Chapter 7
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Transcript of Chapter 7
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SAVINGS AND INVESTMENTS
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Savings
is a very important feature in economy. In a barter economy, people can only save goods, which may spoil or to be stolen. But money economies have mechanisms in a place for people to save.
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Basic Concepts in Savings
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1. Money - This is a means of currency. You can exchange money for a product or a service.
2. Income - This is the money you receive from your work or profits or interests from your businesses.
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3. Saving – This is the act of putting aside a part of the disposable income for the future use. While savings is the money put aside.
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Reasons Why It is Important to
Save
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By saving, you will have money to get when you need it in the future.
By saving, you earn some more, even if it is just a small amount.
By saving, you can help people with their business startups and other money needs.
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How to Save?
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Have a plan or budget for your money coming in.
The budget should apportion a certain amount as savings.
You may open a savings account with a bank with the first P1,000 or P5,000 you have accumulated.
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Investment
In economics, means businesses spending for the production and accumulation of capital goods and additions to inventories such as new plants, machinery, etc.
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Basic Concepts in Investing
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1. Interest – This is the money that you will lend money to others given a certain period.
2. Compounding - This is the process whereby the interest you earn also earns money for you.
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3. Inflation – This is the general increase in the prices of products and services. It is important to always be aware of the inflation rate.
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Where to Invest ?
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Choosing where to invest is
always a question of how much you would want to invest and what risks you are willing to take. Here
are some ways to invest your money.
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Bank Accounts – You can invest your money in the bank through savings account, which earns up to 4% interest per year, and where you can easily withdraw your money.
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Treasury bills - are bonds issued by the government for the purpose of acquiring money for its projects.
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Mutual Funds – These are collection of stocks or bonds, which pooled by an investment manager to be invested in companies that they believe will provide them with necessary returns.
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Commodities – These include anything that you can buy and then sell, such as silver, jewelry, food, cars, and collectibles.
Real Estate – Properties such as land, house, apartment, or buildings are part of real estate.
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Employment, Unemployment, and Underemployment
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Any country has a labor force,
which consists of persons fifteen years old and older, but who are
not incapacitated or are in institutions, who are employed or
seeking employment.
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A primary economic objective of
any government is full employment, which means putting
people where they can gainfully work.
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Employment rate – is the percentage of the labor force who is currently employed.
Unemployment rate – is the percentage of the labor force who is not currently employed.
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Underemployment rate – means the employment of workers with high skills and abilities in low wage and low earning jobs
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Current statistics shows that the
employment rate in the Philippines is at 91.9%, which is about 32.4 million
people employed; unemployment rate is at 8.1%, comprising 2.8 million
people; and underemployment rate is at 21.3%, which is about 6.9 million
workers.
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Measures of National Income and Output
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In economics, the national income and output are measured to
determine the total value of goods and services produced in an
economy.
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Gross National Product
is the total and final output of land, labor, capital, and entrepreneurial ability produced by the country’s citizens, whether these are produced inside the country or abroad.
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Country GNP
1. United States $ 12.1 billion
2. United Kingdom $ 2.0 billion
3. Germany $ 1.9 billion
4. Japan $ 1.9 billion
Top 4 countries in terms of GNP
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Gross Domestic Product
Comprises the value of total goods and services produced within the boundaries of a country, whether these are produced by the citizens of that country or by foreigners.
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Country GDP
1. United States $ 11.6 billion
2. Japan $ 4.6 billion
3. Germany $ 2.7 billion
4. United Kingdom $ 2.1 billion
Top 4 countries in terms of GDP
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Principal Methods of Measuring the GNP
and GDP
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Expenditures Approach – The estimates of all types of spending on goods and services by households, businesses, government, and by the people outside a country are all added up.
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Income Approach – The sum of the estimates of all earnings, including total wages and salaries, profits, and incomes from rentals and interest is arrived at.
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Output or Product Approach – The sum of all output of all individuals and organizations producing goods and services is added with the costs for raw materials and depreciation subtracted.
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Importance of Measuring
National Income
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1. It enables us to keep track of the economy, including the level of production in a given period of time.
2. It allows us to look at an economy’s performance over a long period of time.
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3. It provides lawmakers and government policymakers with a basis on which to base their economic policies and legislation that would promote the betterment of the economy of the country.
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While national incomes are just estimates, they still provide
people with information by which to base how their economy is
growing, which they may use for their personal decisions.
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Thank you for listening!