Economic Development (Reviewer) PDF

ECONOMIC DEVELOPMENT (Reviewer) Economics is a science AE108-C030 SCIENCE is a systematized body of knowledge that traces the relationship between cause and...

ECONOMIC DEVELOPMENT (Reviewer) Economics is a science AE108-C030 SCIENCE is a systematized body of knowledge that traces the relationship between cause and effect ECONOMICS Another attribute of science is that its The science that deals with production, phenomena should be amenable to exchange and consumption of various measurement commodities in economic systems. It shows how scarce resources can be used to increase Economic is a Social Science wealth and human welfare. A Social Science In order to understand the Two Major factors are responsible for the social aspect of economics, we should bear in emergence of economic problems: mind that laborer’s are working on materials drawn from all over the world and producing 1. The existence of unlimited human wants commodities to be sold all over the world in 2. the scarcity of available resources order to exchange goods from all parts of the world to satisfy the wants. Want Economic is an Art An Art is a system of rules for the attainment of Satisfaction effort a given end. A science teaches us to know: an art teaches us to do. “Economics not only covers the decision making MICROECONOMICS behavior of individuals but also the macro variables of economies like national income, Analyses the economic behavior of any public finance, international trade and so on” particular decision-making unit such as a household or a firm. MACROECONOMICS Economics Studies the behavior of economic system as a Oikos (house) whole or all the decision-making units put together Nemein (to manage) MACROECONOMICS POLICIES The CPI is weighted average of all price. It is the price of a basket of goods and services relative What is Macroeconomics? to the price of the same basket in some base It is the branch of economics that deals with the year. overall functioning of the economy. What is Macroeconomics policy? CPI= Cost of market basket in a given year x 100  Macroeconomic policies include taxes, Cost of market basket at base government spending and borrowing, PRODUCER PRICE INDEX (PPI) exchange rate determinants and monetary and credit rule. Producer Price Index (PPI) it measures the  Its primary goal is to reduce uncertainly prices of a typical basket of goods bought by and risk in economic decision-making. firms or producing units A stable macroeconomic environment PPI differs from CPI partly in its coverage which improved living standard includes, raw material and semi-finished goods. It also differs from CPI because it is designed to But stability is not only the concern: these measure prices at an early stage of the policies also have an important impact on how distribution. income is distributed across economic classes and across generation. PPI= Current Price of Basket Base Price of Basket TWO TYPES OF MACROECONOMICS TO PURSUE ITS GOALS INFLATION  Monetary Policy- Which involve  Inflation is a measure of the rate of policies that affect bank lending interest rising prices of goods and services in an rates, and financial market, is conducted economy by a nation’s central bank  If inflation is occurring, leading to higher  Fiscal Policy- which involves prices for basic necessities such as food, government spending taxes is it can have a negative impact on society determined by a nation’s legislative Two types of inflation body  Demand-pull inflation COST OF LIVING  Cost-push inflation Consumer Price Index (CPI) The Consumer price index (CPI) is the most widely used measure of the level of prices. It is constructed by collecting the prices of thousands of good and services In like a manner the CPI expresses the prices of numerous goods and services into a single index for measuring the general price level. UNEMPLOYMENT Foreigners living in the country who have acquired residency Reasons of unemployment in the Philippines Filipinos who have migrated abroad and became  Job – skills mismatch among Filipino residents of foreign countries graduates  Lack of quality graduates Gross Domestic Product  Outdated school curriculum GDP  Lack of skills and experience  Lack of understanding about job A measure of total flow and services produced application by the economy over a particular time period  Discrimination and unreasonable job requirements GDP is the value of goods and services made in  Poverty cycle the Philippines regardless of who owns them  Rapid population growth APPROACHES TO NATIONAL INCOME MACROECONOMICS ACCOUNTS MEASURING GNP AND GDP National Incomes PRODUCTION APPROACH OR VALUE ADDED APPROACH Measure of the money value of the total flow of goods ands services produced in economy over Value which is added at the time of production. a specified period of time. It is used as a basis in determining the capabilities of an economy. It is also known as the reverse of the expenditure approach National Income consists of the following: Gross Value Added= Gross value of output –  Wages or salary- those generated by Value of intermediate consumption labor  Interest- those generated by lenders of EXPENDITURE APPROACH funds GDP FORMULA = C + I + G + NX  Rent-those generated by the owners of real estate WHERE,  Profit- those generated by C= All private consumption/ consumer spending entrepreneurs in the economy. It includes durable goods, non-  Net Factor- Income from abroad durable goods and services ECONOMIC INDICATORS I= All of country’s investment on capital Gross National Product equipment, housing etc. GNP G= all of the country’s government spending. It includes the salaries of a government employee. Measure of market value of the final goods and Construction, maintenance etc. services produced by nationals or citizens of a country in particular period of time. NX= net country import GNP is the value of goods and services made by GDP FORMULA = Consumption + Investment + Filipinos Government spending + Net export INCOME APPROACH GDP Formula= Total National Income + Sales Taxes + Depreciation + Net foreign factor Income Where, Total National Income- Sum of rent, Salaries profit Sales taxes -tax impose by a government on sales on goods and service. Depreciation-the decrease in value of an asset Net foreign factor income- income earn by foreign factor like the amount of foreign company or person earn from the country and it is also the difference between a country citizen and country earn