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The Wealth of Nations (1776) - Adam Smith (Father of Modern Economics) Economics is the study of how wealth is created and distributed Political Systems: 1. Totalitarian: One mas has the right to rule the lives of all them in his community 2. Democratic: All men are equal and their leader should be freely chosen by members through free election Economic systems: evolves when people or the community define the manner by which they want their economic affairs t o function Politico Economic Systems: 1. Communism: - Economic goods are owned by the population population - Classless Classless society society / Equality Equality - No free lunch. lunch. Work! Work! - Produce goods according to capacity and need. need. - Free education, but strict validation on public schools admission. Private schools are present. present. - Totalitarian where rights and privileges of individuals individuals are suppressed - Activities are collectivized and centralized by the state - Leader Examples: Gorbachev of USSR, Mao Tse-Tung of China, Karl Marx - Country Examples: North Korea, Soviet Union 2. Socialism: - Most businesses are owned by the government - Private ownership to minor business. business. Freedom of speech, speech, press and vote. - Option to choose between between private and public public schools. - Free election election is allowed. allowed. - Country Examples: Sweden, Denmark, Norway, United Kingdom 3. Capitalism: - Productive resources are owned, controlled and managed by private citizens with minimum economic intervention by the government - Private ownership, speech, press press and vote. - Conduct Conduct activities freely. freely. - Option to choose between private private and public schools. Rich citizens --> private schools or public schools, Poor citizens --> public schools - Leader Examples: Philippine President Gloria Macapagal-Arroyo, US President George Bush - Country Country Examples: Examples: Philippines, US, Canada, Japan 4. Fascism: - Privately owned, but extensive and far reaching, reaching, government economic economic direction is present. - Certain degree of personal choices - No free lunch. lunch. Work! Work! - Extreme nationalism, racism, glorification, patriotism and gratification of the head of the state - Totalit Totalitari arian an - Free education. Private schools are present present - suppression of civil liberties - Strict validation on public schools admission - Leader Examples: Adolf Hitler of Germany, Moussolini of Italy, Franco Franco of Spain, Lenin - Country Examples: Uganda, Germany, Italy, Spain, Spain, Middle Eastern Countries, and some African emerging countries Because of Scarcity, every society must make a choice on: 1. What to produce 2. How to produce 3. For whom to produce
Four Types of Economic System that can be adopted: 1. Tradition: Economic choices are decided by the past. a. Tradition determines the current level of output for a commodity or service produced. b. Example: Our forefather farmers want their child to be farmers too. 2. Command: Dictatorial system of government a. An economic commander-in-chief or a group of men determines the goods and services to produce b. What, how much and for whom to produce are planned and dictated from above to those involved in the production below. The central government directly or indirectly sets output targets, incomes and prices. 3. Market Economy (Free Enterprise) a. Characterized by the existence of private ownership of the non-personal means of production and the allocation and use thereof, motivated by the desire of personal profits. b. The price of commodity determines what, how much and for whom goods are produced. Laissez Faire (french word) - "allow them to do" - individual people and firms pursue their own self-interests self-interests without any central directions or regulation from the government government *Goods and services are produced and sold only if the supplier can make a profit. produced) by choosing what to Consumer Sovereignity - the idea that consumers ultimately dictate what will be produced (or not produced) purchase (and what not to purchase).
4. Mixed Economy - More of a socialist society. Individual enterprise exists and independent choice is exercised even in economies in which the government plays a major role. Why study economics? 1. To understand the society better. 2. To understand global affairs. 3. To be an informed voter. 4. To learn a way of thinking *Economics is anchored to the concept of scarcity. Economics is the wise allocation of scarce resources geared towards maximization of the available resources. It is a social science because it deals with how he lives his life and that of how other men live. *Resources are very limited but the needs/wants of men are unlimited.
Resources: tools that we can use to battle scarcity 1. Natural Materials: forests, land, minerals, rivers, oceans, wildlife, oil 2. Human resources (capital): Knowledge and skills, innovation, ingenuity. Education develops human capital. 3. Physical Capital: Machinery, technology, tools, equipment. These are man-made resources. Resources (inputs ) and economic goods ( output)
Eight Guideposts to Economic Thinking 1. The use of scarce resources to produce a good is always costly. a. Costs may be hidden or non-monetary, or delayed but there's always a cost. alternative option. b. Opportunity Opportunity cost - cost of choosing another or alternative c. Public education is not free, since the government is paying it. 2. Decision makers choose purposefully, therefore, they will economize. a. It is always our nature to choose something that we can get benefit from. b. Under what condition may people violate the assumption of rationality? By acting emotionally and ppppppppppppsentimentally. 3. Incentives matter. a. Corporate social responsibility is not a good will but done for the government tax credit incentives. 4. Economic thinking is marginal (additional) thinking. a. It would look like making small changes that command small twists in decision, therefore, we end up not making real decisions. 5. Informational is costly, but helps us make better choices.
a. We take into account the cost of information when making decisions. decisions. 6. Economic actions generate second effects in addition to immediate effects. a. We have to be aware of the long-run effects as well as the short-r un effects. 7. The value of a good is subjective or personal. a. A good may cost two individual the same amount but the real value of the good is different to these two individuals. b. De Gustibus Non Disputandum - Preferences differ between individuals 8. The test of a theory is its ability to predict. a. Economic thinking is scientific thinking.
Positive Economics: Unbiased, objective, scientific approach to issues. - It is an analysis when you try to criticize policies and make suggestion to correct certain mistakes. - It does not tell us what policy is best; it just tells us what will happen if a policy is adapted. - Example: If the money is supplied by 10%, interest rates will increase by by about 10%. - Uses words words like "will, shall" shall" - Economics of "what is" Normative Economics: - Specific policy alternative, because it uses subjective, ethical or moral judgments in addition to positive approach. - economics of what ought to be. - uses words like "should", "ought", Pitfalls to Avoid in Economic Thinking 1. Violation of the ceteris paribus condition. a. Ceteris Paribus: "All other things are held equal or constant. b. If the price goes down, but the income also goes down, then we aren't sure what will happen. 2. Association is not causation. a. Statistical testing only proves association or correlation, not actual causation. b. Education brings about higher income. c. What works for others, will not necessarily work for you. 3. Post Hoc, Ergo Propter Hoc (After this, therefore because of this) a. A common mistake in economic evaluation when you base findings on past occurrences and assume that these have caused the present situation. b. Men wearing ties make more money. Important Terms to Remember 1. Fallacy of Composition: Misconceived assumption assumption on the basis of what is true to one is true t o everyone. 2. Opportunity Opportunity Costs: The best alternative that we forego, or give up, when we make a choice or a decision. Marginalism and Sunk Costs 1. Sunk Costs: Costs that cannot be avoided, regardless of what is done in the future (e.g. Food) 2. Transfer Payments: Benefits given to retirees in forms of pension, health insurances and others. (e.g SSS) *Resources are scarce relative to unlimited wants.
Scarcity, Choice and Costs 1. Resources are scarce - not enough to satisfy all wants. 2. Choices have to be made. 3. And any choice involves an opportunity cost cost - the value of the best alternative foregone. Three Basic Decisions 1. What to produce 2. How to produce 3. For who to produce Three main elements of a market 1. Demand 2. Supply
3. Price how individuals and societies make choices. Gerardo Sicat (2006) - Economics is a scientific study, which deals with how Branches of Economics: individual industries and the behavior of individual decision-making units units - that is, business 1. Microeconomics: examines the individual firms and households. 2. Macroeconomics: examines the economic behavior of aggregate income, employment, output and so on, on a national scale.
Income increases? More purchased commodities Graph - a visual representation of the relationship between two variables or a two dimensional representation of a set of numbers or data Cartesian Coordinate Plane - most common method of graphing two variables. Two perpendicular lines that intersect at point 0. Origin: point of intersection Slope of a straight line: ratio of the vert ical change (the rise or drop) to the horizontal change (the run) between any two points on the line. Positive slope: both x and y increases or both x and y a Negative slope: x and y are opposite to each other Economic Resources or Factors of Production: the things which are needed to carry on the production of goods 1. Land (natural resources and raw materials that are beneath and above the land) a. An economic good because it is scarce and a price has to be paid for it 2. Labor (human effort exerted in the production of goods) a. Human beings who extract the raw materials, process them into finished consumption or investment goods b. Transport and sell raw materials or finished products 3. Capital (Man-made goods used to produce other goods) a. Tools, machinery and equipment 4. Entrepreneurial Entrepreneurial Ability (Business-minded) a. Bears risks, takes the initiative, innovators and decides what, how much and for whom to produce Production possibilities schedule or table: - shows the different combinations of two commodities that society can produce by fully employing all its r esources with the best technology available. - shows the different combinations of two goods which are possible to produce when there are both full full employment and full production in a hypothetical economy whose resources remain fixed - the production possibilities frontier tells us that: (1) To produce more commodity commodity A, the economy must must use more of its fixed quantity of resources for commodity A production and (2) the economy must make a choice on which combination to produce and the cost of producing the goods - Since resources are not equally efficient in the production of both commodities, commodities, for each additional unit of a commodity we produce, the more we must give up the second commodity. - Would show a downward, downward, sloping, s loping, concave curve , which reflects the opportunity cost of producing a good. Economics goods are not completely adaptable, hence, concave.
Assumptions in Production possibilities frontier: 1. Efficiency: the economy is operating at full employment and achieving full production 2. Fixed Resources: the available supplies of production are fixed 3. Fixed Technology: the technology does not change at some specific point in time 4. Two Products: There are only two products instead of innumerable goods and services actually produced. Cost = the sacrifice that must be made (or what must be done wi thout) in order to produce goods.
*To increase the production of food from 2 to 3, we have to decrease the production production of clothing by 4. The opportunity cost of 3 units of food is 4 units of clothing.
The Law of Diminishing Returns: If more of the same input is employed in the production of a particular good, the corresponding increase in total output tends to become smaller and smaller, that is, if the amounts of other inputs r equired in the production process are kept constant (ceteris paribus). - Example: The use of fertilizer improves crop production, but at some point, the benefit of adding more and more fertilizer will as good anymore.
Wedn We dnes esda day, y, Ju June ne 18 18,, 20 2014 14
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Political System determines the kind of economic system that a particular society has: command-in-chief. 1. Totalitarian - One Man / All decisions are being made by the command-in-chief. opposite 2. Democratic - Exact opposite
Three Powers of the Sovereign State 1. Police Power 2. Taxation 3. Imminent Domain Politico-Economic Politico-Economic System: 1. Communism: a. In classless society , one won't be judged. b. Everyone is being given equal opportunity in education. Education is free. c. Production and consumption are based on needs. d. Individual rights are suppressed. (Just like Marcos's time) e. Political and economic actions are controlled by the government f. Leader Examples: Gorbachev of USSR, Mao Tse Tung of China, Karl Marx 2. Socialism: a. Right to private ownership but to minor business only. b. Big industries like MERALCO, PJI, NAWASA were government owned. c. Freedom to choose between public or private schools. 3. Capitalistic: a. If you are born rich, you will die rich. b. Productive resources are operated by private citizens c. In classful society , we are being judged with the amount of money that you have. d. Susceptible to make excessive profits e. Leader Examples: PGMA of Philippines, George Bush of US f. Countries: Philippines, US 4. Fascistic: a. "Blind obedience" / Similar to muslims b. You have to follow the commander-in-chief no matter what c. Extreme gratification of the head of state d. Leader Examples: Adolf Hitler to Germany, Moussolini of Italy and Franco of Spain e. Private ownership is allowed but the government has the full say. You want condominium? No, government says you use it for agriculture. Four Economic Systems: 1. Traditional a. Economic decisions are based on what happened on the past. b. The production for this year depends on last year. What about population growth? Possible shortage! 2. Command a. Economic decisions are made by the commander in chief. b. He decides what, how much and for who to produce. 3. Market a. Everything is determined by the price. b. Item is expensive? Not much production. production. Item is cheap? More! 4. Mixed a. More than one is being followed. b. Philippines was a command system before (Martial law). We were also socialism before when the government owns the major industries like MERALCO, PJI and NAWASA Why study economics? 1. To help us understand the political systems of the country. 2. To help us better utilize the scarce resources.
3. To know that purchasing counterfeit is bad for the economy. 4. To know how the economy works Doubling the money but having the resources constant do not make any differences! - Goods are limited, hence, hence, money should should be limited too. December: economy is doing well. Everyone has more money than usual: - Due to remittances, 13th month pay, Christmas bonus --> These These are irregular :) Shortage of goods --> import Excessive money --> Government extracts money out of the economy through treasury bills Shortage of money --> Government offers loans at a very low interest rate. For contracts, consider inflation rate, otherwise, lugi ka. Eight Guideposts to Economic Thinking 1. The use of scarce resources to produce a good is alway s costly. a. Choose the ones that benefit you the most. 2. Decision makers choose purposefully, therefore, they will economize. a. Choose purposefully. 3. Incentives matter. a. Treat yourself with hard-earned money. 4. Economic thinking is marginal (additional) thinking. 5. Informational is costly, but helps us make better choices. a. Advertisements, basketball franchises, commercials. 6. Economic actions generate second effects in addition to immediate effects. 7. The value of a good is subjective or personal. 8. The test of a theory is its ability to predict. Pitfalls to Avoid in Economic Thinking 1. Violation of the ceteris paribus condition. a. Lower Price, Higher Demand b. Lower Price but lower income? We don't know anymore. 2. Association is not causation. a. What works for others, will not necessarily work for you. 3. Post Hoc, Ergo Propter Hoc (After this, therefore because of this) a. Eyeglasses? Genius b. Good in english? Rich c. Men wearing ties make more money. Opportunity Costs: Cost of choosing an alternative Sunk Cost: Cost you can't avoid in the future (e.g food) Transfer Payments: benefits of senior citizens Positive Economics: telling the truth Normative Economics: subjective, ideal Teacher's table or a student's chair? Student's chair because (1) learning needs to be comfortable and (2) a chair will benefit a lot of people in the students. (3) Teachers can also conduct lesson without a chair. Three Basic Questions: 1. What to produce 2. How to produce 3. For whom to produce Inverse proportionality between price and demand 1. Price goes up, demand goes down. 2. Price goes down, demand goes up.
Direct proportionality between price and supply 1. Price goes up, supply will be up because manufacturers want to earn and make a profit. 2. Price goes down, supply should be kept for the mean time until price stabilizes
Microeconomics: studies individual units, household or companies Macroeconomics: studies aggregates or totality Factors of Production 1. Land: not just the soil, but everything in Earth 2. Labor: services a. Considered most important. You need competent employees! b. Even if you got the most advanced technology, if you have incompetent employees, it is useless. 3. Capital: man-made goods required to produce other goods. e.g machineries 4. Entrepreneurial Entrepreneurial Ability (Business-minded) Assumptions: 1. Efficiency: full employment of people and economic resources 2. Fixed Resources: the available supplies of production are fixed 3. Fixed Technology: no new technology 4. Two Products: There are only two products instead of innumerable goods and services actually produced.
PHP 300 Allowance: a week allowance that a student can spend Gap: opportunity costs Point C (beyond the curve) is unattainable since we have fixed resources. Points A and B (on the curve) means that the economy maximized the resources already. Within the curve means that the economy has wasted some of the resources. Reason? 1. Government issues 2. Pocketed by officials
Sunday, Ju June 29 29, 20 2014
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*In the Philippines, the law of demand and suppl y bears importance since our system is predominantly market in nature.
Market: interaction between buyers and sellers for trading or exchange. Goods market is the most common market. Good: Good: a commodity that is socially desirable, gives satisfaction satisfaction so that the consumers are willing to pay a price to get a quantity of said commodity. Service: any assistance extended to by somebody whom we usually repay in monetary terms Price: value of a product or service expressed in monetary units like peso and dollar. Demand: set of quantities that buyers are willing and able to buy at a given, price, time and place * price is the primary determinant of demand Two Requisites of demand to be effective: 1. Willingness to buy 2. Ability to buy Non-Price determinants of Demand 1. Income: Increase in income causes an increase in demand 2. Population: Increase in the number of buyers in a market (or increase in population) increases demand and vice versa a. Baby boomers who once want diapers now wants housing. 3. Taste and Preferences: favorable change in consumer tastes (preferences) for for a product - a change that makes the product more desirable - means that more of it will de demanded at each price and vice versa. 4. Price Expectations: If people expect the prices of goods, especially basic commodities to increase by the coming week, they buy more of these goods and vice versa. 5. Prices of related goods: a. Complement Goods: goods that go together b. Substitute goods - goods that can serve as replacement for another *The lower the price, the higher becomes your willingness to buy (demand) Law of Demand: As price increases, quantity demanded decreases and vice versa. - only valid with Ceteris Paribus (all else equal or all other things remain constant) - only valid with all the non-price determinants are held constant Characteristics of Demand Curve 1. Demand curve depicts situation at a given period of time. 2. Demand curve slopes to the negative side. Reasons Why Demand Curve slopes to t he negative side 1. Income Effect. Whenever a good or a service a person buys goes up or down in price, it will affect the person's real income. a. During 1960s, ligo and coke are just 10 centavos. You can buy more of them in 1960s with PHP 500 than today. 2. Substitution Effect. Whenever the price of a good or service changes while other prices stay constant, relative prices are altered. Consumers tend to buy more goods and services with lower prices. a. People tend to buy better substitutes as their incomes improve. (Raises their standard of living) b. People tend to look for inferior goods as their income diminishes or if the price of the desired good increases. c. If the price to Tide detergent increases, they look for alternative like Ajax or Breeze. Normal goods: demand is directly proportional to income
Inferior goods: demand is inversely proportional to income since individuals are inclined to purchase better quality goods and products with higher status symbol as their incomes rise.
Mond Mo nday ay,, Ju Jun ne 30 30, 20 2014
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*Resources can be allocated through the Market or the Government. *Opportunity costs can be applied on market and government decisions. *Fail: failure to achieve efficient or optimal results from the overall viewpoint of society as a whole. - failure to maximize overall social welfare of society *An economy can operate the same way even without any government or society interfering. *Prices are set by market forces and most economic goods and services in the market get allocated by prices.
*Law of Demand: inverse relation between price and quantity demanded - we want to get as much satisfaction (utility) from our limited income, so we choose to maximize our purchasing power - tells us that that Price Increases result in a reduction of Quantity demanded Substitutes: similar or competitive products. Part of the reason why we purchase less at higher prices. There are substitutes for everything. Depending largely on price. *No butter? We buy more margarine. *No grapes? We buy more bananas. *A lot of good substitutes? Demand curve is flat and the demand is elastic. *A few substitutes? Demand curve is steep and the demand is inelastic. Steepness / flatness of the demand curve reflects how sensitive consumers are to prices. *Elasticity of demand: precise measure that tells us how much quantity demanded will fall with a price increase. Consumer responsiveness to price change.
Consumer Surplus: Difference between the maximum price a consumer is willing to pay and the actual price. - Market Market Price Price - Musician is willing to purchase a guitar for PHP 5000, but was able to purchase the said commodity with PHP 2000 only. Consumer surplus is PHP 3000. Quantity demanded is determined by price only. Movement Movement along the demand curve. - To the left, decrease. To the right, right, increase. Change in Demand is determined by non-price determinants of demand. Shift in the entire demand curve - To the left, decrease. To the right, right, increase. Non-Price Determinants of Demand: 1. Income a. Increase in income means increase in demand. 2. Number of Consumers in the market / Population a. Increase in number of consumers means increase in demand b. Market is expanding if number of consumers is increase. It s 3. Price of Related Goods a. Complements: products used together like cars and gas. b. Substitutes: alternative products c. If the price of complementary good decreases, demand for the product increases. d. If the price of substitute goods decreases, demand for the product decreases. 4. Price expectations a. If price will increase tomorrow, demand will increase today. 5. Demographic Changes a. If changes are favorable to the market, demand will increase. 6. Tastes and Preferences a. Health conscious demand healthier products. Producers/suppliers/firms transform raw materials into goods desired by households and sell final products to consumers. - operates in profit profit and loss system system - profit: sales revenue exceeds all costs of production - loss: costs of production exceeds sales revenue. *Those who profits survive, those who lose money are lost. Profit and loss system guides and directs market activity without any central
control. Consumer Sovereignity: consumers are kings and queens of the market Law of Supply - direct or positive relation between Price and Quantity supplied - At a higher price, the producer has a greater incentive to supply goods and services. - Represents two things: (1) the minimum price necessary to induce producers to supply a specific Q and (2) the valuation (opportunity cost of the resources used in production. Producer Surplus - Market price - minimum price a seller / supplier is willing to accept. - Musician is willing to accept PHP 500, but was paid PHP2000. Producer surplus of PHP 1500. *Elasticity of supply: measure of responsiveness of suppliers to price changes *All variable cost in the short run becomes fixed cost in the long run.
Change in Quantity Supplied: movement along a supply curve. Price-determined! Change in Supply: shift of the supply curve to the right (increase) or to the left (decrease). Non-price determined! Factors that will Shift Supply: 1. Changes in Resource (Input) Prices: Wages, parts, supplies, raw materials, interest rates, etc. a. Resources prices fall, increase in supply. 2. Changes in Technology: New ways of production. a. Higher technology means lower cost of production and speed of production, increase in supply. 3. Nature and Politics: Weather, droughts, new laws a. Favorable weather and favorable political events can increase supply. 4. Changes in Taxes: Tax means additional cost of production. a. Less tax means more supply. 5. Changes in the number of firms a. More firms producing the same good means more supply. *Market: abstract concept describing trade that takes place according to the laws of supply and demand Equilibrium: when conflicting forces of supply and demand are in balance. - Natural state of the market or the state that the market is always moving towards - No shortage, no surplus, market market clearing outcome Q s=Q D = Equilibrium = Market efficiency
Efficient Market: outright dismantling of excessive profit is enforced, then market equilibrium is taking its own course. Invisible Hand Principle - stated by Adam Adam Smith in in 1776 - by trying to make your own life better, you make society better off. When you make your life better, you pursue what you are best at. And by pursuing your own self-interest, you automatically benefit others. - The tendency of market prices is to direct individuals pursuing their own self-interests into productive activities that also promote the economic well-being of society. Questions:
1. In the same way as the market, a government can also allocate resources. Answer: True 2. Market failures means that all the resources in the economy are well and optionally all ocated. Answer: False. Failure to achieve efficient or optimal results is market failure. 3. Not all economic goods have substitutes. Answer: False. Everything has a substitutes. Some may have a few though. 4. Consumer surplus is the difference between the maximum price a person is willing to pay minus the actual price of the good. Answer: True 5. Change in demand means that the demand has shifted. Answer: True 6. The shifting of the demand curve is caused by the change in price. Answer: False. Change in price equates to movement along the demand curve. 7. If the demand of two products moves in different directions, they are complements. Answer: False. If they are complements, they move towards the same direction. 8. If the price of a product is expected to go down in the future, a normal consumer will buy today. Answer: False. If the price of a product will go down in the future, the normal consumer will not do the purchasing yet until the day the price will go down. 9. Producer's surplus is the difference between the actual price and the minimum price the seller is willing to accept for the good. good. Answer: True 10. If a market price of the good decreases, the seller will normally sell all of i t. Answer: False. Law of supply means supply decreases as price decreases. 11. Elastic Goods are those that are sensitive to price changes. Answer: True 12. Goods may either be _____ and ________ depending on whether they are bough together or in lieu of the other. Answer: Substitute or complement. 13. These are the factors that can shift the supply curve either to the right or to the left. Answer: Changes in Resources (Input) Price, Changes in technology, Changes in nature and politics, Changes in Taxes and Changes in number of firms. 14. The profit made by the seller in a transaction is called in economics as _______. Answer: Producer surplus 15. Resources can be allocated by ___________ and _________. Answer: Market and government 16. The inverse relationship of price and quantity demanded is _________. Answer: Law of demand 17. Most goods are allocated by its __________. Answer: Price 18. The market mechanism if allowed to function is always __________. Answer: efficient 19. Ceteris Paribus means ___________. ___________. Answer: Taking everything to be equal. 20. Which products are substitutes __________. Answer: coffee and tea 21. Which products are complementary? Answer: coffee and creamer 22. When the price of cell ular phone goes up, the demand for prepaid cards will ________. Answer: go down 23. The shifting of the demand c urve may be caused by the following except ________. Answer: Change in price of a product 24. The shifting of the supply curve may be cause by the following except _________. Answer: Change in the price of the product being sold. 25. When there is a balance between supply and demand, the market is in __________. Answer: Equilibrium 26. Higher prices will signal _________. Answer: scarcity 27. Market equilibrium represents the amount of trade that maximizes. Answer: net gain to society. 28. The concept of Invisible hand gave rise to the now call ed ____________ ____________ Answer: Free market economy 29. Climate change can affect supply more than demand __________. Answer: Alwayss
Mon da day, Ju Ju ne ne 30 30 , 20 14 14
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*Any law, regulations, and price adjustments that disturb the natural forces of market to free flow is deterrent to achieving economic efficiency. efficiency . Demand adjusting to supply or supply adjusting to demand. The market forces *Allowing market forces to work ensure market efficiency. (when prices are unregulated) will work towards reaching equilibrium! *Market price continually adjusts up and down to eliminate any shortage or surpluses. *Market clearing outcome: Q d = Q s.s. It means equilibrium (no shortages or surpluses). *Shortage and surpluses are economically inefficient and undesirable *Market Equilibrium is efficient and socially desirable because it eliminates shortages and surpluses. *Efficient Market: a market that continually clears. Stock market is close to an ideal efficient market. Why? 1. Stock market prices continually adjust during trading and the fluctuating prices bring about continual market equilibrium. Stock prices adjust to clear the market 2. Stock market is more efficient because prices change by the minute to adjust! Labor Market (very inefficient) because the price (wages) may be fixed for years at a time in a labor union contract. contract. Yet, the market forces are still in effect to reach equilibrium. Supply (quantity of goods available for sale) - NOT the number number of goods that are produced. produced. IT HAS TO BE FOR SALE. - Price is the primary determinant - Other Determinants Determinants of of Supply: 1. Technology: techniques or methods or production. a. Modern machines increases supply. supply. Primitive technology slows it down or decreases supply. 2. Cost of Production: change in price of raw materials or services a. If price of raw materials or services decreases, it increases supply. 3. Numbers of Resellers: More factories, sellers, producers, more supply! 4. Prices of other goods: changes in the prices of goods have effects in the supply of such goods. 5. Price Expectations: This sometimes influences sellers to hoard their goods or release them to the market depending depending on the price expectations. Supply Schedule: table showing the relationship between price and the corresponding quantity supplied. Law of Supply: states that as price increases, quantity quantity supplied also increases and vice -versa. - only valid valid with with Ceteris Paribus and all of the non-price determinants are held constant. *Change in Quantity Supplied occurs because of a change in price only. The movement is along the line only.
*Change in Supply happens when a supplier of a given commodity/good or service has altered their output through the non-price determinants. The graph shifts to the left (decrease) or to the right (increases)
Market or aggregate demand for a commodity gives the alternative amounts of the commodity demanded per time period, at various alternative prices, by all individuals in the market. - achieved achieved by horizontal summation of all the individual's demand curves of the commodity Market or aggregate supply of a commodity is the sum total of the amount of the commodity supplied per time period at various prices by all the producers of the commodity in the market. - achieved achieved by horizontal summation of all the producer's supply curves of the commodity Elasticity of demand is the degree of responsiveness of price changes to the changes in demand Questions: 1. It is the microcosm where the market forces of supply and demand efficiently work. Answer: Stock Market 2. The market forces of demand and supply will exert pressure towards equilibrium when they are: Answer: unregulated 3. It is a general term used to describe the balance of demand and supply in the market. Answer: equilibrium 4. A market that continually clears is an example of. Answer: An efficient market 5. Wages normally do not respond immediately to changes in pri ce because of? Answer: labor union contract 6. A distortion in the market happens when any or all of the fol lowing happens, except? Answer: Supply is unregulated 7. When the price of the commodity is mandated to be lower than its market price, there will be a __________. Answer: Shortage 8. A general reduction in income tax rate will s urely result to a reduced tax revenue by the government. Answer: False. Through investments, the saved money from tax can be used in investments which may become additional government revenue. 9. Price and minimum wage law promotes market efficiency. Answer: False. Any regulation, control or law may slow down market forces. 10. In an efficient market, these phenomena do not occur. Answer: Shortages and surplus. 11. The curve that shows the relationship of tax rate and tax revenue. Answer: Laffer curve
Sunday ay,, Au August 03 03, 20 2014
8:3 :37 7 PM PM
* SONA *DAP gave PHP to of TESDA. Beneficiaries: . (66% Employed, 34% Still being assisted to look for work. / scholar : Joel Villanueva * started additional income of HS grad than grade school grad. * (2012) to (2012) = *Did not increase tax aside from (2010) to (2013) *Better tax collection results to: a. Lower b. Funds for c. Other answered. short for BSP was paid. * Moody's, Fitch and Standard and Poor (credit ratings agency) *Puhunang pumasok sa : (4 years of Pnoy) and (previous 15 years before Pnoy). * , Director General of PEZA. * removed the permitted to Europe. *United States Federal Aviation placed the Philippienes back to Director General of Civil Aviation Authority of the P hilippines * on last * prevented s of strike and lockout to Secretary Linda Baldoz (2011) to (2014) Babes Singson (1) Removal of in the Bidding process and (2 (from 20 to 5). * - Made and repaired repaired roads. (2011) from 6 (of 3 previous administrations) administrations) Cesar Purisima Mactan-Cebu International Airport Passenger Terminal Building, NAIA Expressway Project Ph ase 2, TPLEX, Aluling Bridge, Metro Manila Skyway Stage 3, Ternate-Nasugbu Road, Basilan Circumferential Road *Water shortage in * Dam project, Dam repair and Laguna Lakeshore Expressway Dike * Laoag City Bypass Link Project, Cebu Bus Rapid Transit Project and LRT Line 2 South Extension and Line 2 East Extension, Busuanga Airport, Clark Green City in Tarlac * were saved *Zamboanga City Roadmap to Recovery and Reconstruction: were given 30K to repair their own house * for overall reconstruction * in Bohol: critical bridges fixed, pamilya, provinces affected 3 C130 planes entered, established communications hub. Rapid Health Assessment teams, additional soldiers, policemen and BFO personnel, working L eyte Water district : first gasolinahan opened, 1 millionth food pack and cleared of debris and of cleared National roads. electricity restored
: Greg Domingo Linda Baldoz Jun Abaya Dinky Soliman Mar Roxas Volts Gazmin * Jobs created due to livelihood interventions *According to U , it may take , but Philippines was able to recover in . * for Cebu, Iloilo, Samar, Eastern Samar, Leyte at Tacloban * Ping Lacson - flood early early detection detection system. already mapped river system * Joey Salceda : 8 Sokol Combat Utility Helicopters, 3 AugustaWestland-109 helicopters, BRP Tagban ua Landing craft utility ship, 4 refurbished UH-1 helicopters and 2 navy cutters, 17 FA50 lead-in fighter trainer jets, 8 Bell combat utility helicopters, 2 antisubmarine helicopters,2 light lift aircraft, 3 medium -lift aircraft, radar systems * rifles * in of security. * bought in other countries scandal. * caught. * defeated by against Martilyo Gang of SM MOA * police to pistol ratio *Caught of , and * Operation Lambat (NCR) - 862 vehicles and 29 guns confiscated, 587 warrants of arrest, 410 suspects caught *Result: 31/week to 22/week murders. *Customs was reset. Customs Commissioner Sunny Sevilla. 22% increased collection. First four months: PHP 117B *Cadastral Survey (1913) - identified the lands that can be distributed. New Cadastral Survey (2016) *ARMM Governor Mujiv Hataman *Comprehensive Agreement Agreement on the Bangsamoro (March 2014) *5.17B allotted for infrastructure in ARMM *Bangsamoro Basic Law / Bangsamoro Transition Authority *1.65M new employed Filipinos from April 2013 to April 2014 *K-12, 1:1 pistol ratio, National defense modernization, Mindanao peace. *Energy issues DOE Secretary Icot Petilla *Rice and hoarder issues: import! (500, 000, 800, 000 (buffer), 500, 000 (additional) metric tons of Rice) *Agriculture improvements: 4, 628 production machineries, 11, 362 post-production machineries, and 105 rice mills. Irrigation improvements. *DAP replacement? Supplemental Supplemental budget for 2014. Joint Resolution Resolution to clear definitions and principles in legislature. PHP 2.606 2.606T T in 2015 budget *PHP
*Alternative Learning System of DepEd *Jalaur Multi-purpose River project for Iloilo farmers of irigasyon. *"The Filipino is worth dying for. The Filipino is worth living f or. The Filipino is definitely worth fighting for."
Tues Tu esda day, y, Jul uly y 08 08,, 20 2014 14
7:3 :36 6 PM
Three Powers of the Sovereign State 1. Police Power (800 citizens / 1 police) 2. Taxation 3. Imminent Domain a reaction of two parties where agreed amount. * what is designed
of their goods and
- when a number of individual or groups or interest interest groups
the goods at an for a greater impact of
Income Tax, Taxes (amilyar ng bahay) and Value-added Tax ( 12%. Ralph Rector (proponent) corporate tax, corporate income taxes and Value-Added Tax ( VAT) : inherent power of the government. Inherent means there's no need to pass the law for tax. Government has the right to collect taxes. - higher income, the higher the taxes taxes = progressive - collected for every income earned - from "Robin "Robin Hood" - purpose: to provide public good (Collective) = goods or services for f ree, not required to pay directly *jeepneys are owned by private sectors but is designed for public consumption *exercise when using these public goods (CR, jeepneys) *public goods cannot be denied from anyone! Public schools should accept everyone, rich or poor! *public goods cannot be sold ( MRT, parks, basketball courts) - Partnership with private private investors: BOT (build, operate, operate, transfer) - LRT, NLEX, SLEX SLEX - we want to maximize net benefits or minimize minimize net costs - All actions involve costs and benefits and we want to engage in economizing or maximizing behavior for all decisions, both private and public.
Engage only in activities where In doing so, Undertake efficient activities. (e.g. Education) Plantsang naiwang nakasaksak? nakasaksak? Nagload ng 20 pesos to call mom. 20 pesos is nowhere near the risk of fire damage. Why is building public schools a priority than feeding people or pabahay? Long term bene fits! Feeding program is only short term fix. Senate session is very costly but is wasted o n endless battling and rants. Avoid activities where the costs outweigh the benefits. This leads to Not engaging in inefficient activities. Most of the time, a outcomes.
y because market prices and market forces guide the economy to efficient would lead to economic inefficiency. happens when it intervened but could not improve on market outcomes.
But in some cases, pollution issues.
(e.g. pollution). Government has to take care of
security and peacefulness X - You feel unsafe when going out of the house, while riding public transportation. provide and make available the needed goods and services when the existing market hardly had enough to produce Check - Everything is well provided because of the private sector. It never happened that when you need something, you can't buy it anywhere. provide necessary infrastructures to facilitate the speedy distribution of goods and services Everyone should be reached by the goods: rich and poor.
private sectors can join a government function only on the basis of inviting them to join, while they are allowed to make a profit. Cannot impose excessive profit! - moneyed group whose interest is to to make profit out of the money available available for government to use. - sometimes use the government government to prevent competition! - Competition in the market serves serves as a very effective effective natural regulator and imposes imposes a strong discipline on sellers. sellers. Government intervention may or may not be able to improve on competitive market outcomes. spillover effect (or side ef fect) on non -consenting second parties, which can either be positive or negative. anything that comes from the government (roads and bridges, parks and recreation centers, public ho spitals, public schools, municipal halls, sea and air ports, ROROs, cable lines, NLEX, SLEX, SCTEX, government TV and radio stations, LRT, MRT, garbage collection services and garbage dumpsites. *The joint consumption and excludability makes something a public good, not because the public, government or private sector pro vides it. = people who don't pay taxes *If we relied only on the market to supply all public goods, , especially of things like national defense due to the free rider problem. Therefore, economic efficiency may be improved if some public goods are supplied by the public sector. Lack or unavailability of information to the consumers may mean profit maximization by firms. Hence, the government may have to intervene! The market does provide tremendous amounts of inf ormation and there is also presence o f private regulation (Underwriter's laboratory, Consumer reports), but there may be some cases where the government can increase economic efficiency (FDA). reduction in taxes *but investments of tax payers can still be additional income f or government * : decrease in real income of government but increase in real income of individual tax payers * loss in government income , but the individual people do! - If corporate taxes are raised, raised, the firm will have have to either 1. Raise prices for customers 2. Reduce wages
3. Reduce dividends there is an optimum tax rate between 0% and 100% that gives the government the maximum possible revenue. - theoretical framework of tax collection. collection. - used to validate validate the efficacy of
Friday, Ju Jully 18, 2014
9:01 AM
Peso dollar exchange at that time is 1 dollar to 2 p esos. People are law-abiding citizens There is a cheaper cost of living. Development is vast. Labor strike is at minimum. Political unrest is not present to the majority. Kangaroo court Knights of Rasputin
During election season, in providing all services one can think of. *Government provision of many public goods falls into this category: national defense, national highway systems, etc. *Government provision of a specific service to consumers, financed by a user fee: government provision of electricity, water and sewer. *Voter support of these programs will provide politicians with an incentive to provide these public services, and the outcome could often be economically efficient.
Public choice analysis predicts that there can be serious problems (economic inefficiency) when benefits are concentrated on a narrowly focused special interest group. very organized, concentrated and well informed on issues affecting their group (e.g. farmers, teachers, etc.) - seek (demand) legislation that generates substantial benefits on their well-organized small group, while imposing a very, very small individual cost on the dispersed tax payers. analyses the motives and activities of politicians, civil servants,, and government officials as people with personal interests that may or may not coincide with the interest of the general public. *It does not follow that whenever laissez-faire falls short, government interference is expedient; since the inevitable drawbacks of the latter may be worse than the shortcomings of private enterprises. - looks at the public or collective collective decision making using the economic economic way of thinking and an economic frame work and analysis (Supply and demand) - Decisions in the economy have to be either be made (market, individuals, firms) or (collectively, through ) market fails to promote the general welfare government fails to serve the public is an alternative method (to the market) of social organization - an institutional process through which individuals collectively make decisions and carry out activities have studied the
and the
Voters (Demand) - Consumers, taxpayers taxpayers and special interest groups. Politician Politicianss (Supply) - Suppliers Suppliers Bureaucrats - who carry out and administer legislation. Public choice analysis looks at the Supply and Demand for Legislation part of our national disposable income attributed to the assignment of a certain amount given to retrieved individuals after rendering considerable number of years in the service of others. - monthly pensions received by our older folks. token of recognition of services rendered by the government money spent to a non-f unctioning sector in the economy like "conditional cash transfer" and "tulong pantawid". Motivations to tolerate laziness and dependency.
Thur Th ursd sday ay,, Au Augu gust st 21 21,, 20 2014 14
12:0 12 :05 5 PM
Output (GDP) Inflation Unemployment fluctuations in real GDP growth (some 3%, some 6%, some negative) Two or more consecutive quarters of negative real GDP growth Prolonged and severe recession lasting for years
*
category of international investment that reflects the objective of include, in addition to equity securities and debt securities in the form of bonds and notes, money market instruments and financial derivatives such as options.
new products, new industries, new opportunities for some, reduced opportunities for others. reduction on defense spending, base closings. *
We don't want zero unemployment because it could be a sign of
efficient use of labor and resources in the economy, allowing for frictional and structural unemployment = frictional and structural unemployment. It is a long run, sustainable condition due to imperfect information and dynamic changes, a maximum, sustainable rate of output. Discouraged workers, workers, who have given up looking for a job, are not counted in the labor force, and are not counted in any rate . Only those who are actively looking for a job are counted in the unemployment rate. Part-time workers are not classified as unemployed. Some unemployed people claim to be actively looking for a job, and are counted as unemployed, when they may not be seriously looking seeking employment at all.
Inflation distorts long term projects and contracts. Resources get used up trying to avoid the negative effects of inflation. Time attention attention and energy get diverted away from pro ductive activities activities to trying to protect against the effects of inflation. (Changes in menu price) Inflation reduces the information content content of prices. Market prices transit information about relative scarcity, supply and de mand conditions, etc. Inflation distorts the important economic information delivered by prices. excessive growth in the money supply. Too much money, chasing too few goods. Four Main Markets in the economy: 1. Market for final goods and services 2. Market for resources/inputs resources/inputs (labor market) 3. Market for financial assets (stocks, bonds, credit, loanable funds) 4. Foreign exchange
Conducted by Congress Congress and the President that involves tax policy, spending spending policy, regulatio regulations, ns, social security, Medicare, Medicare, as they try to stabilize and regulate the economy, to promote national goals like economic growth, low unemployment, etc. Conducted by the Federal Reserve or Central Bank of the country, which controls the money supply and attempts to stabilize th e price level. Most narrow definition of money. Cash, checking accounts and traveller's traveller's checks than be used to make final payment of goods a nd services. (Not savings accounts). Underground economy involve a job or transaction that is hidden from official view. *If
1. 2. 3. 4.
, output would expand. If
AD/AS (GDP) Resource Markets (National Income) Loanable Funds/Credits Foreign Exchange
, output would contract.
Households (Consume) Businesses (Invest) Governments (Government spending) *
- a point that the real economy may never get to. It is always moving towards equilibrium but
Sund Su nday ay,, Aug Augus ustt 31, 31, 20 2014 14
A
7:27 7: 27 PM
is an event that suddenly changes the price of a commodity or service due to *A will raise prices and shift the aggregate supply curve to the , can cause combination of . *A will lower the price of said good and shift the aggr egate supply curve to the ) which makes production more efficient, thus increasing output. happen due to the
, could be due to an
and
s. through the economy, the should be more stable than
*The *The economy in
are
1) 2)
* *
of a particular good. due to a
relative to
are
relative to
are temporarily
are temporarily
to be temporarily
to be temporarily
(lowers the retail prices)
1)
(raises the input prices) like oil shocks. 2)
(raises the retail prices) (lowers the input prices)
prices in the market for final goods Cost of Production
is an economic theory about consumption *states that present consumption or expenditure actually (or permanent income) than on the present income (or temporary income). *A theory of consumer spending which states that people will spend money at a level consistent with their expected long term average i ncome. The level of expected long term income then becomes thought of as the level of "permanent" income that can be safely spent. *total expenditure of four sectors of the economy is constant over the business cycle
*
and at least built-in self-correcting, self-stabilizing mechanisms: 2/3 in GDP, Stable consumption spending stabilizes the economy economy and potentially prevents the economy from a prolonged recession. During expansion, temporary income increases yet consumption is still the same, but they s . the stability of consumption helps dampen the and keep During recession, temporary income decreases yet consumption is still the same, since they borrow money from savings, hence . 2. Lower real interest rates during recession attracts borrowers, which stimulates the economy again. High interest rates during expansion limits limits borrowers, which help restrict or slow down the economy. a. During expansion, there is an increased demand for credit by consumers and businesses putting an upward pressure on interest rates. The higher interest rates delimits borrowers, which restricts the economy. b. During recession Lower resource prices stimulate the economy during recession and higher resource prices restrain the economy during expansion. During expansion, the (wages, raw materials, supplies and commodities), hence resource prices tends to go up. This will restrain the economy. During recession, , hence resource prices will fall. This will help stimulate the economy.
Thur Th ursd sday ay,, Sep Septe tem mbe berr 04, 04, 201 2014 4
7:40 7: 40 PM
Fiscal Policy: conducted by the Congress and the President (or Parliament and Prime Minister). Monetary Policy: conducted by the Central Bank (a quasi-governmental institution institution that supervises the banking system and regulates the supply of money in the economy). Money: what we use to make payments for our debts, goods, services, products and financial assets. *Has no real value (unlike gold or silver money), but everyone still wants more of it. Three Important Functions of Money 1. Medium of Exchange: a means to make final payments. payments. a. Dollar for paying good and services outside the country and pesos for our everyday purchases. b. Without money, barter! (a system of trading goods for goods or service of goods). Inefficient because it relies on double coincidence of wants (have to find someone who wants what you have and who have what you want). c. Money eliminates the double coincidence of wants and makes the economy operate much more efficiently. d. When is barter efficient? efficient? In baseball card conventions, coin/stamp trading, etc. 2. Money is used a unit of account - a measure of economic value of a good. a. By having a common unit of account, we can compare prices/values easily since economic value is stated in dollars. 3. Store of Value / Wealth: a. Used as a financial asset asset to transfer purchasing power from the current period to a period in the future. b. Used to store wealth in stocks, bonds, mutual funds, real estate. c. Advantages of Money: i. Cash is more liquid than any other asset.(Liquidity: the degree to which an asset can be converted to cash quickly quickly without loss of value.) Stocks and bonds are not as liquid as cash. ii. Cash has a fixed nominal value. PHP100 will always be worth PHP100 unlike stocks / bonds/real estate which could fluctuate in value. iii. Cash is anonymous. d. Disadvantages of Money: i. Pays no interest , and will lose value (purchasing power) when inflation is positive. ii. Cash is anonymous. *In most cases, the same currency is used a medium of exchange, a unit of account and a store of value, like in the Philippines. However: 1. Israel: Dollars are used as unit of account (to avoid menu costs due to high inflation). Israeli Shekl is used as medium of exchange. 2. Russia, S. America, etc. Local currency is not used as a store o f value; people hoard US dollars. 3. Euro, SDRs. Unit of accounts without a medium of exchange. Basket of currencies, which which are quoted daily in the WSJ as ex -rates. Bangko Sentral ng Pilipinas *Established on July 3, 1993 pursuant to the provisions of the 1987 Philippine Constitution and the New Central Bank Act of 1993 . *Took over Central Bank of the Philippines , which was established January 3,1949 . *Country's central monetary authority that enjoys fiscal and administrative autonomy from the national government in the pursuit of its mandated responsibilities.
Philippine Banking System is composed of: 1. Universal and commercial banks: the largest single group, resource-wise, of financial institutions in the country. a. Commercial Bank: They offer the widest variety of banking services among financial institutions. b. Universal Bank: Authorized to engage in underwriting and other functions of investment houses, and to invest in equities of non-allied undertakings. 2. The Thrift Banking System: Composed of savings and mortgage banks, private development banks, stock savings and loan associations and microfinance thrift banks. a. Thrift banks: engaged in accumulating savings savings of depositors and investing them. They also provide short term working capital and medium and long term financing to businesses engaged in agriculture, services, industry and housing. 3. Rural and Cooperative Banks: The more popular type of banks in the rural communities. Their roles is to promote and expand the rural economy in an orderly and effective manner by providing the people in the rural communities with basic financial financial servic es. a. Help farmers through the states of production from buying seedlings to marketing their produce. b. Rural banks: privately owned and managed. c. Cooperative: organized / owned by cooperatives or federation of cooperatives.
*At present, there are 17 universal banks, 21 c ommercial banks, 80 thrift banks and 72 6 rural and cooperative banks.
*Plastic Money (Credit Card) is the most convenient comfort zone of people who spend more than what they earn. It is a baggage because it carries interests! *Central Bank should be independent from the influence of politicians , so that they can set monetary policy for the best long-term interest of the economy and also to more effectively control inflation since they are not accountable to the fiscal policy makers.
*Federal Reserve (Fed) can affect the MS (Monetary System) by changing the reserve requirements. a. Inverse Proportionality: Proportionality: The lower the Fed requirement , the higher the Monetary system, because banks don't like excess reserves since they are non-interest bearing assets , hence they would be loaned out and MS would increase. b. Lower Reserve requirements = Expansionary or an easing o f monetary policy. requirement s = Contractionary or restrictive monetary policy c. Higher Reserve requirements d. Changes in reserve requirements are rarely used a tool of monetary policy. Open Market Operations: An open market operation is an activity activity by a central bank to buy or sell government bonds on the open market, directly to and from the public. A central bank uses them as the primary means of implementing monetary policy . The usual aim of open market operations is to manipulate the short term interest rate and the supply of base money in an economy, and thus indirectly control the total money supply, in effect expanding money or contracting the money supply. *When BSP buys treasury bills, money supply increases , because BSP gives out money. This money then gets deposited on the individual's individual's or business' bank account, which may get spend and redeposited again. *BSP only deals with Banks, not the public. public . The only instance that it deals with the public is during open market operations.
Friida Fr day, y, Se Sep pte temb mbe er 05, 05, 20 2014 14
8:55 8: 55 AM
The BSP also aims
The BSP’s primary objective is to to promote and preserve
1. 2. 3. 4. 5. 6.
7.
The BSP formulates and implements monetary policy aimed at influencing money s upply consistent with its primary objective to maintain price stability. . The BSP has the exclusive power to issue the national currency. All notes and coins issued by the BSP are fully guaranteed by the Government and are considered legal tender for all private and public debts. The BSP extends discounts, loans and advances to banking institutions for liquidity purposes. The BSP supervises banks and exercises regulatory powers over non -bank institutions performing quasibanking functions. The BSP seeks to maintain suff icient international international reserves to meet any f oreseeable net demands for foreign currencies in order to preserve the international stability and convertibility convertibility of the Philippine peso . The BSP determines the exchange rate policy of the Philippines. Currently, the BSP adheres to a market-oriented foreign exchange rate policy such that the role of Bangko Sentral is principally to ensure orderly conditions in the market. The BSP functions as the , its political subdivisions and instrumentalities and government-owned and -controlled corporations.
Cabinet . *Its chairman is the BSP Governor, with five full-time members from the private sector and one member from the Cabinet. *Serves The Monetary Board meets at . The Board meets every but on some occasions, it convenes to discuss urgent issues. The
include the power to:
1. Issue rules and regulations it considers necessary for the eff ective discharge of the responsibilities and exercise of the po wers vested in it; 2. Direct the management, operations, and administration of Bangko Sentral, organize its personnel and issue such rules and regulations as it may deem necessary or desirable for this purpose; 3. Establish a human resource management system which governs the selection, hiring, appointment, transfer, promotion, or dismissal of all personnel; 4. Adopt an annual budget for and authorize such expenditures by Bangko Sentral as are in the interest of the effective administration and operations of Bangko Sentral in accordance with applicable laws and regulations; and 5. Indemnify its members and other officials of Bangk o Sentral, including personnel of the departments performing supervision and examination functions, against all costs and expenses reasonably incurred by such persons in connection with any civil or criminal action, suit or proceeding, to which any of them may be made a party by reason of the performance of his functions or duties, unless such members or other of ficials is found to be liable for negligence or misconduct.
: Amando M. Tetangco, Jr. 1. 2. 3. 4. 5.
Cesar V. Purisima (Department of Finance) Alfredo C. Antonio Juan D. A Zuñiga, Jr. Valentin A. Araneta Felipe M. Medalla
6. Armando L. Suratos
Wedn We dnes esda day, y, Se Sept ptem embe berr 10, 10, 20 2014 14
10:3 10 :30 0 AM
Taxation: refers to the inherent power of the state exercised through legislature to impose or levy a proportionate burden upon persons, property, rights or transactions to raise revenue to support and maintain government expenditures and for general and economic welfare. Purpose of Taxation: 1. Raise government revenue to finance the provision of public goods and services. 2. Redistribute wealth between the rich and the poor. For example, progressive tax (the richer, the more tax. The poorer, the less tax) 3. A kind of moral control - "Sin tax" to collect more tax from those who could afford them and to minimize consumption of harmful products. 4. Control of the economy - the tax can be designed so as to adjust the money supply, supply of labor, and all other factor of inputs of production. Conditions necessary for a successful of taxation, according to Richard Goode. 1. The existence of a predominantly monetary economy - Taxes are in cash, not goods or services. 2. Well-informed payers. Taxes involve form filing, so an element of being able to read and write should exist. 3. The presence of accounting records that m aintain hones
