International Trade: Specialization, Protectionism
International Commerce
Commerce encompasses international economic relations, including imports and exports between different geographical areas. Several factors influence international trade:
- Production Costs: Labor costs significantly impact production expenses. Countries with cheaper labor may have a production advantage.
- Technology: Technological advancements play a crucial role in production efficiency and trade.
- Natural Resources and Climate: Countries often import products they cannot produce
Pre-Capitalist Economies: Feudalism and Early Business
Unit 1: Pre-Capitalist Economy Features
Highlights: Great diversity of social and economic forms, organic-based economies, predominance of agriculture, manual production techniques, use of hydraulic and wind energy, uniquely human and animal consumption, reduced mobility of production factors, adaptation of the holding unit to the family organization, little specialization, and low capacity for accumulation of surpluses.
Pre-Capitalist Feudal Economy and Business
Feudalism was the dominant socioeconomic
Read MoreUnderstanding Economic Systems and Sectors
1. Economics Explained
In the 20th century, a new society was created where people interact with money. Currently, the service and leisure sectors are of great importance in industrial development, indicating that we live in a service-based society.
2. Functions of the State in the Economy
- Economics – It establishes the rules regulating economic activity.
- Private Sector Support – It provides support for the promotion of the private sector.
- Sector and Area Development – It assists sectors and areas facing
Understanding Economics: Microeconomics and Macroeconomics
Economic Principles
Economy: The study of how humans meet their needs using scarce resources. It deals with the production of goods and services (supply) and consumption of goods and services (demand). Factors of production include natural, human, and manufactured resources. Economic theory attempts to explain the process of managing scarce resources.
Methodology
- Set assumptions about the behavior of agents and the logical context.
- Deduce social conclusions or predictions about the studied reality.
- Contrast
Open Economy: Exercises and Solutions
Exercise 1 (Topic 6)
Consider an open economy, where the goods market is characterized by:
- C = 5 + 0.1 * (Y – T)
- I = 4 + 0.3 * Y
- IM = 0.3 * Y * ε
- X = 0.2 * Y* – 2 * ε
We also know the government sets a level of public spending and of taxes equal to 8, the real exchange rate is 1.4, and foreign income is 1. Given this information, what is the value of autonomous spending in this economy?
The demand for domestic goods in this economy is:
Z = C + I + G + NX = 5 + 0.1 * (Y – T) + 4 + 0.3 * Y + 8 – 0.3 * Y
Read MoreUnderstanding Key Economic Concepts: Fiscal Policy, Unemployment, and More
Key Economic Concepts Explained
Restrictive Fiscal Policies: A tight fiscal policy aims to cool down the economy by reducing public spending and/or increasing taxes. This leads to lower aggregate demand and reduces pressure on prices. With restrictive policies, lower public spending and higher taxes decrease aggregate demand, thereby lowering production, employment, and prices.
Expansionary Fiscal Policy: This involves reducing taxes, increasing financial expenses, or transfers to increase production
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