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

Public Budget and the Economic Cycle

Understanding Deficits

• Deficit: A flow of new debt created when the state spends more than it collects in taxes.
• During recessions, public transfers increase and tax revenues decrease, leading to an increased budget deficit.
• Cyclical Deficit: The portion of the budget deficit that fluctuates with the economic cycle. It increases during recessions (when production is below potential GDP) and decreases during expansions (when production exceeds potential GDP).
• Structural Deficit: The portion of the budget deficit that remains independent of the economic cycle, stemming from structural imbalances between revenue and public expenditure. This is the deficit that persists even when production reaches its potential

Understanding the Chart of Accounts

The Chart of Accounts is a fundamental framework born from the normalization of accounting practices. This standardization aims to establish consistent criteria for companies, enabling homogeneous, reasonable, and valid comparisons across different periods and entities.

EU Directives for Accounting Normalization

The European Union (EU) has issued a set of rules to implement accounting normalization in its participating countries. These directives are crucial for harmonizing financial reporting:

• The Fourth Directive: Also known as the European Accounting Plan, this directive establishes the financial information that corporate accounting should provide.
• The Seventh Directive: This directive sets the requirements

Understanding Macroeconomics: Objectives, Instruments, and GDP

Macroeconomics deals with the study of phenomena that affect the entire economy, among which are inflation, unemployment, and macroeconomic growth. To analyze the performance of the economy, macroeconomics focuses on the study of Gross Domestic Product (GDP) or the general price level to make it easy to set concrete targets and design macroeconomic policy. This integrated set of measures, designed by the government to influence the progress of the economy as a whole, aims for objectives such as the growth of production, employment, and price stability.

Key Objectives of Macroeconomics

• Production Growth

  Having an abundant amount of goods and services is something all countries desire.

Industrial Acceleration and Economic Structure Change

The U.S. accelerated the growth of its industrial production, which was accompanied by a profound change in the economic structure. The expansion of the U.S. economy was based on a profound transformation of production dominated by:

• Technical innovation and changes in work organization.
• New energy sectors, particularly the widespread use of electricity and oil.

The most representative example of this transformation was the automobile industry, the first to apply mass production through assembly lines. All this occurred amidst a process of business concentration, resulting from strong competition driven by lowering prices.

Productivity Gains and the Consumer Revolution

The consequence of these... Continue reading "The Roaring Twenties: US Industrial Growth and Speculation" »

The Entrepreneur

An entrepreneur is a person who takes the initiative and assumes the risk in a company. This individual may be referred to as an autonomous social agent and is a leader in a cooperative or commercial enterprise.

Concept of Business

A business is an economic production unit whose purpose is to create or increase the utility of goods and meet human needs. The end goal of the company is to achieve the objectives it has set, seeking to maximize its benefits.

Company Features

• Common: Accounting, financial, administrative, and HR.
• Specific: Commercial, production, research.
• Other: Technical, security, R&D.

Elements of a Company

• Internal:
  • Materials: Land, buildings and installations, machinery and transport elements, stocks, money, clients,

Service Economy

It is an economic and social transformation that primarily affects developed countries since the last phase of the industrial revolution. It is not only that the employed population in the tertiary sector (services) becomes larger than the secondary sector (industry), but also how the work itself in this sector is increasingly disseminated and outsourced.

Welfare State

A more specific concept, which in practice is considered a category to designate either a set of proposals or a general approach regarding how the state should or could proceed. For example, the Spanish state provides education and healthcare.

Rural Tourism

A tourist activity that is performed in a rural area, usually in small towns or outside the village in larger... Continue reading "Fundamental Economic and Tourism Terminology" »

Labor Market Characteristics

The labor market is influenced by various factors, including how companies and unions affect wages. Work is not a homogeneous product; several factors determine salary and compensation differences:

• Wages for workers in dangerous jobs tend to be higher.
• Differences in talents and skills.
• Differences in human capital: more skilled and prepared individuals are generally better paid.
• Efficiency Wages: A type of wage used by some companies to incentivize and motivate their workers to increase productivity.
• Discrimination: Men often receive higher wages.

Causes of Unemployment

Neoclassical Theory

If the labor market operated freely and wages were flexible to lower and raise, there would be no unemployment, even with a serious... Continue reading "Labor Market Dynamics: Unemployment Causes and Job Creation" »

Economic Crises in Mexico (1976-2008)

Defining Economic Crisis

An economic crisis is characterized by a decline or stagnation in output and real incomes, leading to reduced employment and an uneven distribution of national wealth and income.

The 1976 Economic Crisis

1. Fiscal disorder in the U.S.
2. The Bretton Woods Agreement established the dollar as the reserve currency for all countries.
3. External financing of the fiscal deficit and current account.
4. In 1973, the Bretton Woods arrangement collapsed, and flotation was established between currencies.
5. High petroleum prices and increased contributions.
6. Excessive government spending.
7. Public debt as a percentage of GDP: 12% in 1970, rising to 35% in 1976.
8. Increased foreign loans and bank credit in Mexico.
9. Central

Economic Rationality

Economic rationality assumes that households and businesses use their scarce resources to maximize their own utility or profit, respectively. It is used to model economics to explain and predict the behavior of economic agents.

Households

Function: Consumer target

Objective: Maximize their own welfare by choosing goods that satisfy them according to their preferences and their limited budget.

Businesses

Function: Production

Objective: Maximize profits through effective utilization of available resources to produce goods and services as profitably as possible.

Public Sector

Function: Regulation system

Objective: Maximize the general welfare by using available resources to produce required public goods and services and reducing inequalities.... Continue reading "Economic Rationality: Households, Businesses, and the Public Sector" »

Activity-Based Costing (ABC) Fundamentals

Background of ABC Costing

The background of Activity-Based Costing (ABC) stems from the principles established by management accounting experts Robin Cooper and Robert Kaplan. They asserted that the cost of goods must include the cost of all necessary activities employed, not just manufacturing costs.

This means that traditional product costs (raw material, labor, and manufacturing overhead) are supplemented by costs incurred through efforts made for non-manufacturing activities, such as:

• Sales
• Distribution
• Service
• Post-sales support

Defining Activity-Based Costing

ABC is a methodology that assigns costs to products or services based on the consumption of activities. Key characteristics include:

• Manufacturing