Macroeconomics: Key Concepts and Applications
1. Small Open Economy with Perfect Capital Mobility
Consider the case of a small open economy with perfect capital mobility. Suppose that the government raises public expenditure and taxation by the same amount. Starting from a long-run equilibrium, this policy will have the following long-run impact:
- c. A rise in the real exchange rate, a drop in net exports, and no change in GDP.
- d. None of the above answers is correct.
2. Negative Demand Shock in a Closed Economy
Consider a country that is hit by
Read MoreUnderstanding Macroeconomics: Key Concepts and Theories
Aggregate Demand and Supply
Aggregate demand is the total number of acquisitions that different economic sectors are willing to make in a certain period of time at a certain price level. Aggregate supply is the amount of product that companies are willing to offer in a certain period of time, with a determined level of wages and prices.
Inflation and Deflation
Inflation is the process in which the price of an economy increases continuously and generally over time. Deflation is the process in which
Read MoreKey Market Structures and Economic Efficiency
Productive and Allocative Efficiency
- Productive Efficiency: Achieved when goods are produced at the lowest possible cost per unit. This occurs where Average Total Cost (ATC) is minimized (Marginal Cost (MC) = ATC).
- Allocative Efficiency: Occurs when resources are allocated to produce the optimal mix of goods and services that consumers demand. This is achieved when the price of the last unit produced equals its marginal cost (MC = Average Revenue (AR)).
Market Structures
Perfect Competition
A market
Spain’s Domestic and Foreign Trade Dynamics
Foreign Affairs and Trade
Trade is the activity that provides surplus commodities and services to consumers. It can be performed within the boundaries of a country (domestic trade) or outside them (foreign trade).
Internal Trade
It is characterized by:
- Its location depends on the existence of a transport system between the producer and the consumer, and the existence of a broad consumer market with adequate purchasing power. Both factors contribute to urban neighborhoods and communities with good transport
Essential Glossary of Financial and Economic Terms
Acyclical
Describes an economic variable that is neither procyclical nor countercyclical. The correlation coefficient is close to 0.
Amplification of Business Cycles
It means that the size of the shock is smaller than the impact of the shock on total output. The actual response of the economy is bigger than the shock itself.
Amplification
It refers to the strong fluctuations in output generated by changes in interest rates, phenomena that the interest rate channel cannot explain. Adverse and positive
Urban Social Problems, Economic Systems, and Globalized Economy
Social Problems in Developed Urban Areas
Social problems in cities of developed countries include:
- Changes in Residential Areas: Speculation and deterioration of infrastructure lead to the marginalization of the poorest and excluded populations, such as the elderly and immigrants.
- New Social Movements: Ideological critique spreads throughout the system, exemplified by movements like squatting.
- The Fourth World: The poorest and most disadvantaged sectors of society living within developed nations.
- Racial