econ dev

• MACROECONOMICS


  study of the economy as a whole or the basic sector or aggregates
• basic sector or aggregates

   Household sector

   Business sector

   Government sector

   Foreign sector
• MEASURING NATIONAL INCOME AND OUTPUT

  Schools of Thought to Attain Growth and Development

  -Classical Economics

  proponent is Adam Smith, the “Father of Economics”

  the ideal economy is self regulating with no government intervention

  market system is described as an “invisible hand” that guides the economy to attain an equilibrium and at the same time full employment level
• 2 Schools of Thought

  • Keynesian Economics
  • Proponent is John Maynard Keynes
  • no automatic mechanism moves output and employment towards full employment
  • advocated government intervention through monetary and fiscal policies to stabilize output over the business cycle
• Economic growth


  measures the capacity of a country to produce goods and services Long-term expansion of the potential of the economy

  Short-term growth is measured by the annual percentage change in real Gross Domestic Product (GDP)
• CPI= Current Price/Base Year Price X 100

  Inflation Rate = CPI2-CPI1/CPI1 X 100

  Real GDP = Nominal GDP/

  CPI X 100
• Economic Development

   defined as the sustained increase in the economic standard of living of a country’s population by increasing its stocks of physical and human capital and improving its technology
• Gross Domestic Product


   measures the total market value of the final goods and services produced in the economy in a given period of time inside the boundaries of the country
• Current or Nominal Gross Domestic Product


   measures the total market value of the final goods and services produced in the economy at prevailing price at a given time
• Real or Gross Domestic Product at Constant Price


   measures the total market value of the final goods and services produced in the economy at price with base period removing the effect of inflation or deflation.
• 3 Approaches in Estimating GDP

  1. Final Expenditure Approach GDP = C + I + G + (X – M)
  2. Factor Income Approach GDP = NY + IBT + D NY = SUM (W + R + I + P)
  3. Value Added from Industrial Origin Approach GDP = A + I + S
• Balance of Payments

   Current Account

   Financial Account

   Capital Account
• Final Expenditure Approach


  GDP = C + I + E + (X – M)
• C

  Household Final Consumption Expenditure representing almost all purchases by households of durable consumer goods, non-durable consumer goods, and consumer expenditures for services
• I

  Investment or the Capital Formation
• G


  Government Consumption Expenditures including all government spending on the finished products of business, all direct purchase of resources by government but exclude transfer payments, veterans payments and welfare payments
• (X-M)

  Net Export is the difference between exports and imports of goods and services representing the net effect of foreign trade on GDP in our in our economy
• Real GDP (2012) = Current GDP/CPI X 100

  Real GDP = 19,516,418/119.1 x 100 = 16,386,581

  Real GNI (2012) = Current GNI/ CPI X 100

  Real GDP = 21,457,391/119.1 x 100 = 18,016,281

  
• Indirect Business Taxes (IBT)


  Taxes on the sales of goods and services including value added tax (VAT)
• Depreciation (D)


  Also called capital consumption allowance or consumption of fixed capital. Cost of the used capital goods in a given period of time
• Depreciation

  Gross Investment – Net Investment
• Net Primary Income

  Net Factor Income from Abroad which is the difference between the aggregate flow of factor payments from the rest of the world
• Inflow (+)


  • Receipts from the use of the economy's resources from the rest of the world like salary remittances of OFWs
• Outflow (-)


  • Payments for the economy's use of foreign investments in the Philippines
• Factor Income Approach


  GDP = National Income + Indirect Business Tax + Depreciation

  National Income

   the sum of all income payments derived from the four factors of production from (land, labor, capital and entrepreneur) such as the rent, wages, interest and normal profit

  Normal Profit

   sum of proprietors’ income and corporate profits

   corporate profits include corporate income taxes, dividends, and undistributed corporate profits
• Value Added from Industrial Origin Approach


   reflects the sectoral contributions to economic activities such as in agriculture, industry and service sectors

   derived by adding together the gross value added originating from the various industries

  
• GOVERNMENT FUNCTIONS

  Resource allocation

  Resource Distribution

  Stabilization
•  Resource allocation


  Sectoral allocation of resources

   Social services

   Economic services

   National defense

   General administration

   Debt servicing
• Stabilization


  Fiscal policies - taxation and expenditures

  Monetary policies - to control inflation and manage supply of money
• Resource Distribution


   Income support

   Redistribution in kind

  example 4Ps as Conditional Cash Transfer
• Sources of Government Revenues

  • Tax revenues
  • Non-tax revenues  Operating and service income  Income from public enterprises/investments  Sale of assets  Grants and aids  Borrowings
• Economic development


  It is the process of improving the quality of all human lives and capabilities by raising people's levels of living, self esteem, and freedom.
• Absolute poverty


  The situation of being unable or only barely able to meet the subsistence essentials of food, clothing, shelter, and basic health care. Absolute measure (not relative measure): If you have under 1.90 Dollar per day, you live in absolute poverty.
• Economic growth


  It refers to an increase in aggregate production in an economy in a given period.
• Sustainable development


  It reflects the need for careful balance between economic growth and environmental preservation. for the purpose of "meeting the needs of the present generation without compromising the needs of future generations.
• Real Gross Domestic Product


  It is used as the indicator to measure economic growth.
• Investment


  Leakages in the circular flow of economic activities include the following except
• Crowding out effect


  It is the effect when an increase in government spending financed through public borrowing results in less spending by the private sector because they no longer borrow since interest rates increased.
• Net Primary Income from Abroad


  The component that differentiate the Gross Domestic Product and Gross National Income is the
• Recession


  During this time of COVID 19 pandemic, the country is experiencing an economic phenomenon that would describe which business cycle as manifested by declining economic activities and increasing unemployment for more than the past 6 months?