Key Definitions in Economics and Banking

Market Fundamentals: Demand and Supply

Market and Trading Activities

A Market is the set of trading activities for a given product, involving buyers (demanders or bidders) and sellers (suppliers).

Demand and Supply Concepts

Demand (Dn): The amount consumers are willing to acquire at a specific price, considering the prices of related goods, disposable income, and tastes and preferences.

Demand Curve: The graphic representation of the demand function, which shows the different quantities of a property buyers are willing to acquire at each price.

Supply: The amount of a property that companies are willing to produce at a certain sale price, taking into account production costs and business objectives.

Supply Curve: The graphical representation of the supply function, which shows the different quantities of that good firms are willing to produce at each market price.

Market Equilibrium: The matching point where consumer plans and enterprise plans align, resulting in an exchange that satisfies both parties.

Monetary Policy and Banking Reserves

Monetary Sensitivity and Regulation

Elasticity of Demand for Money: Measures the sensitivity of the quantity demanded of money to price changes in the property concerned.

Legal Coefficient (Reserve Requirement): The percentage of real money that the Central Bank requires banking institutions to keep inactive to cover against any customer withdrawals of money and for general reasons.

Monetary Policy: The set of measures taken by the ECB (European Central Bank) or other monetary authorities to achieve specific objectives. This is done by extending or reducing the amount of money in circulation, or by altering interest rates.

Economic Factors and Income

Market Access and Factor Remuneration

Entry Barriers: Factors that prevent or hamper entry into a market.

Factor Income (Rent): Represents the value or price paid for a factor of production over a given period of time. This includes:

• Labor: Wage
• Natural Resources: Rent or Alquiler
• Capital: Interest

Interest: The value of services or the price of capital money.

Salary: The remuneration paid for labor performed on behalf of another party.

Minimum Interprofessional Wage (Salario Account): The minimum wage that any worker in Spain should charge, regardless of their profession.

Employment Policy: A set of plans and procedures aimed at reducing unemployment figures in an economy.

Money, Fiat Currency, and Banking Operations

The Role of Money and Financial Institutions

Money: A medium of exchange, a unit of account, or a generally accepted means of payment.

Fiat Money: Money used as a medium of exchange because it generates confidence and is accepted as such, rather than having intrinsic value.

Banking: The activity of capturing lawful money from savers to lend to traders who need funding.

Fractional Reserve: The percentage, calculated on the total deposits received, that the bank keeps inactive to cover against client money withdrawals.

Deposit Money Propagation (Money Multiplier): The increase in lawful money within the banking system resulting from an initial deposit.