Bank Balance Sheets, Risk, and Monetary Policy
Understanding the Balance Sheet
A Balance Sheet is a statement that shows an individual’s or a firm’s financial position on a particular day. The typical layout of a balance sheet is based on the following accounting equation:
Assets = Liabilities + Shareholders’ Equity.
An Asset is something of value that an individual or a firm owns, particularly a financial claim. A Liability is something that an individual or a firm owes, particularly a financial claim on an individual or a firm. Bank capital
Read MoreCore International Trade Theories and Concepts
Ricardian Theory: Comparative Advantage in Trade
The Ricardian theory of international trade, developed by David Ricardo in 1817, explains why countries engage in trade based on comparative advantage rather than absolute advantage.
Key Idea: Comparative Advantage
A country should specialize in producing goods that it can produce at a lower opportunity cost and trade for goods that it produces at a higher opportunity cost.
Example:
- India: Produces textiles efficiently (low labor cost) but struggles with
International Trade Dynamics: Policies and Agreements
International Trade Fundamentals
International trade is the exchange of goods, services, and capital between countries. Several factors affect the production capabilities of different countries:
Key Factors in Production
- Weather conditions
- Mineral wealth
- Technology
- Available quantity of labor, capital, and land
Benefits of Free Trade
Some benefits associated with free trade include promoting competition, specialization, and technological advances. It can also increase productivity, enhance consumer welfare
Read MoreUnderstanding Wage Payment Structures and Regulations
Wage Receipt Requirements
Wage receipts must be delivered using the official model and conserved in detail for six years. A wage receipt should include: Wages + Accessories – Deductions = Net Pay.
Wage Structure Components
Base Salary
The base salary is the worker’s pay, set by unit of time, labor, or both, without regard to circumstances that warrant allowances.
Accessories
Accessories are amounts added to the base salary, fixed in response to circumstances relating to the worker, the work done, or the
Read MoreUnderstanding Government Financing, Debt, and Fiscal Policy
Government Financing: Taxes and Debt
Government financing is typically achieved through taxation and public debt. While taxes are a primary source of revenue, raising taxes can be unpopular. Another option is deficit spending financed by issuing government bonds. However, public debt also has limitations.
Public Deficit and Debt: A Closer Look
Deficit and surplus are flow variables, while public debt is a stock variable, representing the total amount owed by the state at a specific time. Public debt
Read MoreGlobalization, Trade, and Sustainability: Key Concepts
Globalization: A process of growing integration and interdependence of nations, characterized by the intensification of international links of all types – commercial, financial, cultural.
Globalization: Globalization at a lower price.
Trade and Economics
Direction of Trade Statistics (DOTS): Presents the value of merchandise exports and imports disaggregated according to a country’s primary trading partners.
Gravity Model: Predicts bilateral trade flows between two countries/regions based on their
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