Applied Economics

Philippine Economic Problems

Quarter 3, Module 2
Applied Economics
Senior High School
Locally-Developed Module
Quarter 3: Module 2 Week 3 Philippine Economic Problems
First Edition, 2021

All rights reserved. No part of this module may be reproduced or transmit-

ted to any form or by any means, electronic or mechanical, including pho-
tocopying, recording, or by any information storage and retrieval system
without written permission from the publisher and authors.
Published by the Schools Division Office (SDO) Dagupan City
OIC, Schools Division Superintendent: Aguedo C. Fernandez
Asst Schools Division Superintendent: Marciano U. Soriano, Jr.

Development Team of the Module

Writer: Pina T. Cochangco
Editor: Jaqueline G. Melendez
Reviewers: Princess Grace M. Kim
Mildred A. Balanza
Reynante R. Carrera
Renato R. Santillan
Renata G. Rovillos
Layout Artists: Pina T. Cochangco
Michael Angelo C. Gatchalian
Management Team: Maria Linda R. Ventenilla
Edilberto R. Abalos
Renata G. Rovillos
Cherry A. Cayabyab
Rosalind R. Lomibao

Department of Education-SDO Dagupan City

Office Address: Burgos Street, Poblacion Oeste, Dagupan City
Telefax: (075) 515-6009
E-mail Address: dagupan.city@deped.gov.ph

Macalinao, Eloisa M (2016). Applied Economics. Intramuros Ma-
nila:Unlimited Books Library Services and Publishing Inc.
Economic Theories of Poverty retrieved from https://
www.jrf.org.uk/report/economic-theories-poverty
The inflation target in the Phippines retrieved from http://
www.bsp.gov.ph/monetary/targeting_inflation.asp
PHILIPPINE ECONOMIC PROBLEMS
This module intends to help the students identify, understand
the different economic problems that our country faces and what
solutions can be proposed . Specifically , this module will focus fon
the topics : poverty , unemployment, income inequality ,and inflation
At the end of this module , you are able to :

• Identify the economic problems of the country.

• Explain how economics can be used to solve economic

problems

In doing this module, the following

are some reminders:

1. Take the pretest before

answering the module.
2. Read the instructions carefully
before doing each task.
3. Answer all the exercises.
4. Take the posttest.
5. Use a separate sheet in
answering all the activities.

20 1
 19 2
D. Dept of Economics
C. Bangko Sentral ng Pilipinas
Answers to ACTIVITY 1 B. Bureau of Internal Revenue
1. : Solution: A. Board of Investments
P = 100.00, i = 0.02, and t = 10. Calculate F = P(1 + i) t = 100 monetary policy to stabilize the economy.
(1.02)10 = Php121.89. 5.The agency of the government responsible for implementing the
2.We have P = 100.00, i = 0.1183, and t = 38. Calculate F = P(1 D. Classical Unemployment
+ i) t = 100(1.1183)10 = Php 305.90. C. Voluntary Unemployment
3. Solution: We have i = 0.0161 and t = 10. Calculate Purchasing B. Cyclical Unemployment
power = 1 (1 + i) t = 1 (1.0161)10 = Php 0.85. A. Structural Unemployment
4. .We have P = 40, 000, i = 0.0161, and t = 10. Calculate F = P(1 knowledge then what kind of unemployment will it be called?
+ i) t = 40000(1.0161)10 = Php 46, 927.19. 5 employees are fired from the job due to lack of computer
4. If new computers are being installed in a company and some
Activity 2 D. Classical Unemployment
1. Consumer Price Index- measure that examines the weighted C. Voluntary Unemployment
average of prices of a basket of consumer goods and ser- B. Cyclical Unemployment
vices. A. Structural Unemployment
2. Inflation– increase in the general price level unemployment would it be called?
3. Unemployment– happens when s when a person who is ac- market, but he is unable to find the work, then what type of
tively searching for employment is unable to find work 3. If a person is ready to work at the prevailing wage rate in the
4. Poverty– a person cannot buy or provide for his basic needs
5. Income Inequality– income/money is concentrated to few
D. Demand Push and Cost Pull
people
C. Supply side and demand side
B. Demand Pull and Supply Glut
6. Fiscal Policy– policy affecting taxes and govt. spending
A. Demand Pull and Cost Push
7. Monetary Policy– policy affecting savings and investments 2. Two types of inflation
8. Structural Unemployment– one loses job because of changes
in structure of the industry or economy. D. Rise in general prices
9. Voluntary Unemployment– when one person choose not to C. Rise in some prices
accept a job at prevailing salary/wage. B. Rise in most prices
10. Underemployment –job does not match skills and education A. Rise in all prices
1. What is inflation
letter of the correct answer.
1. Underemployment- Directions: Read carefully the questions below and encircle the
 6. The agency of the government responsible for price monitoring
and control.
A. Dept. of Trade and Industry
B. Bureau of Customs
C. Bureau of Internal Revenue
D. None of the Above
7. A
7. State of inability to support basic human needs
6. A 10. A 5. D. A. Poverty
5. C 9. A 4. B B, Income Inequality
4. A C. Unemployment
8. A 3. B
D. Indolence
10. B 3. C 7 A 2. A.
8. The invisibly underemployed
9. B 2. A
A. are workers who are compelled to work short hours.
6. D 1. D
8. A 1.D Posttest B. result from an inadequate use of workers' capacities.
Pretest C. are part-time workers who voluntarily work short hours.
D. none of the above is correct
10. True
9. Which of the following is TRUE in the least developed
countries?
9. False answer may vary
8. True Review A. Labor is often underemployed, having a low alternative
7. False cost.
B. It is cheaper to hire labor in least developed countries
6. True because its productivity is relatively higher than in
5. False next page developed countries
found on the C. Adapting existing Western technology to LDC conditions
4. True
tivity 1 and 2 is requires little creativity.
3. True Answers for Ac- D. Labor is usually considered the scarce factor.

10. Monetary policy affects the ________ and ________.

2. False
1. False A. reserve, unemployment.
Activity 3 B. money supply, interest rate.
C. taxes, exchange rate.
D. stock price, minimum wage.
18 3
 10. The labor force includes those people with a job and
A. those people who are looking for work.
Individual Activity: Three-Two-One (3-2-1) B. Those people training for a job.
C. those people who formerly worked and are now retired.
Directions: Write three (3) key terms from what you have learned D. homemakers
last meeting, two (2)ideas they would like to learn more about,
and one (1) concept or skill that you have mastered.

1.

2.

3.

1.

You can check your

2. answers in the SELF
CHECK page

1.

4 17
5.Bob is unemployed if he
A. is temporarily laid off.
B. is not looking for a job.
C. has looked for a job for two months and then quit looking. You can achieve great economic gains by solving social
D. A and C are correct problems “
-Paul Tudor Jones
6.For you to be considered out of the labor force, you can be
A. a full-time student.
B. a full-time retiree. “Applied Economics involves applying economic theories in the
C. a full-time volunteer. real world like finding solutions to economic problems
D. any of the above
Economic theories are used to find ways and solutions to
7. When an individual quits his/her job and decides to stay at problems like economic crisis, health care crisis, problems in
agriculture.
home for a while, the labor-force participation rate
A. decreases.
B. increases. Unemployment Rural to Urban Migration
C. stays the same.
Poverty Poor Quality of Infrastructure
D. may increase or decrease, depending on the length of time
he/she stays at home Income Inequality

8.Classifying discouraged workers as unemployed would

A. increase the unemployment rate. Economic Problems in the Philippines in Retrospect
B. decrease the unemployment rate.
C. does not change the unemployment rate.
D. have an indeterminate impact on the unemployment rate

9.) Minimum wage laws contribute to a higher unemployment rate by

A. raising wages above the market clearing level in some labor
markets.
B. pushing wages below the market clearing level in some labor
markets.
C. raising wages above the market clearing level in all labor
markets.
D. pushing wages below the market clearing level in all labor
markets.
16 5
 Unemployment

Unemployment is defined as a situation where someone of Directions: Read the following questions carefully and encircle the
working age is not able to get a job but would like to be in full- letter of the correct answer.
time employment
Types of Unemployment 1. Which two of the following situations are most likely to result
in demand pull’ inflation?
A. Structural Unemployment- occurs because of the absence
A. Increases in the rate of savings and the rate of taxation.
of demand for a certain worker . This usually happens when
B. A rise in investment of 5% with a rise of productivity of 5%.
the skills needed by the company do not match the skills the
workers have. C. A rise in the combined value of investment and
government spending of 5% with no change in
B. Frictional Unemployment- occurs when a person changes Productivity.
jobs, relocated, just graduated or takes time off from their
D. A fall in the rate of savings and the rate of taxation for an
jobs for different reasons.
economy already operating at full capacity
C. Cyclical Unemployment– caused by the contraction phase
of the business cycle, for example when jobs are only 2. Minimum wage is an example of a price ________, and
needed during specific season like during Christmas they results in a ________ of labor.
hire temporary workers in department stores but after the A. floor; surplus
Christmas season they will be laid off from their jobs. B. ceiling; surplus
Underemployment -the condition in which people in a labor C. floor; shortage
force are employed at less than full-time or regular jobs or at D. ceiling; shortage
jobs inadequate with respect to their training or economic
needs. 3. Fiscal Policy
A. Affects savings and investment
Offered Solutions to Help Solve Unemployment
B. Affect taxation and government spending
1. Provision of more investment opportunities. Like the giving of C. Affects price monitoring
tax incentives to new investors. D. None of the above
2. Faster and more efficient policies on investment e.g reduce
bureaucracy if possible. 4.Structural unemployment
A. arises from recessions .
3 Educational and training institutions should work closely with
B. is due to changes in the structure of the economy
industries to result to better trained graduates who are ready for
the needs of the industries C. arises from the time it takes employers to find appropriate
employees.
D. is due to seasonal changes.
6 15

Below is a list of key terms you have learned in this lesson.
Unemployment is defined as a situation where someone of
working age is not able to get a job but would like to be in full-
time employment .
Inflation Income Inequality
Unemployment Consumer Price Index
Poverty
Inflation reduces the purchasing power of each unit of
currency, which leads to increases in the general prices of
goods and services over time. It increases the cost of living.
Poverty means that the income level from employment is so
low that basic human needs like food , shelter and clothing
can't be met.
Income inequality- is an extreme disparity
of income distributions with a high concentration
of income usually in the hands of a small percentage of a
population.
Consumer Price Index measures the weighted average
of prices of a basket of consumer goods and services, such as
transportation, food, and health care. It is calculated by taking
the changes in the prices for each item in the basket of
goods and compute for the average.
14
Why Poverty Perpetuated in the Country
1. People are not able to participate in social and cultural
activities
2. Lack of participation in decision making in civil, social and
cultural life
3. Unavailability of access to loans for small business.
What Can be Done to Help Alleviate Poverty
1. Capital formation through education and must be
appropriately designed for each locality.
2. The importance of community development rather than
focusing on the individual e.g Gawad Kalinga communities.
3. Increase access to affordable credit.
4. Increasing social services on health, food subsidies (e.g 4ps)
5. Reduce unemployment
Income inequality- is an extreme disparity
of income distributions with a high concentration
of income usually in the hands of a small percentage of a
population.
This is a sad fact that there is a wide disparity in the
income of the Filipinos. Income inequality refers to the gap in
income between the rich and the poor.
What can be Done to Solve Income Inequality
1.Policies to implement progressive taxes to higher income
individuals.
2. Money transfers and subsidized food programs
3. Prices of basic commodities to be kept low.
4. Raise the minimum wage
5. Encourage and expand collective bargaining.
7
 ACTIVITY #3
Inflation
Inflation reduces the purchasing power of each unit of Directions: Alternate Response: If the statement is correct write
currency, which leads to increases in the general prices of goods TRUE, otherwise write FALSE. Write your answers on the space
and services over time. It increases the cost of living. provided.

• Inflation exists when prices rise but purchasing power falls over
a certain period.
• Demand, supply, and expectations about goods affect inflation
rates.
• The Bangko Sentral ng Pilipinas uses monetary policy to
manage inflation.
1. Monetary policy is implemented by the Department of
Industry in the Philippines.________________
2. When a person cannot support his basic needs then he is
experiencing relative poverty.___________

3. Unemployment results to income inequality and

poverty._____
Winners Losers
4. Voluntary unemployment is defined as a situation when
Debtors on Savers workers choose not to work at the current equilibrium wage
fixed interest rate ______

5. A fall in the rate of inflation means that the average price

Owners of Retirees and
level is falling. _____________
land and phys- employees
ical assets with fixed
incomes 6. A rise in the rate of inflation means that the percentage rise
in average prices is higher than previously. _______
Persons with Borrowers on
flexible income variable rates 7. One of the costs of inflation is that those on fixed incomes
do better than those on variable
Exporters income.________________

8. If a rise in raw material costs feeds through to higher prices

we use the term ‘cost push’ inflation _______________

9. Absolute poverty is absent in developed countries._______

10. Because of computerization there is a steady increase in

structural unemployment.

8 13
 Causes of Inflation
ACTIVITY 2
Demand-pull inflation. That's when demand outpaces supply
Directions: Define the following concepts in your own words, for goods or services. Buyers want the product so much that
they're willing to pay higher prices.
Cost-push inflation occurs when overall prices increase
1. Consumer Price Index (inflation) due to increases in the cost of wages and raw
materials. Higher costs of production can decrease
2. Inflation the aggregate supply (the amount of total production) in the
3. Unemployment economy.
Quantity theory of money says the primary cause of inflation is
4. Poverty
the printing out of too much money by the government
5. Income Inequality
6. Fiscal Policy Bangko Sentral ng Pilipinas and Monetary Policy
7. Monetary Policy
The Bangko Sentral ng Pilipinas uses monetary policy
8. Structural Unemployment to avoid inflation and its opposite, deflation. BSP aims for
9. Voluntary Unemployment a target inflation rate of 2% year-over-year. BSP uses the core
inflation rate that removes energy and food prices since those
10. Underemployment prices are set by commodities traders and are too volatile to
take into consideration
The monetary policy provides for exemption clauses to
recognize the fact that there are limits to the effectiveness of
monetary policy and that occasional breaches owing to factors
beyond the control of the central bank may happen. The
.
following situations are exemptions to the application of the
monetary policy is price pressures arising from: (1) volatility in
the prices of agricultural products; (2) natural calamities or
events that affect a major part of the economy; (3) volatility in
the prices of oil products; (4) significant government policy
changes that directly affect prices such as changes in the tax
structure, incentives and subsidies. Thus, the communications
strategy will have to carefully specify the reasons, plan of
action and length of time involved to bring inflation back to
target.

12 9
Consumer Price Index measures the weighted average
of prices of a basket of consumer goods and services, such as
transportation, food, and health care. It is calculated by taking
the changes in the prices for each item in the basket of ACTIVITY #1: Computing for CPI and Inflation Rate
goods and compute for the average.
Here’s how to compute consumer price index
1.If an item costs Php 100.00 today and the inflation rate is 2%,
what will the price be in 10 years?

2. In 1980 the inflation rate was 11.83%. If an item cost Php

100.00 in 1980 and if the inflation rate had remained 11.83%,
what would that item cost today (2018)?

Divide the price of the basket of goods and services in a 3. Over the last 10 years, the average rate of inflation has been
given year (t) by the price of the same basket in the base year 1.61%. What is the purchasing power of a peso today in terms of
(b). This ratio is then multiplied by 100 what a peso could purchase in 2008?

Take this case, the base year is 1996 and cost of

market basket is 400 and the current year is 1997 and the cost 4. If a person’s salary was Php 40,000 in 2008, what should it be
of market basket is 412. The consumer price index from 1996 today if the person received only a cost-of-living raise each year?
which is 100 it increased to 103.
In order to determine the inflation rate if CPI is given the
.
formula to use
CPI of current year– CPI of base year /100.
Example
(128 – 100) /100 = 28/100 = 28% Well done! On the next
page, you will learn
more

10 11