Analyze the effects of

contemporary economic
issues affecting the
Filipino entrepreneur
A. INVESTMENTS AND
INTEREST RATES
 A. INVESTMENTS AND INTEREST
RATES
INVESTMENT: A DETERMINANT OF INCOME
1. Investment–is a process of building up capital stock, or the
expenditure which determines the income and production in the
economy.
• also refers to the value of machinery, plants, and buildings that
are bought by firms for production purposes–investment is the
capital expenditure on the purchase of physical assets such as
plant, machinery, and equipment (also known as fixed
investment) and stocks (also known as inventory investments)
 2. Investment Expenditure
• 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.–The surplus may not be sufficient to finance
even a fraction of investment spending. Instead, a
business may borrow the savings of the economy,
which households likewise do, e.g., for housing
construction.–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.
 3. Fixed Income Investment
• Investors are aware that there are risky investment options. For investors who
are averse to risk fixed income investments are the best option since these
investments are guaranteed to have a lower risk of losses.–Fixed income
investments (FIIs) are investments that provide fixed periodic sources of
income over a certain period of time–examples:
• 1. Government securities like treasury bonds, treasury bills and notes
• 2. Corporate bonds (which have higher interests compared to government
securities)
• 3. Special deposit accounts offered by the Bangko Sentral ng Pilipinas(BSP)
• 4. Foreign currency time deposits
 4. Variable Income Investment
• are forms of investment that are suitable for risk tolerant
individuals.–in VIIs, returns are not fully guaranteed and money or
resources invested may also not be fully recovered. The reason for
this is that the returns from variable income investments are strongly
influenced by economic situations and the behavior of financial
markets.–examples:
• 1. Business ownerships in the form of equities
• 2. Company stocks
• 3. Investment fund shares that have a high level of liquidity since
theycan be easily converted to cash
 B. RENTALS
• Renting, also known as hiring or letting, is
an agreement where a payment is made for
the temporary use of a good, service or
property owned by another. A
gross lease is when the tenant pays a
flat rental amount and the landlord pays
for all property charges regularly incurred
by the ownership.
B. RENTALS
• In simple words, ‘ rent’ is used as a part of the produce which is paid to
the owner of land for the use of his goods and services.
• But, in economics, rent has been differently defined from time to time.
• Thus rent refers only to make payments for factors of production which
are in imperfectly elastic supply. For instance, it is the price paid for the
use of land.
 Is rent a good or service?

• That “product” could come with attached services,

like the landlord's obligation to make repairs or for
maintenance of the property, if the tenancy agreement
or lease provides for it. Thus, the rent will always be
consideration for a “product” or “service”, however
you choose to see it.
The main types of rent
are as under:
1. Economic Rent:
• Economic rent refers to the payment made
for the use of land alone. But in economics
the term rent is used in the sense of
economic rent. In the words of Ricardo and
other classical economists, economic rent
refers to the payment for the use of land
alone It is also called Economic Surplus
because it emerges without any effort on
the part of landlord.
 2. Gross Rent:
• Gross rent is the rent which is paid for the services of
land and the capital invested on it.
Gross rent consists of:
• Economic rent. It refers to payment made for the use
of land.
• Interest on capital invested for improvement of land.
• Reward for risk taken by landlord in investing his
capital.
3. Scarcity Rent:
• Scarcity rent refers to the price paid for the
use of the homogeneous land when its
supply is limited in relation to demand. If
all land is homogeneous but demand for
land exceeds its supply, the entire land will
earn economic rent by virtue of its scarcity.
In this way, rent will arise when supply of
land is inelastic.
 4. Differential Rent:
• Differential rent refers to the rent
which arises due to the differences in
the fertility of land. In every country,
there exists a variety of land. Some
lands are more fertile and some are
less fertile.
5. Contract Rent:
• Contract rent refers to that rent which is
agreed upon between the landowner and
the user of the land. On the basis of some
contract, which may be verbal or written,
contract rent may be more or less than the
economic rent.
C. MINIMUM WAGE
 MINIMUM WAGE
• A minimum wage is the lowest remuneration
that employers can legally pay their workers—
the price floor below which workers may not
sell their labour.
• Minimum wages have been defined as
“the minimum amount of remuneration
that an employer is required to
pay wage earners for the work performed
during a given period, which cannot be
reduced by collective agreement or an
individual contract”. The purpose
of minimum wages is to protect workers
against unduly low pay.
D. TAXES
 TAXES
• A sum of money demanded by a government for its support or for specific
facilities or services, levied upon incomes, property, sales, etc. a
burdensome charge, obligation, duty, or demand.
• Taxation not only pays for public goods and services; it is also a key
ingredient in the social contract between citizens and the economy.
How taxes are raised and spent can determine a government's very
legitimacy.
 How do taxes affect the economy?
• How do taxes affect the economy in the long
run? Primarily through the supply side. High
marginal tax rates can discourage work,
saving, investment, and innovation, while
specific tax preferences can affect the
allocation of economic resources.
But tax cuts can also slow long-
run economic growth by increasing deficits.
The major types of taxes are:
• Income Tax - It is a tax imposed on
individuals or entities that varies with
respective income or profits. Income tax
generally is computed as the product of a
tax rate times taxable income. Taxation
rates may vary by type or characteristics of
the taxpayer. The tax rate may increase as
taxable income increases.
 Sales Taxes
• Sales Taxes - is a
consumption tax imposed by the
government on the sale of goods and
services. A conventional sales tax is levied
at the point of sale, collected by the
retailer, and passed on to the government.
Property Taxes
• Property Tax - A property tax or millage rate
is an ad valorem tax on the value of a
property, usually levied on real estate. The tax
is levied by the governing authority of the
jurisdiction in which the property is located.
This can be a national government, a
federated state, a county or geographical
region or a municipality.
 Excise Taxes
• Excise Tax - An excise, or excise tax,
is any duty on manufactured goods
that is levied at the moment of
manufacture rather than at sale.