SS - CHAP 10

• Dr. Bernardo M Villegas, in his book Guide to Economics for Filipino, defined economy as “people, needs, and work— and the results of work, which are goods and services that satisfy part of the peoples needs
• Thus, economy is a social institution that is primarily concerned about the proper allocation of scarce

  resources to satisfy multiple human wants.
• Allocating resources entails work, which makes the production of goods and services possible.
• The study of the national economy falls in the realm of macroeconomics. Economists also call the national economy as the macroeconomy. Macroeconomics views the economy from the "top down. It deals with the activities of the major sectors of the economy. It studies the total movements of income, consumption, employment, and

  production.
• National economy is an interrelationship of four macroeconomic ideas:

  consumption, employment, production and income.
• Consumption, _employment, production, and income are invariably called the interdependent parts of the economy. Consumption is the purchase and use of goods and services. Empleyment refers to people at work. Production is the processing of factors of production into goods and services. Income is the payment for the inputs used in production and for the goods and services consumed
• Recession is a period of reduced economic activity resulting to increased unemployment.
• depression is a period of general economic hardship due to massive unemployment, declining real incomes, and acute shortages.
• john Maynard Keynes divided national economy into four major interacting sectors: consumers, businesses, government, and the rest of the world. Their interrelationships portray how most economies operate these days.
• Private individuals comprise the consumers sector of the economy. The

  1:

  consumers sector is also known as the household sector. The National Statistics Office (NSO) defined household as "an aggregate of persons, generally but not necessarily bound by ties of kinship, who live together or share in common the household food." It follows that families are not the only ones that comprise the household sector. Any group of persons who live together under one roof is a household.
• The total household spending is known as personal or private consumption expenditures.
• Profit-seeking organizations comprise the business sector of the economy. These organizations are invariably called firms, companies, or enterprises. The entrepreneurs or capitalists are the key people in the business sector. They are commonly called businessmen.
• Based on capital and manpower size, businesses are classified as micro, small, medium, or large.
• Business spending is known as investment or capital formation.
• Capital formation comes in two forms: fixed capital and changes in stocks.
• capital is accumulated through direct investments, while stock investments are carried out through buying equities in the stock or securities market.
• Stock investment is also known as equity shares investment or portfolio investment.
• The Philippine government is another major sector of the economy. Also known as the public sector, it is the biggest single economic entity in the country.
• Government expenditure is regulated by fiscal policy.
• The rest of the world is the foreign sector component of the national economy.
• The households are the suppliers of factors of production, which are land, labor, capital, and entrepreneurship. The firms buy these resources from the households through the input market and process them into products. The payments that households receive from the firms are called factor incomes.
• four factors of income are: salary, wages, rent, and interest
• Salary or wage is the payment for labor services.
• Proff is the payment for the use of capital.
• Rent is the payment forthe use of land and other real property
• Interest is the payment for the use of funds.
• The payments the firms receive from the households are called business revenues. Business revenues are commonly referred to as profit.
• savings, taxes, and foreign exchange outflows, (such as importation, foreign debt servicing, and travels abroad) create leakages in the circular flow of goods, services, and income.
• Production is a major economic activity. It is responsible for turning out goods and services for the economy's consumption. The national economy is divided into three production sectors. These are the agricultural, industrial, and service sector.
• Providing support to the production sectors are the financial and labor sectors.
• policy can influence growth, either for good or i’ll, im many ways.