Understanding Asset Markets and Monetary Systems
Asset Markets and Their Characteristics
T.4: Markets of Assets. We can distinguish between real assets or capital goods and financial assets (bonds and money).
Walras’ Law: If we have equilibrium in n-1 markets, we have equilibrium in the remaining market.
Money: Definition, Functions, and Types
Money is a financial asset universally accepted as a means for repaying debts that appear in economic transactions with legal tender.
Functions of Money
- Medium of exchange to pay debts
- Unit of account to account
Understanding Supply and Demand: A Comprehensive Analysis
Supply Analysis: A Deep Dive
The Law of Supply
Supply analysis is a crucial concept in economics that examines the relationship between the quantity of a good or service producers offer at different prices and the price levels. The Law of Supply states that, all else being equal, as the price of a good or service increases, the quantity supplied by producers also increases. Conversely, as the price decreases, the quantity supplied decreases. This positive relationship between price and quantity supplied
Read MoreUnderstanding Money: Fiat, Banking, and Demand
Understanding the Current Monetary System
The Current Monetary System: We operate under a fiduciary system where paper money isn’t backed by precious metals. It’s supported by institutions and used for payments, but it has no intrinsic commodity value.
Evolution of Money
Kinds of Money: Money has evolved from commodity money to paper money backed by gold, and now to fiat money, which is based on trust and the institutions that support it.
Current Money: Includes physical currency plus legal deposit
Read MoreFundamentals of Economics and Microeconomics
Economy: The economy is the study of how nations use scarce resources to produce valuable commodities and distribute them to different groups.
Microeconomics: A behavioral analysis of specific components, such as industry, business, etc.
Pitfalls in Economic Reasoning
- Not Keeping Other Things Constant: The key step to isolating the effect of a variable is to keep the others constant.
- The “Post Hoc” Fallacy: The fact that event A is observed before event B does not prove that A caused B.
- Fallacy of Composition:
Understanding Trade Barriers and Tariffs: Impact and Types
Trade Barriers
- A government-imposed restriction on the free international exchange of goods or services.
- Economic areas like the E.U. do not have them.
Tariffs
- A tax.
- It adds an extra cost to the cost of imported goods.
- One of several trade policies that a country can enact.
Tariffs: Most Common Reasons
- Protecting Domestic Employment
- Protecting Consumers
- Infant Industries
- National Security
- Retaliation
Protecting Domestic Employment
- The levying of tariffs is often highly politicized.
- The possibility of increased
Business Operations: Procurement to Taxation
Procurement
Procurement is the process of purchasing materials for a business and storing them until they are used or sold. It is divided into:
- Shopping: This involves researching product features, identifying suppliers, providing products, and negotiating contracts with vendors.
- Storage: This involves sorting, storing, and classifying the stock.
- Inventory Management: This involves tracking the entry and exit of products.
Production
Production aims to capitalize on the company’s capital. It involves monetizing
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