Understanding Economics: Key Concepts and Definitions
Economy
The science that deals with managing scarce resources and unlimited needs, with the objective of producing and distributing goods and services for consumption among society members.
Shortage
In economics, a shortage refers to the relative lack of a property concerning the needs, desires, and requirements of consumers, not a total lack.
Need
In economics, a need is identical to a consumer’s desire for a commodity or service. It does not necessarily imply urgency or hardship. Financial needs can
Read MoreUnderstanding Microeconomics, Trade, and Macroeconomic Objectives
Understanding Key Economic Principles
1. Microeconomics vs. Macroeconomics
Microeconomics is the study of decisions made by individuals and businesses regarding the allocation of resources and the prices of goods and services, considering taxes and government regulations. It focuses on supply and demand and other forces that determine price levels in the economy.
Macroeconomics, on the other hand, studies the behavior of the economy as a whole, including entire industries and economies. It examines
Read MoreUnderstanding Macroeconomics: Objectives, GDP, and Key Indicators
Macroeconomics: Objectives and Instruments
Macroeconomics deals with the study of the functioning of the economy as a whole. Its purpose is to obtain a simplified view of the economy, but at the same time allows us to understand and influence the level of economic activity in a particular country or set of countries.
Macroeconomic policy is made by governments to influence the course of the economy as a whole.
A. Objectives of Macroeconomics
- Growth of production
- Full employment
- Price level stability
- Reduce
International Economics: Key Concepts and Relationships
International Economics: Key Concepts
E= (e·p)/p* r€ = r$ – (forward – e)/e Interest Rate Parity: r€-r$ = (Expect €/$ – e€/$)/e€/$ = 9 in order to satisfy interest parity… 9%
US iPhone 199, Spain 699, e=1.38$/€. 699·1.38=x, x/199=4. No arbitrage, E is not equal to 1.
An expansionary policy of China increases r*. In Spain, it reduces investment, increasing net capital outflow and the supply of € in the foreign exchange market, causing E to fall and NX to rise. Decrease supply of
Read MoreGlobal Food System: Bretton Woods, Corporate Influence, and Land Grabs
Understanding the Global Food System
Bretton Woods Institutions and Their Significance
The three Bretton Woods Institutions (BWI) are the World Trade Organization (WTO), the International Monetary Fund (IMF), and the World Bank (WB). These institutions are significant because they helped reduce trade barriers through exchange rate stability. The IMF and WB implemented Structural Adjustment Programs (SAPs), which facilitated neoliberal globalization throughout the global south. Although free trade
Read MoreUnderstanding Inflation, Fiscal Policy, and Government Budgets
Understanding Inflation
Inflation: is a general increase in prices.
CPI: [(Current year CPI – Previous year CPI) / Previous year CPI] * 100
Core CPI: CPI less the evolution of unprocessed foods and energy products.
GDP Deflator: [(Current year deflator – Previous year deflator) / Previous year deflator] * 100 or (Nominal GDP / Real GDP)
Causes of Inflation
Inflation occurs due to:
Increased Demand
- Monetarist View: Inflation occurs when the money supply increases beyond production increases.
- Keynesian View: