Public Revenue, Money Evolution, Inflation, and Financial Markets
Classification of Public Revenues and Taxes
Social Contributions
Payments made to social security for those entitled to benefits.
Charges or Taxes
Taxes
Payments required by law without a specific benefit in return.
Direct Taxes: Taxes on income or wealth (PIT, Corporation Tax).
Indirect Taxes: Taxes on consumption (VAT).
Fees
Payments for the use of public goods or services (garbage collection, driver’s license).
Special Contributions
Payments for benefiting from public works (street paving).
Historical Evolution of Money
Commodity Money
Primitive form, using assets with inherent value (metals).
Paper Money
Certificates representing metal deposits, leading to banknotes.
Fiat Money
Credit cards, backed by central bank authority.
Functions of Money
- Medium of exchange
- Store of value
- Unit of account
Inflation
Widespread and sustained rise in prices.
Types of Inflation
- Moderate
- Runaway
- Hyperinflation
Causes of Inflation
- Demand-inflation
- Cost-inflation
Effects of Inflation
Depend on intensity and predictability.
Types of Financial Intermediaries
Banks
Private companies seeking profit.
Savings Banks
Nonprofit entities for charitable purposes.
Credit Cooperatives
Owned by depositors/partners.
Nonbank Financial Intermediaries
- Investment companies and funds
- Pension funds
- Insurance companies
- Leasing entities
- Factoring entities
Balance of Payments Arrangements
Current Account Balance
- Merchandise trade balance
- Balance of services
- Balance of income
- Current transfers
Capital Account Balance
- Capital transfers
- Intangible assets transactions
Financial Account Balance
International financial flows.
Securities Markets (The Stock Exchange)
Historical Origin
Italian merchants, Van der Borse family.
Stock Indices
Spain (IBEX-35), London (FTSE), EU (EUROSTOXX-50, EURONEXT-100), US (Dow Jones, NASDAQ), Japan (Nikkei).
Definitions
Currency: Foreign currency in a country (e.g., Euro in America).
Fiscal Policy: Government measures on spending and taxes.
General State Budgets: Annual document of state spending and revenue.
Credit Card: Bank advances money, repaid later.
Debit Card: Payment from existing funds.
Reserve Ratio: Percentage of deposits banks must hold.
Public Deficit: Expenditures exceed income.
Appreciation: Currency value increase.
Depreciation: Currency value decrease.
Speculation: Using resources for maximum profit.
Tariff: Tax on imported goods.
Dumping: Selling below cost to eliminate competition.
Euribor: Interest rate on interbank loans in the Eurozone.
Stock Exchange: Facilitates transactions of securities.
Financial Intermediaries: Institutions channeling savings to investment.
Microcredit: Small loans based on trust (Grameen Bank).
International Monetary Fund: Post-war economic systems institution.
Continuous Market Share: Uninterrupted stock market functioning.