Basic Economic Problems Overview
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Questions and Answers

What primarily influences decision-making in a traditional economy?

  • Financial incentives
  • Government directives
  • Market forces
  • Traditions and practices (correct)

    • In a command economy, who typically makes economic decisions?

  • The government or a planning committee (correct)
  • Private individuals
  • Market participants
  • Foreign investors

    • What best describes the decision-making process in a market economy?

  • Supply and demand (correct)
  • Centralized government control
  • Traditions and customs
  • Random selection

    • What is one of the main reasons economics is important?

    <p>To understand how to budget and allocate resources</p> Signup and view all the answers

    Which step is NOT part of the scientific approach in empirical testing of economic theory?

    <p>Apply unrelated knowledge</p> Signup and view all the answers

    What role do statistics and econometrics play in economic theory testing?

    <p>They provide empirical proof for hypotheses</p> Signup and view all the answers

    What type of economy relies heavily on governmental control over resource allocation?

    <p>Command economy</p> Signup and view all the answers

    Why is it essential for consumers to understand economics?

    <p>To enhance rational decision-making in spending and investing</p> Signup and view all the answers

    What is the primary economic problem concerning the amount of goods and services to be produced?

    <p>What to produce</p> Signup and view all the answers

    Which economic problem addresses the utilization of resources and technology in production?

    <p>How to produce</p> Signup and view all the answers

    What does the 'for whom to produce' problem involve?

    <p>Distributing goods and services among members of society</p> Signup and view all the answers

    What is one consequence of a society utilizing all its resources for current consumption?

    <p>Decline in standard of living in the future</p> Signup and view all the answers

    Which of the following does NOT represent a basic economic problem faced by society?

    <p>Determination of taxes</p> Signup and view all the answers

    How does society choose between different production techniques?

    <p>Depending on the availability and prices of factors of production</p> Signup and view all the answers

    Which problem must society address to promote economic growth?

    <p>What provisions/laws should be made</p> Signup and view all the answers

    What must society decide regarding the quantity of goods produced?

    <p>The total output of goods and services produced</p> Signup and view all the answers

    What does normative economics primarily focus on?

    <p>Formulating policies for ideal situations</p> Signup and view all the answers

    Which of the following best defines Gross Domestic Product (GDP)?

    <p>The market value of all finished products produced within a country's borders</p> Signup and view all the answers

    How is Gross National Product (GNP) primarily calculated?

    <p>Personal consumption expenditures plus income from abroad</p> Signup and view all the answers

    What aspect does net exports represent in the GNP/GDP calculation?

    <p>Difference between a country's exports and imports</p> Signup and view all the answers

    What is the role of Gross Domestic Product (GDP) in economics?

    <p>To function as a comprehensive scorecard of a country's economic health</p> Signup and view all the answers

    Which of the following components is NOT part of the expenditure approach for calculating GNP?

    <p>Net foreign income</p> Signup and view all the answers

    What distinguishes positive economics from normative economics?

    <p>Positive economics deals with actual economic situations</p> Signup and view all the answers

    Which of the following does NOT contribute to Gross National Product (GNP)?

    <p>Income generated by foreign companies in the domestic economy</p> Signup and view all the answers

    What classification do basically stocked capital goods and inventories of raw materials fall under?

    <p>Investments</p> Signup and view all the answers

    Which of the following is included in the GNP equation?

    <p>Government Spending</p> Signup and view all the answers

    What did the GDP growth rate reach in the Philippines in 2021?

    <p>6.8%</p> Signup and view all the answers

    What is the primary difference between GDP and GNP?

    <p>GNP includes income from resident producers only</p> Signup and view all the answers

    What is a noted economic problem despite the growth in the Philippines?

    <p>Growth is considered non-inclusive</p> Signup and view all the answers

    Which of the following countries had economic growth rates that the Philippines surpassed during President Aquino’s term?

    <p>Malaysia</p> Signup and view all the answers

    In GNP accounting, if all payments for resource contributions went to resource owners, what would GNP represent?

    <p>Sum of all factors payments</p> Signup and view all the answers

    Which of the following is NOT a component of the GNP equation?

    <p>Tariffs (T)</p> Signup and view all the answers

    What is scarcity directly related to in the economy?

    <p>Inadequate production resources</p> Signup and view all the answers

    Which of the following accurately describes income inequality?

    <p>The gap in income between the rich and poor</p> Signup and view all the answers

    What is one of the main aims of the Build Build Build Program?

    <p>To enhance infrastructure projects</p> Signup and view all the answers

    Which statement about normative economics is true?

    <p>Describes 'what ought to be'</p> Signup and view all the answers

    How do people's preferences affect the market economy?

    <p>They are reflected in prices of goods.</p> Signup and view all the answers

    Study Notes

    Basic Economic Problems

    • Scarcity is a fundamental issue in all economies, dictating the availability of resources.
    • Key questions in economics include: What to produce? How to produce? For whom to produce?
    • Decisions on production involve the selection of goods and services, influenced by society's choices and available resources.

    Production Choices

    • The "what to produce" decision focuses on selecting goods and services to be available in the economy.
    • "How to produce" encompasses the choice of production techniques and resource allocation, depending on factors of production and their costs.

    Distribution of Goods

    • "For whom to produce" addresses the allocation of goods and services among society members, influencing income distribution and living standards.

    Economic Systems

    • Traditional Economy: Decisions are based on historical practices and customs.
    • Command Economy: Centralized decision-making occurs predominantly within the government or a planning committee.
    • Market Economy: Decisions are made based on supply and demand principles, allowing consumer preferences to influence production.

    Importance of Economics

    • Understanding economics is essential for effective resource allocation and budgeting at both individual and national levels.
    • Knowledge of economics aids in making more informed decisions regarding spending, saving, and investment.

    Scientific Approach in Economics

    • A systematic approach involves stating hypotheses, observing facts, applying logic, and establishing principles for testing economic theories.
    • Empirical proof through statistics and econometrics is crucial in validating economic hypotheses.

    Positive vs. Normative Economics

    • Positive Economics: Focuses on factual statements regarding current economic conditions, such as inflation rates and employment statistics.
    • Normative Economics: Discuses ideal situations and policy formulations aimed at achieving desired economic outcomes.

    Measuring Economic Performance

    • Gross Domestic Product (GDP): Represents the total monetary value of finished goods produced within a country's borders over a specific period, reflecting overall economic health.
    • Gross National Product (GNP): Estimates the total income generated by residents of a country from all economic activities, regardless of location.

    GNP Calculation Approaches

    • Expenditure Approach: GNP is calculated based on household consumption, government expenditure, investments, and net exports, using the formula GNP=C+I+G+(X-M).
    • Income Approach: GNP is the sum of all income payments to factors of production, considering wages, rent, interest, and profit distributions.

    Philippines Economic Context

    • The Philippines experienced GDP growth under President Benigno Simeon Aquino’s administration, achieving 6.8% in 2021 and peaking at 7.2% in 2013.
    • Despite growth, challenges like poverty and unemployment persist, indicating issues with inclusive economic development.

    Basic Economic Issues in the Philippines

    • High poverty rates remain a concern, with millions living below the poverty line.
    • Rapid population growth contributes to scarcity of resources, exacerbating economic problems.

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    Description

    This quiz explores the four fundamental economic problems that every economy faces, including questions of what to produce, how to produce, and for whom to produce. Gain insight into the concepts of scarcity and resource allocation that are crucial for understanding economic theory.

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