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

National Healthcare Privatization Debate

In Spain, healthcare service is public. In my opinion, this service should be public worldwide so that the sick or the poor will not face difficulties in receiving treatment. Public healthcare offers significant advantages:

• It guarantees healthcare for all citizens, including those with limited financial resources.
• Pharmaceutical services are free for pensioners and their beneficiaries.
• Public health services often possess more human and technical resources, leading to superior medical care quality compared to private services.

Conversely, private healthcare often presents notable drawbacks:

• It generally does not cover chronic diseases, even if they appear after the insurance policy is contracted.
• Most private

Auditing

Checking and evaluating financial records.

Cash Flow

The total amount of money being transferred into and out of a business, especially as affecting liquidity.

Balance Sheet

A statement of the assets, liabilities, and capital of a business or other organization.

Bookkeepers

Individuals who record transactions in purchase ledgers and sales ledgers.

Income

The money a company receives from supplying goods or services.

Expenditure

The money that a company spends.

Fee

A charge for a service performed by a bank.

Premiums

Payments for an insurance policy.

Conglomerate

A multi-industry company. It is generally formed when one company expands by acquiring other firms.

Insurance

A method of protecting a person or firm against financial loss resulting from damage... Continue reading "A Glossary of Financial Terms for Beginners" »

Expected Value of Perfect Information (EVPI)

Expected Value of Perfect Information = Expected payoff with perfect information – Expected payoff without perfect information.

Expected payoff with Perfect Information: Create a new row in the payoff table which lists the best payoff for each state of nature. Determine the expected payoff of this row to obtain the expected payoff with perfect information.

Expected payoff without Perfect Information: The expected payoff of the best decision when you use the expected value approach (choose the alternative with the highest expected payoff).

Posterior Probabilities and EVSI

Posterior probabilities arise when you obtain additional testing or survey data (at some expense) to improve prior state probabilities.... Continue reading "EVPI and EVSI: Expected Value, Utility & Decision Analysis" »

Timeliness Principle

The Timeliness principle in accounting refers to the need for accounting information to be presented to users in time to fulfill their decision-making needs.

• Example: Users of accounting information must be provided financial statements on a timely basis to ensure that their financial decisions are based on up-to-date information. This can be achieved by reporting the financial performance of companies with sufficient regularity (e.g., quarterly, half-yearly, or annually) depending on the size and complexity of the business operations. Unreasonable delay in reporting accounting information to users must also be avoided.

Prudence Principle

Prudence requires that accountants should exercise a degree of caution in the adoption... Continue reading "Essential Accounting Principles" »

Chapter 4: The Federal Reserve's Responsibilities and Operations

Three Main Responsibilities of the Federal Reserve

1. Achieve full employment
2. Maintain price stability
3. Maximize economic growth

The Federal Reserve conducts the national monetary policy to achieve these goals.

Open Market Operations

Responsibilities:

• Control the money supply (MS)
• Set targets for MS growth and interest rate levels
• Influence the MS by buying or selling government securities (debt securities, Treasuries)

The Trading Desk

What they do: Purchase or sale of Treasuries

Impact on the economy:

• Money Supply: Purchasing government securities increases the money supply, while selling them decreases it.
• Interest Rates: An increased money supply puts downward pressure on interest rates, while

Understanding Income Inequality

Definition of Income Inequality

Income inequality refers to the phenomenon where households earn different shares of income within an economy.

Key Characteristics of Income Distribution

• Income is typically unequally distributed within economies.
• Inequality can provide incentives and rewards for productivity and innovation.

Measuring Income Inequality

The Lorenz Curve

The Lorenz curve illustrates the proportion of a nation’s income earned by a given percentage of the population. It typically lies below the line of complete equality because, for instance, the poorest 20% of the population will own less than 20% of the national income. The more curved the line, the greater the degree of inequality.

The Gini Coefficient

The... Continue reading "Income Inequality: Policies, Measurement, and Economic Impact" »

Modern Currency Trading

Currency trading began in 1980, with transactions now averaging over $3 trillion a day. New financial instruments have emerged, including:

• Derivatives: Options against the future
• Sovereign wealth funds
• Offshore financial centers

The 1990s Asian Financial Crisis

In 1997, speculation drove up the Thai baht. Attempts to protect its value caused investors to flee, leading to a 20% drop in value. The crisis spread to Malaysia, the Philippines, Indonesia, Singapore, and South Korea.

As countries were unable to quickly adjust to rapid capital withdrawal:

• Exchange rates plummeted 50%
• Stocks fell 80%
• Real GDP dropped 4–8%

The International Monetary Fund (IMF) responded with large, controversial bailout packages featuring lengthy conditions... Continue reading "Global Financial Systems and Trade Institutions Explained" »

Why Currency Exchange Rates Change

If our currency is demanded (for example, because our products are demanded), the price of our currency would increase unless we increase the money supply. Conversely, if, for example, people hold assets in our currency but want to sell them, this would lead to depreciation.

Interest rate is the price of our money, because we sell bonds that yield a certain benefit. If we increase the interest rate, we make the bond more attractive. People would invest money in these bonds, and less money would circulate in the economy.

This internal use of interest rates to control inflation also has external consequences. High interest rates make bonds more attractive to foreign investors who would want to buy Euros (or the... Continue reading "Factors Affecting Currency Exchange Rates" »

Types of Market Research Information

• Demographics: Knowing more about the characteristics of your market.
• Economic information
• Social and cultural influences
• Political and legal information and influences
• Consumer buying habits and behavior
• Market size and potential for growth
• Competitor information
• Resources, support, and costs

Psychic Distance

Psychic distance refers to the difference in socio-cultural factors between countries. It is arguably easier to enter a market if the distance is smaller. Therefore, businesses should choose countries that have similarities to their domestic market.

Political and Legal Influences

Two current examples include Brexit and Donald Trump as US President. The importance of these factors lies in their influence on the... Continue reading "Key Factors in International Market Research Analysis" »

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 =