Core Economic Principles: Markets, Development, and Global Trade
Understanding Supply and Demand
The Law of Supply and Demand is the fundamental economic model explaining the formation of market prices for assets. It is used to clarify a wide variety of macroeconomic and microeconomic phenomena and processes.
The Law of Supply states that supply is directly proportional to price: the higher the product price, the more units will be offered for sale. Conversely, the Law of Demand indicates that demand is inversely proportional to price: the higher the price, the
Read MoreGlobal Economic Imbalances: Crisis, GDP, and Open Economy Dynamics
Financial Globalization and the 2008 Crisis
The 2008 financial crisis was closely linked to global macroeconomic imbalances. Key points include:
- Global Imbalances: Emerging countries (e.g., China, oil exporters) had large current account surpluses, while the US experienced significant deficits.
- Capital Flows: Surplus countries invested their excess savings abroad, leading to substantial net capital outflows.
- US Financing: These capital flows played a role in financing the US housing and financial bubble,
Working Capital Management: Factors, Methods, and Impact
Determinants of Working Capital
The factors influencing a firm’s working capital decisions can be classified into two main groups: internal factors and external factors.
Internal Factors Affecting Working Capital
These factors originate from within the business operations and strategic choices:
- Nature and size of the business
- Firm’s product policy
- Firm’s credit policy
- Dividend policy
- Access to money and capital markets
- Growth and expansion of business
- Profit margin
- Operating efficiency of the firm
- Coordination
Key Economic & Public Finance Concepts Explained
Essential Economic and Public Finance Concepts
Euribor: Euro Area Interbank Rate
Euribor (Euro Interbank Offered Rate) is the interest rate at which a large panel of European banks lend to one another in the euro wholesale money market. Depending on the loan term, different types of Euribor are used:
- Euribor One Week
- Euribor One Month
- Euribor One Year
The one-year Euribor is a crucial financial market reference, significantly impacting mortgage loans and other bank financing. Its value is updated daily.
Read MoreStock Market Dynamics: Features, Factors, and Market Types
Features of the Secondary (Stock) Market
Market Intermediaries
The stock market involves various intermediaries, including stockbrokers, depositories, and clearing corporations. Stockbrokers facilitate the buying and selling of securities, depositories like NSDL and CDSL handle the electronic holding of securities, and clearing corporations ensure the settlement of trades.
Market Segments
The Indian stock market is segmented into different categories, including equity markets for stocks, derivatives
Core Macroeconomic Definitions & Formulas
This document provides a comprehensive reference for key macroeconomic terms, concepts, and essential formulas. Understanding these definitions is crucial for analyzing economic performance and policy.
Key Economic Indicators & Concepts
Gross Domestic Product (GDP) & Output
- GDP Omissions: GDP calculations do not include:
- Nonmarket Goods and Services
- Used Goods
- Financial Transactions
- Government Transfers
- Real GDP: The value of the entire output produced annually within a country’s borders, adjusted