BRANCHES OF ECONOMICS Goods and services – outputs

MACROECONOMICS GOODS

deals with the economic behavior of the whole Something that can be used or consumed
economy or its aggregates
SERVICES

An action that someone does to help others

DISTRIBUTION

refers to the marketing of goods and services to

different economic outlets

MICROECONOMICS EXCHANGE

deals with the economic behavior refers to the process of transferring goods and
services to a person in return for something
of individual units
CONSUMPTION

refers to the proper utilization of economic

goods.

PUBLIC FINANCE

pertains to the activities of the government

regarding taxation, borrowings and
expenditures.

METHODOLOGIES/TOOLS OF ECONOMICS
DIVISIONS OF ECONOMICS
POSITIVE ECONOMICS

deals with objective statements that can be

tested, amended or rejected by referring to the
available evidence

based on facts about the economy

NORMATIVE ECONOMICS

a subjective statement of opinion rather than a

fact
PRODUCTION TYPES OF ECONOMIC SYSTEM
refers to the process of producing or creating Economic Sytstem
goods needed by the households to satisfy their
needs is the way a society organizes the production,
distribution, and consumption of good and
Factors of production – inputs services.
Economic Efficiencies-making the most of
resources
Economic Freedom-freedom from government
in production and distribution
Economic Security and Predictability-assurance
that good and services will be available,
payments will be made, a safety net will assist
in case od disaster
Economic Equity-fair distribution of wealth
Economic Growth and Innovation-innovation
leads to growth, growth leads to higher
standard of living
Features:
existence was primarily based on traditions and
customs
barter was the main form of trading
individuals existed on a subsistence level
the decision of what, how and for whom was
determined by customs and traditions
resources were owned or controlled by a
sovereign or feudal lord.
Command
Features:
government controls all economic activity
government decides what goods are produced,
how much of each good to produce and how
much the people should get.
Free-Market
Features:
The government plays little role in economic
activity
Emphasis is on freedom of the individuals
(consumers and producers)
The private sector (private firms and
individuals) answer the basic economic
questions.
There is consumer sovereignty.
Profit maximization is the main goal in this
economy.
Price drives the economy
Mixed
Features:
Economic decisions are driven by price and also
by the state
The aim of the private sector is to maximize
profits while the aim of the public sector is to
maximize social welfare
The public sector produces goods and services
that the private sector is unable or unwilling to
produce, with a bureaucratic set up like the
planned economy (i.e. freeways)
MEASURING THE ECONOMY
Gross Domestic Product
the value of a nation's finished domestic goods
and services during a specific time period.
It is the most basic indicator used to measure
the overall health and size of a country's
economy.
It is the overall market value of the goods and
services produced domestically by a country.
GDP is an important figure because it gives an
idea of whether the economy is growing or
contracting
GDP = C + I + G + X
C – Consumption Expenditure
I – Investment
G – Government Expenditure
X – Net Export (Value of exports minus value of
imports)

Gross National Product

the value of all finished goods and services

owned by a country's residents over a period of
time.

Gross national product is another metric used

to measure a country's economic output.
Where GDP looks at the value of goods and
services produced within a country's borders,
GNP is the market value of goods and services
produced by all citizens of a country—both
domestically and abroad.

While GDP is an indicator of the local/national

economy, GNP represents how its nationals are
contributing to the country's economy. It
factors in citizenship but overlooks location. For
that reason, it's important to note that GNP
does not include the output of foreign
residents.

GNP = C + I + G + X + Z

C – Consumption Expenditure

I – Investment

G – Government Expenditure

X – Net Export (Value of exports minus value of

imports)

Z – Net Income (Net income inflow from abroad

minus net income outflow to foreign countries)