temporary needs with short-term bank instruments such as credit policies and discount financing. True.

This statement highlights the principle of matching the maturity of assets with the maturity of liabilities. Permanent needs, such as fixed assets and the stable portion of working capital, should be... Continue reading "Mastering Business Finance: Capital, Debt, and Funding Strategies" »

Understanding Economic Measurement

The Expenditure Approach to GDP

The expenditure approach is a fundamental method for calculating a nation's Gross Domestic Product (GDP). It sums up all spending on final goods and services within an economy. The components include:

• Private Consumption Expenditure (C): Spending by all consumers on goods and services.
• Investment (I): Expenditure incurred by companies to acquire capital assets, such as machinery, equipment, and buildings.
• Public Expenditure (G): Spending by the public sector when it acquires goods and services.
• Exports (X): Spending that businesses and consumers abroad perform on domestically produced goods and services.
• Imports (M): Spending by domestic consumers and businesses on foreign-produced

State Intervention and the Financial System in the 19th Century

The Role of the State

There are two primary perspectives on the role of the state in the economy:

• The State Does Not Intervene: This approach was predominantly observed in Britain and, to a lesser extent, the United States. It was rooted in the classical schools of thought, whose proponents advocated for liberalism. They believed that state intervention should be confined to activities that were not attractive to the private sector but were beneficial to society, adhering to the doctrine of "Principles of Liberalism."
• The State Intervenes: State intervention can be motivated by a country's economic backwardness, the late unification of certain nations in the 19th century (such as Italy

• 1. Upon the expiration of discounted trade bills, the bank announced that all had been processed except one with a face value of €1,200. The bank charged this amount to the company's current account, along with €60 for return postage.

• 2. Goods are purchased on credit for €10,200. The invoice includes a discount of €200. These goods are contained in returnable containers valued at €400.

Corporate Tax and IAE: Key Aspects for Businesses in Spain

IAE: Tax on Economic Activities

The Impuesto sobre Actividades Económicas (IAE), or Tax on Economic Activities, is a local tax. The taxable event is constituted by the course of business, professional, or artistic activities. Business activities refer to livestock, mining, industrial, commercial, and service activities.

Taxpayers: The taxpayer is the individual or legal entity that carries out any of the activities included in the taxable event. Since 2003, taxpayers with a turnover below 1,000,000 per year are exempt.

Tax Rate: The tax rate is obtained from the application of the IAE rates. These rates group activities into sections, divisions, and groups, and the groups are classified... Continue reading "Understanding Corporate Tax and IAE in Spain" »

Current Economic Trends

Today, economics presents certain trends:

• More Realistic: It's based not on abstract positions, but on the behavior of different social groups.
• More Humane: It analyzes the free activity of individuals and social groups that influence the economic system.
• More Social: The community aims at full employment, welfare economics, and social justice.
• More Normative: It not only serves as an instrument to interpret reality but also as a guide to act on it.

The Origin of Economic Laws

Economic laws arise from:

• Hypotheses: Data sets that provide a simplified picture of reality.
• Statistics: The overall result of a myriad of economic facts.
• Trends: Explain casual relationships between economic variables over time.

Objectives

To take into account... Continue reading "Economic Trends, Principles, and Factors" »

Key Business & Economic Terms

COMPANY: An economic unit that is used to produce goods and services.

ECONOMIC ACTIVITY: This is part of human activity that has to do with allocating scarce assets to fulfill unlimited wants.

CORPORATE SOCIAL RESPONSIBILITY: It is a responsibility firms voluntarily assume that goes beyond what the law requires.

MULTINATIONAL: A large company headquartered in one country with branches in other countries.

GLOBALIZATION: The extension of economic, cultural, and social processes across the world.

DECOLONIZATION: Consists of a transfer of economic activity from one company to another country for advantages that benefit the company.

An economic good: It is scarce, limited, and requires payment.

INDUSTRIAL PROPERTY: A property... Continue reading "Key Business & Economic Terms: A Concise Reference" »

The Public Sector: An Overview

The public sector comprises institutions whose activities are guided by political decisions. It is divided into public administration and public enterprises.

Economic Functions of the Public Sector

The public sector serves several key economic functions:

• Acting as an economic agent.
• Regulating economic relations.
• Providing public goods.
• Implementing economic policy.

Regulation

Regulation involves establishing standards and procedures that economic agents must follow to address economic problems.

Reasons for Regulation

• To compensate for market failures.
• To provide collateral security.
• To ensure the common good.
• To guarantee efficiency.
• To ensure fair competition.

Deregulation

Deregulation involves eliminating laws and regulations... Continue reading "Understanding the Public Sector: Economic Functions and Policy" »