1.) What is economics?

How is this intertwined with the issue of scarcity and

resource allocation?
Supply, demand, preferences, costs, benefits, production relationships and
exchange are tools that are used to describe and analyze the market processes by
which individuals allocate scarce resources to satisfy as many wants as possible.
Economics is a social science that studies how individuals, governments, firms and
nations make choices on allocating scarce resources to satisfy their unlimited
wants. Economics is also the branch of knowledge concerned with the production,
consumption, and transfer of wealth. Economics is the study of how various
alternatives or choices are evaluated to best achieve a given objective. The
domain of economics is the study of processes by which scarce resources are
allocated to satisfy unlimited wants. Ideally, the resources are allocated to their
highest valued uses.

2.) What is macroeconomics? Distinguish it from microeconomics in terms of

concept, coverage, matter covered and concepts considered.
Macroeconomics analyzes all aggregate indicators and the microeconomic
factors that influence the economy. Government and corporations use
macroeconomic models to help in formulating of economic policies and strategies.
Macroeconomics is the branch of economics that studies the behavior and
performance of an economy as a whole. It focuses on the aggregate changes in
the economy such as unemployment, growth rate, gross domestic product and
inflation. On the other hand, microeconomic study deals with what choices
people make, what factors influence their choices and how their decisions affect
the goods markets by affecting the price, the supply and demand.
Microeconomics is the study of individuals, households and firms' behavior in
decision making and allocation of resources. It generally applies to markets of
goods and services and deals with individual and economic issues.
Simply put, the difference between micro and macroeconomics is simple.
Microeconomics is the study of economics at an individual, group or company
level. Macroeconomics, on the other hand, is the study of a national economy as a
whole. Microeconomics focuses on issues that affect individuals and companies.
3.) Exhaustively define the following terms:
a.) Economics is a social science that studies how individuals, governments, firms
and nations make choices on allocating scarce resources to satisfy their unlimited
wants. Economics can generally be broken down into: macroeconomics, which
concentrates on the behavior of the aggregate economy; and microeconomics,
which focuses on individual consumers. Economics is often referred to as "the
dismal science." Economics is the study of how people choose to use resources.
Resources include the time and talent people have available, the land, buildings,
equipment, and other tools on hand, and the knowledge of how to combine them
to create useful products and services. Important choices involve how much time
to devote to work, to school, and to leisure, how many dollars to spend and how
many to save, how to combine resources to produce goods and services, and how
to vote and shape the level of taxes and the role of government.
b.) Gross national product (GNP) is the market value of all the products and
services produced in one year by labour and property supplied by the citizens of a
country. Unlike gross domestic product (GDP), which defines production based on
the geographical location of production, GNP allocates production based on
location of ownership. GNP is an economic statistic that is equal to GDP plus any
income earned by residents from overseas investments minus income earned
within the domestic economy by overseas residents. GNP does not distinguish
between qualitative improvements in the state of the technical arts (e.g.,
increasing computer processing speeds), and quantitative increases in goods (e.g.,
number of computers produced), and considers both to be forms of "economic
growth". GNP is a measure of a country's economic performance, or what its
citizens produced (i.e. goods and services) and whether they produced these
items within its borders. The simplified version of the official GNP formula can be
written as the sum of consumption by nationals, government expenditures,
investments by nationals, exports to foreign consumers and foreign production by
domestic firms minus the domestic production by foreign firms. Another way to
represent GNP is GDP plus net factor income from abroad. Gross domestic
product (GDP) is a monetary measure of the value of all final goods and services
produced in a period (quarterly or yearly). Nominal GDP estimates are commonly
used to determine the economic performance of a whole country or region, and
to make international comparisons. Nominal GDP, however, does not reflect
differences in the cost of living and the inflation rates of the countries; therefore
using a GDP PPP per capita basis is arguably more useful when comparing
differences in living standards between nations.
c.) Inflation is a sustained increase in the general price level of goods and services
in an economy over a period of time. When the price level rises, each unit of
currency buys fewer goods and services. Consequently, inflation reflects a
reduction in the purchasing power per unit of money – a loss of real value in the
medium of exchange and unit of account within the economy. The term "inflation"
originally referred to increases in the amount of money in circulation, and some
economists still use the word in this way. However, most economists today use the
term "inflation" to refer to a rise in the price level. An increase in the money
supply may be called monetary inflation, to distinguish it from rising prices, which
may also for clarity be called "price inflation". Economists generally agree that in
the long run, inflation is caused by increases in the money supply. Conceptually,
inflation refers to the general trend of prices, not changes in any specific price.
Inflation is the rate at which the general level of prices for goods and services is
rising and, consequently, the purchasing power of currency is falling. Central
banks attempt to limit inflation, and avoid deflation, in order to keep the economy
running smoothly. Growth is an increase in the output that an economy produces
over a period of time, the minimum being two consecutive quarters. Economic
growth is an increase in what an economy can produce if it is using all its scarce
resources. An increase in the capacity of an economy to produce goods and
services, compared from one period of time to another. Economic growth can be
measured in nominal terms, which include inflation, or in real terms, which are
adjusted for inflation. For comparing one country's economic growth to another,
GDP or GNP per capita should be used as these take into account population
differences between countries. Increase in a country's productive capacity, as
measured by comparing gross national product (GNP) in a year with the GNP in
the previous year. Increase in the capital stock, advances in technology, and
improvement in the quality and level of literacy are considered to be the principal
causes of economic growth. In recent years, the idea of sustainable development
has brought in additional factors such as environmentally sound processes that
must be taken into account in growing an economy.

d. Quantity Theory of Money is an economic theory which proposes a positive

relationship between changes in the money supply and the long-term price of
goods. It states that increasing the amount of money in the economy will
eventually lead to an equal percentage rise in the prices of products and services.
Simply put, the quantity theory of money is the idea that the supply of money in
an economy determines the level of prices and changes in the money supply
result in proportional changes in prices. In other words, the quantity theory of
money states that a given percentage change in the money supply results in an
equivalent level of inflation or deflation. This concept is usually introduced via an
equation relating money and prices to other economic variables. This theory is
expressed as:
　　MV=PT
　　M = Money Supply
　　V = Velocity of Circulation
　　P = Average Price Level
　　T = Volume of transactions of goods and services)

e.) Inflow of the Circular Flow is the movement of capital into a market or
economy. Changes in capital inflow are used to measure the growth of an
economy, and steady or increasing capital inflows are usually indicative of positive
perceptions of a market in the global economy, or an attractive business
environment due to favorable tax structures or business-friendly regulations.
Some of examples are the Investments an asset or item that is purchased with the
hope that it will generate income or appreciate in the future. In an economic
sense, an investment is the purchase of goods that are not consumed today but
are used in the future to create wealth. In finance, an investment is a monetary
asset purchased with the idea that the asset will provide income in the future or
appreciate and be sold at a higher price. Government Spending or expenditure
includes all government consumption, investment, and transfer payments. Exports
is a function of international trade whereby goods produced in one country are
shipped to another country for future sale or trade. The sale of such goods adds to
the producing nation's gross output. If used for trade, exports are exchanged for
other products or services. Exports are one of the oldest forms of economic
transfer, and occur on a large scale between nations that have fewer restrictions
on trade, such as tariffs or subsidies.
f.) Outflow of the circular flow is the movement of assets out of a country. Capital
outflow is considered undesirable and results from political or economic
instability. It occurs when foreign and domestic investors sell off their assets in a
particular country because they no longer perceive it as a safe investment. The
capital is withdrawn from the country (flows out) and may end up in another
country or back in the investor's home country.
g.) Monetary policy is the process by which the monetary authority of a country
controls the supply of money, often targeting an inflation rate or interest rate to
ensure price stability and general trust in the currency. Further goals of a
monetary policy are usually to contribute to economic growth and stability, to
lower unemployment, and to maintain predictable exchange rates with other
currencies. Monetary economics provides insight into how to craft optimal
monetary policy.
Monetary policy is referred to as either being expansionary or contractionary,
where an expansionary policy increases the total supply of money in the economy
more rapidly than usual, and contractionary policy expands the money supply
more slowly than usual or even shrinks it. Expansionary policy is traditionally used
to try to combat unemployment in a recession by lowering interest rates in the
hope that easy credit will entice businesses into expanding. Contractionary policy
is intended to slow inflation in order to avoid the resulting distortions and
deterioration of asset values. Fiscal policy is the use of government revenue
collection (mainly taxes) and expenditure (spending) to influence the economy.
According to Keynesian economics, when the government changes the levels of
taxation and governments spending, it influences aggregate demand and the level
of economic activity. Fiscal policy can be used to stabilize the economy over the
course of the business cycle. Fiscal policy can be distinguished from monetary
policy, in that fiscal policy deals with taxation and government spending and is
often administered by an executive under laws of a legislature, whereas monetary
policy deals with the money supply, lending rates and interest rates and is often
administered by a central bank.

h.) Foreign Trade Policy, commercial policy (also referred to as a trade policy or
international trade policy) is a set of rules and regulations that are intended to
change international trade flows, particularly to restrict imports. Every nation has
some form of trade policy in place, with public officials formulating the policy
which they think would be most appropriate for their country. Their aim is to
boost the nation’s international trade. Examples include the European Union, the
Mercosur committee etc. The purpose of trade policy is to help a nation's
international trade run more smoothly, by setting clear standards and goals which
can be understood by potential trading partners. In many regions, groups of
nations work together to create mutually beneficial trade policies. Trade policy
can involve various complex types of actions, such as the elimination of
quantitative restrictions or the reduction of tariffs. According to a geographic
dimension, there is unilateral, bilateral, regional, and multilateral liberalization.

j.) Economic Groupings which seek some sort of economic advantage for their
members, are the most common type of interest group. Money has significant
influence in capitalist societies, so economic interest groups are numerous and
powerful. These groups are usually well funded because members willingly
contribute money in the hopes of reaping greater political influence and profit.
Economic groups work to win private goods, which are benefits that only the
members of the group will enjoy. When a labor union agrees to a contract, for
example, its members benefit from the contract, whereas nonunion members do
not. If there is no private good incentive, people might choose not to join
(especially if there is a membership fee or dues). There are four main types of
economic groups: business groups, labor groups, agricultural groups, and
professional associations.

4.) Compare and contrast the Monetary, Fiscal and Foreign Trade Policy in terms of
its tools, the industry that uses these policies, and its effect in the economy during
growth and inflation.
Foreign trade is exchange of capital, goods, and services across international
borders or territories. In most countries, it represents a significant share of gross
domestic product (GDP). While international trade has been present throughout
much of history, its economic, social, and political importance has been on the rise
in recent centuries. International trade means trade between the two or more
countries. International trade involves different currencies of different countries
and is regulated by laws, rules and regulations of the concerned countries. Thus,
International trade is more complex.
Monetary policy and fiscal policy refer to the two most widely recognized
"tools" used to influence a nation's economic activity. Monetary policy is primarily
concerned with the management of interest rates and the total supply of money
in circulation and is generally carried out by central banks such as the Federal
Reserve. Monetary policy consists of the actions of a central bank, currency board
or other regulatory committee that determine the size and rate of growth of the
money supply, which in turn affects interest rates. Monetary policy is maintained
through actions such as modifying the interest rate, buying or selling government
bonds, and changing the amount of money banks are required to keep in the vault
(bank reserves). Fiscal policy is the collective term for the taxing and spending
actions of governments. In the United States, national fiscal policy is determined
by the Executive and Legislative Branches.

5.) From the following publication, discuss all the economics and macroeconomics
at play.
Pope: Church does not want "dirty money"

According to Pope Francis, a major reason behind the increase in social and
economic woes worldwide "is in our relationship with money and our acceptance
of its power over ourselves and our society". The December 2015 report from
Moneyval, the Council of Europe's lead agency in the struggle against corruption
and the financing of terrorism, said that legal reforms in the Vatican had been
positive. It said that the Vatican Bank had shut down nearly 5,000 suspicious
accounts but that there had been "no real results" in terms of prosecutions for
serious crimes or the confiscation of assets.

Philippines Impounds North Korean ship under UN sanction

The Philippines said on Monday it had impounded a North Korean ship, becoming
the first country to enforce tough new sanctions imposed on the state last week.
“This is in compliance with the UN Security Council resolution that calls for
sanctions,” said Charles Jose, a spokesperson for the Philippine foreign ministry.
“The most important thing is to impound the vessel so it cannot engage in
economic activity that could benefit North Korea.” “The Philippines is a maritime
nation but the volume of trade passing through wouldn’t be as great as Singapore
or Hong Kong, so there might be less commercial impact,” said Euan Graham,
director of the international security program at Australia’s Lowy Institute. “There
is always a tension between security and economic efficiency of a port.”

Ikeda, Hidekazu Sandy B. MWF(2:35-3:25PM)

BSA 2E