CONTEMPORARY ECONOMIC ISSUES

FACING THE FILIPINO ENTREPRENEUR

I. Investment and interest rate
II. Rentals
III. Minimum wage
IV. Taxes
INVESTMENT AND INTEREST RATE
INVESTMENT: A DETERMINANT OF INCOME
Investment
- a product that people buy with the hope that they will be beneficial or
will generate income in the future
- is a capital expenditure on the purchase of physical assets such as
plants, machinery, and equipment (also known as fixed investments)and
stocks (also known inventory investment)
 Investment Expenditure
- means capital spending
- it is mainly derived from accumulated savings and other sources
external to the circular flow; it does not come from current income and
consumption.
WHY IS INVESTMENT ESSENTIAL TO THE ECONOMY?

– Current business income serves current business needs.

– Investment, therefore, requires that a portion of current consumption
be forgone (i.e., saved) to free up resources which can be used to finance
investment.
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WHAT IS INTEREST RATE? WHAT IS ITS ROLE ININVESTMENTS?

 In economics, interest is used in two ways.

1.It can be the price of the credit, which is often referred to as
loanable funds
2.It can also be the return that the capital earns as an input in
the production process

 Interest rate represents the cost of using or borrowing money.

 RENTALS
Rent
– It is typically refers to the use of property for a certain amount
– It is the price paid for the use of land and other natural resources or
factors of production that is in fixed supply.
– Rent has been traditionally associated with land, which is a fixed
factor of production.
The scarcity of land becomes the concept of rent
WHAT RENT ON LAND?

 Rent on Land
-Land is one of the most common type of investments aside from owning
shares, cash and securities.
-In order to analyze how the price for the use of land is determined, we must
look at the supply of land and its level of demand.
 Minimum Wage
 Minimum Wage is the lowest allowed wage paid to workers by
virtue of legislation and government policies.

This is a form of government intervention to alleviate poverty and

income inequality in terms of rendering job services.

Minimum wage is set primarily to protect workers from abusive

employment practices.

A decent minimum wage is actually a useful tool in addressing wide

disparities in wage distribution.
 TAXES

 Taxes are the lifeblood of the government

 Taxation is the act of levying tax so that the sovereign,

through its law-making body, can raise income to defray the
necessary expensesof the government.
Types of Taxes

1. Direct taxes are taxes levied by government on the income and

wealth received by households and businesses to raise government
revenue and to act as an instrument of fiscal policy.

2. Indirect taxes are taxes levied by government on goods and services

to raise revenue and to act as an instrument of fiscal policy. Observe
that these are not taxes on people but on goods and services that
people purchase and consume.
Types of Taxes

3. Progressive taxes are taxes that place greater burden on those best
able to pay and put little to no burden on the poor.

4. Proportional taxes are taxes that places an equal burden on the rich,
the middle class, and the poor: In other words, taxes are levied at a
constant rate as income rises.

5. Regressive taxes are taxes that fall more heavily on the poor than on
the rich.Under this taxation structure, taxes are levied at a decreasing
rate as income rises.