Study guide: Business English Economics

📋 Course Outline

1. Economics Vocabulary and Scope
2. Scarcity and Economic Choices
3. Medieval Economic Thought
4. Mercantilism and State Power
5. Classical Economics and Socialism
6. Keynesianism and Monetarism
7. Global Economic Traditions
8. The Euro and Monetary Union
9. Brexit and Its Consequences
10. The Covid-19 Economic Crisis
11. Ukraine War and Inflation
12. Macroeconomic Environment
13. Economic Growth and Business Cycles

📅 Key Dates

1. 1929The Wall Street crash triggered a crisis that spread from the United States across the world and became known as the Great Depression.
2. 1957The Treaty of Rome created the European Economic Community with six founding members: France, Italy, Germany, Belgium, the Netherlands, and Luxembourg.
3. 1969The Hague summit decided to prepare the Werner Plan for closer economic and monetary union and a future single currency.
4. 1979The European Monetary System was established to provide stable but adjustable exchange rates and facilitate trade.
5. 7th February 1992The Maastricht Treaty established the European Union and set the process toward a common currency, subject to economic convergence.
6. 1st of January 1999The euro was launched as a non-physical common currency and was initially adopted by 12 countries.
7. June 2016A majority voted for the UK to leave the European Union in a referendum on EU membership.
8. 31/01/2020The UK ratified a withdrawal agreement, beginning a transition period in which it followed most EU rules and remained in the common market without EU membership voting rights.
9. 31/12/2020The transition period ended, ending 47 years of UK membership and free movement under EU rules.

📖 1. Economics Vocabulary and Scope

🔑 Key Concepts & Definitions

• Economy: The system by which goods and services are produced, distributed or sold, and consumed or purchased.
• Economics: A social science that studies the economy and the factors affecting it, including production, distribution, and consumption under conditions of scarcity.

★ Must-know

📌 Economic relates to the economy, trade, and money, whereas economical describes using money, time, energy, or resources carefully and efficiently.

Further detail

• An economy is a network of producers, distributors, and consumers operating at local, national, or international levels.

💡 Memory Hook

Economic describes the economy; economical describes careful resource use.

📖 2. Scarcity and Economic Choices

🔑 Key Concepts & Definitions

• Scarcity: A situation in which a resource or product is difficult to find or obtain because its quantity is limited relative to human wants.
• Cost-benefit principle: The cost-benefit principle says that an individual, business, or government should take an action if its benefits are at least equal to its costs.

★ Must-know

📌 Because resources are limited, individuals, businesses, and governments must make choices, set priorities, and accept trade-offs to use resources as effectively as possible.

📌 Microeconomics studies decisions by individuals and businesses and their effects on specific markets, whereas macroeconomics studies the economy as a whole.

Further detail

📌 When benefits exceed costs an action is favorable, when benefits equal costs it produces neither a net gain nor a net loss, and when costs exceed benefits it generates regret and resource waste.

💡 Memory Hook

Limited resources → choices → trade-offs.

📖 3. Medieval Economic Thought

🔑 Key Concepts & Definitions

• Just price: For Thomas Aquinas, the just price covers production costs and the maintenance of the worker and the worker’s family.

★ Must-know

📌 Aristotle regarded merchants’ profits from selling goods above their purchase price as morally problematic, whereas Thomas Aquinas accepted merchants earning a return for their work.

Further detail

📌 Aquinas opposed raising prices in response to high demand and supported government price control and market regulation to protect the common good.

• Antoninus of Florence considered government intervention in economic and commercial affairs a moral duty that protected the common good and helped the poor and needy.

• Medieval economic thought closely connected morality, business, and social responsibility, with government charged with protecting that connection.

💡 Memory Hook

Aristotle questions profit; Aquinas permits a just profit.

📖 4. Mercantilism and State Power

🔑 Key Concepts & Definitions

• Mercantilism: Mercantilism was a political and economic system dominant from the 16th to the 18th century that aimed to increase national wealth and state power against rival states.
• Zero-sum game: A zero-sum game is a situation in which one country’s economic gain comes at another country’s expense because resources are treated as limited.

★ Must-know

📌 Mercantilist governments sought self-sufficiency, stimulated domestic production and exports, limited consumption and imports, and imposed tariffs to achieve a trade surplus.

Further detail

• Jean-Baptiste Colbert, finance minister under Louis XIV in the 17th century, symbolized mercantilism through strong state intervention in production, state-owned companies, subsidies, infrastructure, and production standards.

• Mercantilism’s pursuit of national wealth and power contributed to colonialism, imperialism, and conflicts in Europe.

💡 Memory Hook

Exports exceed imports → gold inflows → stronger state power.

📖 5. Classical Economics and Socialism

🔑 Key Concepts & Definitions

• Invisible hand: Adam Smith’s invisible hand is the market mechanism through which individuals pursuing their own interests contribute to an efficient allocation of resources.
• Comparative advantage: D Ricardo - Ricardo’s theory of comparative advantage recommends that countries specialize in goods they can produce at lower opportunity cost and import goods other countries can produce at lower opportunity cost.
• Capitalism: In Karl Marx’s account, capitalism is a social and economic organization based on private ownership of the means of production and the accumulation of capital.
• Exploitation: Marx’s theory of exploitation holds that workers produce economic value greater than their wages, allowing capitalists to make profits.
• Labor theory of value: D Ricardo - Ricardo’s labor theory of value holds that a good’s value can be determined by the number of labor hours needed to produce it.

📝 Essential Points

• Adam Smith’s The Wealth of Nations (1776) is presented as a foundational text of classical economics and supports individual initiative, entrepreneurship, free markets, and minimal government intervention.

💡 Memory Hook

Smith’s market self-regulation contrasts with Marx’s account of worker exploitation.

📖 6. Keynesianism and Monetarism

🔑 Key Concepts & Definitions

• Keynesianism: J.M Keynes - Keynesianism advocates government-managed capitalism in which public action stimulates demand and spending to support economic activity and employment.
• Monetarism: Milton Friedman - Friedman’s monetarism emphasizes controlling the money supply, which should grow at a steady, moderate rate consistent with the economy’s natural growth.
• Quantity theory of money: Friedman’s quantity theory of money links the quantity of money in an economy to the general price level, so a rapid increase in money can raise prices substantially.

📝 Essential Points

• Keynesian demand measures include:

  • tax reductions
  • increased government spending and investment
  • subsidies and social benefits
  • lower interest rates

• Gary Becker analyzed labor-market discrimination and family behavior, arguing that discriminatory firms can become less efficient and competitive and that families make economic choices according to costs and benefits.

💡 Memory Hook

Keynes prescribes demand management; Friedman favors limited intervention and steady money growth.

📖 7. Global Economic Traditions

🔑 Key Concepts & Definitions

• Imperfect competition: Joan Robinson studied imperfect competition, in which firms have market power and markets may fail to self-regulate smoothly, allowing inequality to persist.

★ Must-know

📌 Subsistence production meets a community’s needs for its own consumption, whereas cash crops are produced for sale and profit.

Further detail

• Confucian economic thought promoted (Confucius, 6th and 5th centurie):

  • hard work
  • education
  • honesty
  • personal responsibility
  • respect for social roles
  • ethical business
  • concern for the community

• Islamic economic principles emphasize ethical behavior, social justice, responsible wealth management, charity, and redistribution to support the poor.

• Ibn Khaldun, a 14th-century North African economist, philosopher, and historian, argued that civilization depends on taxation, labor, productivity, supply and demand, and the role of the state.

• Elinor Ostrom studied how communities can manage shared common-pool resources such as forests, fisheries, and water through collective management, cooperation, and sustainable use.

📌 Behavioral economics studies how psychology and human behavior shape economic decisions, which are not always fully rational.

📖 8. The Euro and Monetary Union

📝 Essential Points

• The four euro convergence criteria are:
  • control of inflation
  • public deficit below 3% of GDP and public debt below 60% of GDP
  • exchange-rate stability without devaluation
  • control of interest rates

💡 Memory Hook

Rome → Werner → EMS → Maastricht → ECB → euro.

📖 9. Brexit and Its Consequences

📝 Essential Points

• David Cameron organized the Brexit referendum and resigned after losing it; Theresa May served as prime minister from 2016 to 2019 but did not complete Brexit, and Boris Johnson conducted the withdrawal process.

• The Northern Ireland Protocol avoided a hard border between Northern Ireland and the Republic of Ireland, left some EU rules applicable in Northern Ireland, and gave it access to both the European and British markets.

💡 Memory Hook

Referendum → transition → withdrawal → lasting UK–EU changes.

📖 10. The Covid-19 Economic Crisis

★ Must-know

📌 The pandemic crisis combined a supply shock that reduced production with a demand shock that reduced household consumption and business investment.

Further detail

• The Covid-19 pandemic emerged at the end of 2019 and reached a peak in spring 2020, prompting countries to use measures including lockdowns, travel restrictions, school closures, and cancellation of public events.

• Factors contributing to the pandemic supply shock included: factory shutdowns, halted construction and infrastructure projects, labor shortages, disrupted supply chains

• Pandemic restrictions and uncertainty reduced household consumption and business investment, contributing to the demand shock.

• Responses included:

  • large-scale fiscal stimulus
  • monetary easing through lower interest rates
  • job-retention schemes

💡 Memory Hook

Supply shock constrains production; demand shock reduces spending.

📖 11. Ukraine War and Inflation

★ Must-know

• The Russia–Ukraine conflict began in 2014 with Russia’s annexation of Crimea, and Russia launched a full-scale invasion in February 2022.

• The war disrupted energy and food supplies because Russia and Ukraine were key suppliers of energy, fertilizers, wheat, maize, and oilseeds, contributing to higher prices and supply-chain disruption.

• Eurozone headline inflation was 0.3% in 2020, 2.6% in 2021, and 8.4% in 2022.

📌 Headline inflation measures total inflation including food and energy, whereas core inflation measures price changes excluding food and energy.

Further detail

• In 2022, the European Central Bank raised interest rates to slow inflation by making borrowing more expensive, reducing investment and consumption, lowering demand, and easing price pressure.

📌 An increase by a number of percentage points describes the difference between two rates, whereas an increase to a rate gives the new rate reached.

💡 Memory Hook

Energy and food supply shocks → higher prices → interest-rate increases.

📖 12. Macroeconomic Environment

🔑 Key Concepts & Definitions

• Macroeconomics: Macroeconomics studies the aggregate economy, including national income, GDP, economic growth, inflation, unemployment, and government policies addressing them.

📝 Essential Points

• Microeconomic decisions affect macroeconomic outcomes, and macroeconomic decisions affect individuals and businesses.

• Government decisions influence aggregate demand through measures such as tax reductions and influence production through measures such as subsidies to companies.

• Economic activity is cyclical, alternating between growth, stagnation, and contraction or crisis.

💡 Memory Hook

Micro examines individual decisions; macro examines the aggregate economy.

📖 13. Economic Growth and Business Cycles

🔑 Key Concepts & Definitions

• Economic growth: At the country level, economic growth is visible as an increase in GDP, reflecting the capacity to produce and sell valuable goods and services.
• Boom: A boom is a period of rapid economic expansion associated with efficient resource use, high production and demand, and low unemployment.
• Recession: A recession is a period of economic crisis in which production and consumption decrease and unemployment is high.

📝 Essential Points

📌 Actual growth fluctuates with the business cycle, whereas potential growth is the economy’s ideal or potential growth rate.

• 🔄 The business cycle proceeds through:
  1. a boom
  2. a downturn
  3. a recession
  4. a recovery

💡 Memory Hook

Boom → downturn → recession → recovery.

📊 Synthesis Tables

Euro Convergence Criteria