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

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.

Understanding Self-Financing in Business

Self-financing refers to funds a company generates internally, without relying on external financial institutions or new contributions from its members. This form of financing generates resources within the firm, encompassing both retained earnings and reserves, as well as depreciation and provisions for risks.

Enrichment Self-Financing for Growth

Enrichment Self-financing (for company growth) refers to the portion of profits that partners forgo sharing. This portion then becomes part of the company's own funds to supplement capital, often termed 'reserves'. The fewer dividends distributed, the more internal resources are retained, increasing the company's self-financing capacity. However, dividends can... Continue reading "Company Self-Financing: Internal Capital Strategies" »

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" »

The Labor Market: Understanding Employment Dynamics

The labor market is the arena where employers (buyers) and job seekers (sellers) converge to exchange work and skills. It's a dynamic environment shaped by various factors.

Population Classification for Labor Purposes

• Active Population: Individuals who are either employed or actively seeking employment (unemployed).
• Inactive Population: Individuals who are neither employed nor actively seeking employment (e.g., students, retirees, homemakers).

Participation and Unemployment Rates

Key indicators of labor market health include the participation rate (percentage of the working-age population that is active) and the unemployment rate (percentage of the active population that is unemployed).

Employment

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" »

The Buying Decision Process: Stages

These are the operating phases involved in a new buying situation. In repurchase scenarios, whether modified or direct, some of these stages are reduced or omitted.

1. Identification of the Problem

Someone within the company becomes aware of a problem or need that can be met by purchasing a good or service. This realization occurs through internal or external stimuli.

2. General Need Description

This stage involves describing the general characteristics, required quantity, and timing of the need.

3. Product Specification

The buying organization decides and specifies the optimal technical features of the product. Sometimes, a team is assigned to conduct a value analysis, carefully studying the most important components... Continue reading "Organizational Buying Decision Process Stages" »

Components of Economic Policy

Tax Policy

Tax policy is an essential tool to facilitate growth, investment, and social balance. It is a key concern for the Government.

Exchange Policy

Exchange policy is the joint action implemented by the monetary authority to establish or manage the exchange rate parity.

Interest Rate

The interest rate is the percentage applied to a sum of money (capital) and is equivalent to the amount to be paid or charged for loaning or borrowing money.

Money Supply

The money supply is the principal variable used. It is the amount of money circulating in the economy to move the commercial and financial transactions of society. It is the package of cash circulating in the economy and serves to cherish and value, deferring future... Continue reading "Understanding Economic Policy: Key Components and Mechanisms" »