Guide Basic on economy

What is the economy?

The economy is the discipline that studies the social relations that have to do with the processes of production, Exchange, distribution, and consumption of goods and services, understood these as a means of satisfying human needs and individual and collective result of society.

John Maynard Keynes defines economics as “a method rather than a doctrine, a mental device, a technique of thought that helps its possessor to draw right conclusions”.

Not all economic claims are irrefutable, but certain postulates can be verified, i.e. it can be said that “they are”, and when that happens, we talk about economy.

On the contrary, those statements based on value judgments, that they try what they ‘should be’, are typical of the normative economics and, as such, cannot prove it. The economy moves constantly between both poles.

Economic Theories

Economic theory means the set of hypotheses that seek to reproduce aspects of economic reality. In economic theory there are two distinct approaches: Microeconomics and Macroeconomics.

Microeconomics

Microeconomics is a part of economics that studies the type of economic behavior of individual actors, such as consumers, companies, workers and investors; as well as the markets that include areas. It is considered a decision which takes each to meet certain objectives themselves. The above, taking into account that is in the case of free enterprise or free market.

Microeconomics has many branches of development. Some of the most important are: the theory of consumer of demand, the producer, that of general equilibrium, and that of financial asset markets. They are not entirely separate because the results of a few aspects influence the others.

Microeconomics proposed mathematical models that develop assumptions about the behavior of economic agents. Any conclusions that may be reached using these models only will be valid if the assumption, which does not happen always, met especially if it is very strong or restrictive assumptions.

Macroeconomics

Macroeconomics is the global study of the economy in terms of the total amount of goods and services produced, the total income, the level of employment of productive resources, and the general behavior of prices.

The macroeconomics can be used to analyze which  is the best way of influencing political objectives as for example to grow the economy, stability of prices, work and obtaining a sustainable balance of payments. Macroeconomics for example, focuses on the phenomena that affect the indicator variables in the standard of living of a society.

Macro-economics is a study of the economy of a country from economic relations that country agents argue among themselves and with the outside.

ECONOMIC INDICATORS

– Gross Domestic Product (GDP) is the total monetary value of the production of goods and services a country during a period (usually a quarter or a year). GDP is a flow variable, as counts only goods and services produced during the period of study. In addition the GDP does not assess the goods or services that are a fruit of the informal work

– Nominal GDP: The Nominal GDP is the monetary value of all goods and / or services produced by a country or an economy at current prices in the current year in which the goods are produced. However, in a situation of high inflation, a substantial increase in prices, even if the production does not increase too, may give the impression of a substantial increase in GDP.

– Real GDP: The real GDP is defined as the monetary value of all goods and services produced by a country or an economy in constant prices. This calculation is carried out deflating the value of GDP according to the rate of inflation (or by computing the value of the goods irrespective of the year of production by a certain year of reference prices).

– Index Price Consumer or IPC: is an index which is checked prices for a set of products (known as “basket”) determined on the basis of the continuous survey of family budgets a number of consumers acquired so regular, and variation with respect to the price of each one, with respect to a previous sample. In this way is intended to measure, monthly, the evolution of the level of prices of goods and services consumption in a country.

– Unemployment: unemployment consists of the active population (in working-age) that it doesn’t work. Not to be confused the active population with the inactive population. There are four types of unemployment. These types of unemployment are cyclic, the structural, the frictional and the seasonal.

-Inflation: it is the increase in sustained and widespread level of prices of goods and services, measured against a purchasing power. Defined also as the fall in the value of market or the purchasing power of a currency in an economy in particular, which differs from the devaluation, since the latter refers to the fall in the value of the currency of a country in relation to the other currency quoted in the international markets, as the US dollar, the euro or the yen.

– EURIBOR: it is an acronym for “Europe Interbank Offered Rate”. It is the interest rate applied to transactions between banks in Europe; i.e. the percentage you pay as the rate a bank when another lends him money. The EURIBOR is defined as the simple average of the daily, applied interest rates for operations cross within a year on the market for interbank deposits in the area of Monetary Union, among the financial institutions with the highest level of business.

– Balance of payments: is an accounting document in which are registered commercial operations, services and of capital movements carried out by residents in a country with the rest of the world, during a given period of time. The balance of payments provides detailed information about all transactions between residents and non-residents.

– Exchange rate: the type or rate of change is expressed the value of a currency or foreign currency expressed in national currency units. This definition follows the British convention. The peseta, however, was the European system for their definition: the exchange rate were the pesetas needed to get another currency.

Circulation in macroeconomics

Circulation in macroeconomics – Wikimedia.org

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Erick Gálvez

Administrador at ASD Forex
Webmaster of ASDForex.com and trader of forex market since 2008. I'm in charge of the publication and editing of news and analysis www.asdforex.com

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