Economics, Texation, and Agrarian Reform CIRCULAR RESOURCES, FLOW OF GOODS, AND INCOME 4 macroeconomics as a branch of economics deals with the aggregates in the economy. It specifically measures the econom: activities of a country. In macroeconomics, there are cyclical activities ofin ‘eral participants, like households and fa and outflow brought about by sev‘ i aie outdtivties will be identified using the circular flow model shown in Figg, 8.1. We have already define Export earnings Government expenditures Investments, ‘Consumption Land, Labor, Capital, Gane een faecencr Nesey Rent, Wage, interest, Profit Imports (dollar spending) Figure 84 The Circular Fiow in Macroeconomic Scale MEASUREMENT OF GROWTH We m a {he aggregute or total output to determine if @ count a muoiie economically and showing signs of economic growth. measurement commonly used is the gr domestic product (GDP). 1 is Oe Seaton ofall goods and services produced in a specific country wwithit® ie period of time. It does not include factor payments from abroad ere are ‘a ‘ : added apy ue ures ways to measure GDP. For simplicity, we will use the valu proach as presented in the GDP by industrial origin. Scanned with CamScanner GDI -muc ame Va ens al ~~Introduction to Macroeconomics ; anther measure of economic Srowth that will be discussed in this section ae . p . capita. GNP refers to gross national product, or the country’s 4 GDP plus net factor income from abroad. The GNP per capita measures how “much each member of the population receives ifthe GNP were divided equally among them, Value-added Approach Value-added or product approach is used primarily to measure GDP, which { ensures that no double counting was done. Double counting occurs when the value of final goods includes the value of intermediate goods. For instance, since a computer is already a final good in itself, we do not have to include the value of cach component. In this process, we only get the added value in each stage of the production of computers. ‘To understand it better, let us look at the value added in the production of sardines. Table 8.1 shows the value of the sardines as it goes through the three stages of production. Note that in GDP, only the value of the final good is counted. PHP 6,000 is the cost generated by the fisherman, factory, and cannery. This is similar to the total of the value added of all the goods necessary in the production. : I } Teble 81 Value-added in the Production of Sardines t ‘Stoge of Production Cost | Generated Cost | Value-added | Fisherman | catches sardines 0 PHP1500 | PHP 1500 } Factory cooks sardines | PHP1500 | PHP4,000 PHP 2500 } Cannery eee PHP.4000| PHP6CD0 | PHP2000 Total] PHP1500 | PHP&OOO ‘The value-added approach measures GDP as follows: : GDP = Gross value-added by agriculture 28 ; + Gross value-added by industry + Gross value-added by the service sector actual GDP using the value-added approach and applying the current and constant (real) prices is shown in Table 8.2. GDP at constant or real prices to GDP whose prices were adjusted for inflation. In this case, the 1985 0 GDP w Price level was used. 01 Scanned with CamScanner[ Economics, Taxation, and Agrarian Reform Tobie 82 [Brose Dorteats Product bylndustrielOnn ‘Ast Gtr 2003 — 1st Gtr 2008 {Ga rnifion Php) ‘At Gurrent Prices ‘At Constant 1985 Prices Agriculture, Period aren industry | Service Fishery.and | lhndustry Service Forestry Forestry 2003 | 631970 | 1978870 | 2s05se2| 215273 | 369.486 | Sogn] oi | wiees | aweso | sea7a0 | sas | esis | 7005] G2 | 0310 | ss086e | 571268 47168 91279 | 25802 o3 | 745161 | sasse6 | sessss | az77_| saa | vaca 04 | 205274 | 382763 | 644200 | 66777 | 96338 | 139,404 2004] 734171 | 1544.951| 2593.02 | 226,417 | 382419 | 545458] oi | miss | as3se6 | saaosa | sease | 97821 _| 25507 G2 _| 64343 | 368723 | 648108 43429 | 96607 | 136902 o3 | 177261 | 379042 | 642251 50,491 94582 | 134507 o4 | esoses | aaais0 | 719591 | 68009 | 103,408 | aasae 2005 | 778970 | 1785148 | 2930521 | 230,954 | s9sese | sass ci | esse | sa9977 | es1asa | seese | sose | 135206 ce_| ‘6acsa | aare9 | yaaa | soan | 100349 | v466ss | o3 | 182770 | 430745 | 7e0ssa | sivas_| s7s6 | 305 o4 | 248sa9 | sooese | sos9s9 | 70554 | 108035 | 158709 2008 | 852800 | 1913031 | 3267004 | easase | 159085 | 621389 ai_| 20sses | 434088 | 7asst2 | soaa7 | 95677 | 143995 ce | e320 | 257548 | esses | sasa5 | 105085 | 164627 a3 201671 4757" | 798959 53580 _| 102,990 | 151040 | G4 _| es1ee9 | 545684 | soscos | 717a7_| meeaa | 171727 2007 | 936415 | 2107287 | 36045a2| es1272 | aasaee | 671809 o_| eee | 4eaaa0 | seaves | ease 102035 | 5618 g2_| 185092 | 525.461 | ss804e | s6194_| n907 | 767550 | 93 _| 278475 | Si224a | 883070 | Seen | 109793 | 163109 = | soscos | ses143 | ssa620 | 7s80e | ase | 85077 or |_esivos | siaea | s16450_| easa1 | soa0a1 | 5848 Allfgures are estimates as of May 2008, Detals ray not add up to totals due ta rounding [ Source: Notional Statistical Coordination Board (NSCB) Page 5! AsotAugk 2013, ‘ak teniliee eens ! = Scanned with CamScanner | namo accounts OF THE PHLIPPAES| anon ACCOUNTS OF THE PHIUPP RES Unt nmionpesae Becthi209 TABLE 20 GROSS VALUE ADOCD IN AGPACULTURE, HUNTING, FORESTRY AND SING BY OUST GROUPE {st autTen 01 TORN QUARTER 23 ATCURRENT PACES Seni Sant sami Sent Set 8 e le 2 2 ‘nousTmmusTRY ROL a SAGRICARTURE HUNTING AND FORESTRY 2a406 246329 27217 an.ais 2s6a01 DEAS EGr2 smOM 20017 ZINK SILI9S SHON KOEN SIDE senses ‘sano dases ZEst0 sin7's Zenoo ZoRIM sis sa7acy sane exes ‘acricueTere aris teas Boe Saat aor Svama Sm 41ST) sbass caiue “2m s2307 fe713 edn eLaes WSs! toz? Iago TSAAZH 12448 con Bm sm ou toes Hise ‘sos Zeist iet ‘som ‘sang ‘law atsce 702 Canning co BBE zis Si Ae Lom wae TMS iar tems ies Sos Gms Tals 425) 2420 Sapere Bom “Gin “os aan tay Seis as) jase ies zeus Zoaas anos Ha? Tse Tate| tow Om) AER wy mish Dale 247K om 7138 ord wus tay ORO ee Gane A7ast tgs “gu Wim ‘ham ma 4oma taete tae) ow amet faaka gant aaa fegm 2377 tate Prewoe zag ‘zom t2m sau 2am ‘Zur Aa gta 2am ‘aan ‘Aas eas ‘Sat0 Ks 8 Cate ion “m “ha ais ine “i “SE 34 fem “ne din dow dam ‘dom 230 Cem ian sen am 4718 20 362 suo Sem dios 400 it ain eat a7? ean fee aoa tu ama tus aay Sazz ums ato as ios sta an gem nas Jam os dose x30 te expe $S551 7B 5G 1 3c reno maooD zis eon trast Za aD Crmaose SET Mos on fim man or yore laa somo Maal Mu? min ao mane a070 ue wm om xan Ram man aus man Stace Mimo fen om wear im sow Stes) Acad es wd sen ia ws ies Bim 90 aon thin aim itis im Hoo hoa tan aro dean ‘a2 “tas ‘tama se "an toa an am ‘tow tin Ste? 801 0K ae om zs a2 Sime Ea wan ss OM) aoe “tans “Tazo “ies se1s0 waz 10417 eos 2in4s7 zens zach Sean o18H6 aHTASe aR saaNs snzmn ALONE SoD eOLIES cHN4SD HLH SOLA 8 FRgure 81 The Grouor Flown Macrosconarc Seal, Scanned with Cam 1 vorrei Scannera ~ Economics, Taxation, and Agrarian Reform ‘Jeble 8.9 Summary of GOP by Industrial Origin Usi eines aires ere ‘orowth | poet. | incuntry Tob nor | mamey | seome | coe |e 008 | 691970 | 1378870 @| a3%6ace - (26273 ce | ear | 2829 (bs zoos | 7am | wasnt fesoance| arse | 00 | 2264 - Zasona| saaange | 1175 |2a0ss4| soseee | sea6% | r2nase <3] Lo 2008 | 7ma70| asia | escosas | con Jesonna| worn | assreos| eooanss | “oer [aaano| eae | eatana | araora| 2) L 700 [ose on |sao7 qou7e pacsaon | eresa | wosaan| oy Zoo? | ean | ea7267 [scone] assazea | 020 = he GDP growth rate comy bas ‘Table 8.3 summarizes Table 8.2. It shows the : goon ate H puted ea both in current and constant prices. These are actual figures of total outpy Tne produced in the country from 2003 to 2007. The last column Le us e more in i a y indust precise growth in output using the value-added approach or y industrial a origin. Current growth is more superficial than growth using constant price because former measures include the effects of yearly price changes. Growth rate is computed Per Capita GNP (or GDP) Per capita GNP (or GDP) measures the country’s economic growthby di the national income (GNP/GDP) with the number According to the National Statistics Office of August 2007 is 88.57 million. Give PHP 7,227,312 million, the GNP pe ing of members in a population (NSO), the total population 3 n the 2007 GNP at current prices a T capita for 2007 is PHP 81,600. Per capita GNp = —_GNP + coe Total Population . i i or 7 Per capita Gop = Gop Total population However, this m os easure is highly citi that each Filiping * highly criticized because it is erroneous to cil” 81,600 for the year 2007. received PHP Scanned with CamScanner yeu betIntroduction to Macroeconomics | Using Current Prices and Constant Prices 8.4 Computing for Price index and Real GNP Current Price: E Veoe Levet Priceindex | Current GNP | 2000 50 4 S a ~ 2oo) 57 14 6S 2002 72 144 7 = Table 8.4 compares the current GNP with the real GNP. In this hypothetical example, the current price level is given and the year 2000 is assigned as the base year. The price index is derived by dividing the price level of a current year to that of the base year. Based on the current GNP figures, can we say that the economy is indeed growing by 10 million each year from 2000 to 2002? Current GNP grows from year to year due to many causes like inflation; in other words, it can be superficial. We use an index to give us a real GNP figure. Using the real GNP, we observe a 2-million increase in real GNP from 2000 to 2001 and a decrease of 5 million in 2002. What made real GNP low is the high prices for that particular year; thus, there is currently a comparatively high GNP. Note that the figures do not represent any country. They were made only to explain the difference between current GNP and real GNP using a price index. Difference between GDP and GNP Based on the formula using the value-added approach, the GNP by industrial origin GDP=A4#I1+S GNP = GDP + NFY where: A is agricultural output: Tis industrial output; Sis service; and NFY is net factor income from abroad. XP i fall the final goods within a country in a specific time Freon, cluding earnings from abroad. In the formula for GNP, the net factor income (NFY) from outside the Philippines may be positive or negative. It is also the difference between GNP and GDP. Scanned with CamScanner