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

Exam Questions

GDP

GDP fails to measure changes in "the quantity of existing products that don't cause a change in price". Whenever there is inflation, the increase in nominal GDP will overstate growth in the economy

True

Unemployment

Assume the US unemployment rate is 4.9%. If 10,000 working age immigrants enter the country all looking for work and 9.000 find a job, what happens to the US unemployment rate?

Increases

Assume the US unemployment rate is 4.9%. If 10,000 working age immigrants enter the country all looking for work and 9.000 find a job, what happens to the US labor force participation rate?

Increases

A recent college graduate who is still looking for their first job would be considered as

Unemployed

The eligible population is: 200,000. Employed:

What is an ethical dilemma in a company?

One knows when they have a significant ethical conflict when there is a presence of:

• Significant value conflicts among differing interests
• Real alternatives that are equally justifiable
• Significant consequences on stakeholders in the situation

An ethical dilemma exists when one is faced with having to make a choice among these feasible, comparable, and relevant alternatives.

Social Marketing Concept:

Economic Liberalism

Humans act rationally to maximize self-interest.

• When individuals act rationally, markets develop to produce, distribute, and consume goods.
• Markets enable individuals to carry out necessary transactions to improve their own welfare.
• If there are many buyers and sellers, competition ensures prices as low as possible.
• Low prices mean increased consumer welfare.
• Markets must be virtually free of government interference.

Pro-market interventionism: When governments step in to create the conditions for markets to function.

Note: Laissez-faire economic policy was not favored by Adam Smith, contrary to common belief.

Later versions posit both economic and political advantages: economic wealth comes with the formation of an international... Continue reading "Core Principles of Economic Liberalism and Trade" »

This text tries to make known the changes that capitalism has had in the last thirty years, second the opinion of several authors. It makes a comparison between different texts of the 1960s, where  family capitalism is criticized, and the texts of the 1990s, where there are already large planned organizations, hierarchies.

Objective Management in 1960

In relation to Objective Management in 1960, two major problems arise:

• Strong dissatisfaction on the part of the “Cadres”
• Management problems that are linked to the giant size of companies.

Cadres, it is the meaning of the value they have for a company. On the one hand, we have the role of “technical expert” and on the other the “relay management” the transmission of orders from above... Continue reading "Changes in Capitalism: 1960s vs 1990s" »

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