Part A

• Public Economics is the study of government policy focused on economic efficiency and equity.
• Public Economics - also deals with the study how government policies affect the economy and how policies are designed to maximize welfare through provisions of public goods.
• Public Finance is the study of the role of the government in the economy.
• Public Finance - a branch of economics that assesses the revenue and expenditure of the government and adjust of one or the other to achieve positive effects and avoid the negative ones.
• Public finance looks into threefold functions of the government namely:

  1. efficient allocation of available resources
  2. the distribution of income among citizens
  3. the stability of the economy
• According to the economist Jonathan Gruber, the framework to assess the broad field of public finance covers the following four central questions:

  1. When should the government intervene in the economy?
  2. How might the government intervene?
  3. What is the effect of those interventions on economic outcomes?
  4. Why do government choose to intervene in the way that they do?
• The public sector is a specific part of the national economy composed of the institutions and organizations that are in whole or in part funded by public funds and are connected with the fiscal system.
• Public sector - other specific characteristics include their ownership, management system, provision of public goods to the people. It fills the gap unoccupied, for various reasons, by private companies within their business activities.
• The private sector is the segment of a national economy that is owned, controlled, and managed by private individuals or enterprises.
• Private sector - is an organization created by forming a new enterprise or privatizing a public sector organization.
• The public and private sectors permanently influence each other with respect to both size and activity.
• The state strongly influences the private sector through various public-private partnership.
• According to Abraham Lincoln, "government is of the people, by the people, and for the people".
• The prime duty of government is to serve and protect the people.
• Government to be able to exercise its mandate, it has to perform three major fiscal functions, namely: resource allocation, resource distribution, and stabilization.
• Government resources are generated from:

  • taxation
  • sale of government assets
  • income from operations of government agencies and government owned and controlled corporation
  • grants and aids
  • borrowing
• In case of deficit budget, the government may source needed financing for implementation of policies, programs and projects through borrowings which may come from domestic or foreign borrowings from bilateral or multilateral sources.
• Restrictive measures. One of its control tools is public finance. Therefore, public finance measure must be analyzed and examined, including how its impact the private sector.
• When the government intervenes and takes action within the economy, the outcomes are classified into one of three categories: economic efficiency, distribution of income, or macroeconomic stabilization.
• The allocation function involves government tax and expenditures policies which are concerned with influencing the provisions of goods and services in the economy.
• Resources are channeled by the government for the provision of public goods and services into five sectoral allocations namely:

  Social Services

  Economic Services

  General Public Services

  Debt Burden

  Defense
• Social Services - including health, education, nutrition, and social welfare.
• Economic Services - including agriculture, tourism, transportation, and energy.
• General Public Services - including running the operations of the government.
• Defense - for national security and maintenance of peace and order.
• Debt Servicing - including government borrowings.
• The yearly budget is appropriated by law under the annual General Appropriations Act.
• "Bayanihan to Heal as One Act" was enacted on March 23, 2020 to "authorize the President to exercise power necessary to carry out urgent measures to meet the current national emergency related to COVID-19 only for three months unless extended by the Congress.
• Government policies on taxation and expenditures are aimed at equitable distribution of income.
• Those with higher income are paying higher taxes through progressive income taxation policy.
• Redistribution of income may take in two forms: Income support in the form of monetary payments and redistribution in-kind.
• Income support in the form of monetary payments like unemployment benefits, social security payments and conditional cash trasnfer program such as the 4Ps and Social pension.
• Redistribution in-kind which involves public provision of goods and services such as health care, education, housing, and food for certain individuals and families.
• The stabilization function of the government is to maintain a steady pace of economic growth and to stabilizes prices. The policy measures for stabilization involves fiscal policies and monetary policies.
• Fiscal policy uses government spending and tax policies to influence macroeconomic conditions, including aggregate demand, employment, and inflation. These may have expansionary or contractionary effects in the economy.
• Expansionary fiscal policy in the form of tax cuts is imposed by the government. When there is a tax cut like in personal income tax, disposable income increases that leads to increased consumption and reduces government spending.
• Contractionary fiscal policy does the reverse. It decreases the level of aggregate demand by decreasing consumption.
• On monetary policy, the Bangko Sentral ng Pilipinas is mandated to be responsible in ensuring price stability and the management of money supply in the economy.
• The monetary policy instruments either to contract or expand the money supply in the economy include: 1) reserve requirements, 2) rediscounting, 3) open market operations
• The private sector is the part of economy that is run by individuals and companies for profit and is not state controlled.