ECONOMICS 10 Berbs Debtors

FOURTH QUARTER REVIEWER YAAAAAAAAY Speculators

Elasticity - The responsiveness of supply or demand to the Monopolists
change in price Entrepreneurs
Supply - The number of goods the producer is willing to Investors
produce People without Fixed Income
Price Elasticity of Supply The responsiveness of
PEOPLE WHO ARE HURT FROM INFLATION
suppliers to the change in price
INFLATION Creditors
Continual increase in the price of commodities People without fixed income
CAUSES: Individuals who save
>>Cost-Push
WAGE INCREASE Price Index a number that compares the prices of
EXPENSIVE RAW MATERIALS present year to the prices of the base year.
DESIRE TO HAVE MORE PROFIT 1. WHOLESALE PRICE INDEX/RETAIL PRICE INDEX
2. GNP DEFLATOR/ GNP IMPLICIT PRICE INDEX
>>Demand-Pull
3. CONSUMER PRICE INDEX
A SECTOR WANTS TO BUY MORE PRODUCTS MORE
THAN WHAT IS AVAILABLE IN THE MARKET How to Compute CPI
Aggregate Demand> Aggregate Supply Total Weighted Price of Current Year
Aggregate Demand- Total Expenditure of Consumer, CPI= 100
Total Weighted Price o f Base Year
business firms, and government
Aggregate Supply- Quantity of goods to be produced Purchasing Power of Peso
and distributed by business sectors
>>Structural Inflation CPI of Base Year=(1 100)
PPP=
Every decision of each economic sector that causes an CPI of Current Year
increase in the price of commodities.
Reasons for Inflation Inflation Rate
1. Import dependent
2. Export oriented CPI of Current YearCPI of Previous Year
IR= 100
3. Monopoly/cartel CPI of Previous Year
4. Foreign debt

DEVALUATION DECREASE IN THE VALUE OF PESO CPI of CY

Inflation Rate= 1100
COMPARED TOA FOREIGN CURRENCY CPI of PY

PEOPLE WHO BENEFIT FROM INFLATION

 Government expenditures expenses incurred by the
High government in the process of providing services which are essential
Price to the functioning and maintaining of society
s
Household income income earned by individuals
Input market a venue for the trading of factor inputs for
Effects production
More More
of Produ
Work
Inflatio Output market a venue for trading final goods and services
ers ction
n Leakages consists of two types: taxes and savings, which are
withdrawn from the household and the business sector respectively
High Injections - amount of money to be put into the economy to solve
Wag disequilibria in the market
es Taxes sum of money collected by the government from the
EFFECTS OF INFLATION private sector for the purpose of paying government expenditures
Investment an economic activity that forgoes present
consumption with the goal of increasing consumption in the future
Savings that part of income, which is not consumed
SIMPLE MODEL
Households consist of individuals in an economy who own the
productive resources, including land, labor and capital
Firms are directly involved in the production of goods and services
It will be noted that only final goods and services are traded in the
output
market.

CIRCULAR FLOW OF MARKET ECONOMY

SAVINGS AND INVESTMENT IN A CIRCULAR FLOW OF GOODS

In here the household consumption of goods and services is lower
Consumption the act of purchasing goods than the total production
and services in the market Savings are outflow of money or income from household pockets.
To prevent the withdrawal of goods from the circular flow the output
must be disposed of by others besides consumers.
INVESTMENTS: is another form of expenditure of goods and
services in the output market besides consumption. Its objective is
to create productive capacity in the future. It is considered an
inflow to the circular flow. It is an expenditure of final goods and
services. Expenditure: To use up or consume.

SAVINGS AND INVESTMENT IN A CIRCULAR FLOW OF GOODS

NATIONAL INCOME ACCOUNTING

Market Value - goods and services are expressed by the

expenditures spent on them Market Value = Quantity x Unit
Price

GNP

GNP growth is the basis of the government for acquiring foreign

GOVERNMENT SECTOR AND CIRCULAR FLOW OF GOODS,
loans.
SERVICES AND MONEY
It is necessary to understand the economic condition of the country.
Taxes- to provide for the social or public goods the government
collects taxes from the taxpayers. GNP = GDP + NFIA (Net factor income from abroad)

GDP produced within the countrys borders

- measure of the final output produced by the factors of production
located in the domestic economy regardless of who owns the these
factors

GNP produced by a countrys citizens

- measure of the market value of the final goods and services
produced by the nationals or citizens of a country in a given
year
 - measures total income earned by the citizens of an
economy regardless of the country where their factor
services were used
Factors that affect GDP and GNP

Consumption Expenditures amount spent on purchasing goods

and services
Investments amount that firms spend on goods that are used for
further production
Government Expenditures/Consumption funded by the taxes,
used to deliver services to the society
Imports goods and services purchased abroad
Exports goods and services sold to other nations
Net Exports = (Exports Imports)
Net Factor Income from Abroad (NFIA)
income earned by citizens who own resources used in the
production process abroad less the property income of
foreigners who own factor inputs used in the production
process in the Philippines
Difference between earnings of Filipinos abroad from the
earnings of foreign nationals within the country Income Approach
Statistical Discrepancy GNP = PI + GI + CI + IT S + D
accounts for any errors in measurement that may occur
Approaches to Measure GDP and GNP 1. Personal income (PI)
Salaries and wages(workers), profits and dividends
Income Approach
(investment in stocks), rents (land), interest (banks, etc.)
Expenditure Approach 2. Government Income (GI) from government operations
Industrial Origin Approach 3. Corporate Income (CI) from private corporations
4. Indirect Taxes (IT) Sales tax on goods and services
Expenditure Approach 5. Subsidies (S) payments to government activities that are
not earning well
GNP = C + I + G + (X M) + Net Factor Income from 6. Depreciation (D) amount placed on the gradual decline in
Abroad + Statistical Discrepancy value of equipment or buildings
Note: Lahat ng Income, Tax, Allowance, Profits
wherein isasama
C = consumption expenditures Industrial Origin Approach
I = investment expenditures
G = government expenditures GDP by Industrial Origin = Agriculture, Fisheries, and
X = exports Forestry + Industry + Services
M = imports GDP + NFIA = GNP
(X-M) = net exports
Causes GNP to rise?
1. Quantities are rising
2. Prices are rising

Current GNP (or Nominal GNP)

GNP at current prices is the nominal GNP

- refers to the total production of the country based on the
prevailing price in the market
- Without adjusting for changes in price as they rise every
year
No distinction if rise is caused by the rise in quantity or rise
in price

Real GNP (or Constant GNP)

GNP at constant prices is known as real GNP
- it is the value of the country's production based on the price
in a given base year
- prices are kept constant
changes in GNP would only be caused by change in quantity

GNP Growth Rate

GNP a given yearGNP Previous Year Purpose of Taxation

100
GNPthe Previous Year
TAXATION
TAXATION is the inherent power of the sovereign,
exercised through the legislature, to impose burdens
upon subjects and objects within its jurisdiction for the
purpose of raising revenues to carry out the legitimate
objects of government.
Taxes are the enforced proportional contributions from
persons and property levied by the law-making body of the
State by virtue of its sovereignty for the support of the
government and all public needs.
1. Revenue or fiscal
The primary purpose of taxation on the part of the
government is to provide funds or property with which to
promote the general welfare and the protection of its
citizens and to enable it to finance its multifarious
activities.
2. Non-revenue or regulatory
Taxation may also be employed for purposes of
regulation or control.
LIFEBLOOD DOCTRINE
Taxes are the lifeblood of the nation.
Without revenue raised from taxation, the government will >Do You Have Any Dependent? How Many?
not survive, resulting in detriment to society. Without taxes, >Determine the total monetary and non-monetary
the government would be paralyzed for lack of motive power compensation paid to an employee for the payable period
to activate and operate it. segregating gross benefits like:
1. 13th month.
TAX COMPUTATION 2. productivity incentive
3. Christmas bonus
4. Other benefits
5. Employees contribution to SSS, GSIS, HDM, PHIC
and Union dues
Gross benefits of P30,000.00 and less shall be
DEPENDENT - legitimate, illegitimate or legally adopted exempted from income and withholding tax.
child STEP 2 Segregate the taxable from the non-taxable.
STEP 3 Segregate the taxable compensation income as
Compensation determined in step 2 into:
regular compensation income.
1. Salaries
2. Wages
1. basic salary
3. Emoluments, honoraria 2. fixed allowance for representation transportation and other
4. Allowances (transportation, representation, entertainment, etc.) allowances
5. Commission Supplementary compensation income
6. Fees, including directors fees, if the director is at the same time 1. Commission
an employee of the corporation. 2. Overtime pay
3. Taxable retirement pay
7. Taxable bonuses and fringe benefits except those that are fringe
4. Taxable
benefit tax bonus
8. Taxable pension and retirement pay 5. Other
taxable benefits
STEP 4 USE
APPROPRIATE TABLE

STEP 5 COMPENSATION
LEVEL
HOW TO COMPUTE?
1. Status (eg.
STEP 1What is Your Status? (Single or Married?)
B4,etc )
2. Column

Withholding Tax = (([Taxable Income] - [Bracket

or Exemption]) x [%over] ) + [Bracket Tax or
Base Tax]

EXERCISES YAY LOL NO

1. Mr. A, single with no qualified dependent receives P6,000 as regular of SSS/GSIS,PHIC,HDMF employee share only) as monthly regular
monthly compensation. compensation and P 7,000 as supplementary compensation for January
2011 or a total of P25,000. How much is the withholding tax for January 2011
2. Juan Santos, single with no
dependent, receives P18,000 (net