ECONOMIC DEVELOPMENT @ First Edition © scanned with OKEN ScannerCHAPTER 3 A NATION'S WEALTH Figure 3.1, Gross Notional Hoppiness2 LEARNING OBJECTIVES {In this chapter, you will be introduced to a nation’s wealth in relation to economic growth and development. Specifically, this will help you: 1 2. 3, expound on GDP as a metric for economic growth and development; contrast the two approaches of computing the GDP; evaluate the uses of GDP and its implications on economic growth and development; differentiate and evaluate real and nominal GDP and define GDP deflator and GOP per capita; discover data on GDP and apply it to your understanding of economic growth and development; discuss other measurements of a nation’s income or wealth; analyze the case of Vietnam as an economic miracle; and recommend possible . * ‘The welfare of« nation can scarcely be) measurements of inferred from a measurement of national performance from the case of income as defined by the pas economic development. ‘Simon Smith Kuznets; b, 1901 ‘Nobel Memorial Prize in Economie Sciences ? Bagdi, Online Image. © scanned with OKEN ScannerLOOKING BACK . We have differentiated absolute from relative poverty, the previous being relative to re peyery tine and the latter being known as inequality of the rich and the poor. Then, toeath otherane non poverty and the world where poverty and inequality are attributed t luggish economic growth and low production and consumption of goods and services, natural disasters that are considered catastrophic, bad politics, and even discrimination. We also mentioned hope for the eradication of global poverty, like the commitment of all member nations of the United Nations to adopt Sustainable Development Goals to eradicate poverty. Subsequently, we attempted to understand how to measure poverty, its issues, and the variables to consider. We appreciated the poverty incidence and equality through the Lorenz Curve, showing the relationship of the population _ in percentile ranking to the national income. Thereafter, we examined what poverty trap is and the Persistence of poverty despite all government and private sectors’ efforts to eradicate it. We realized various ways to somehow reduce poverty, like cash transfers, in- kind transfers, work incentives, minimum wage law (which will be dealt with in more detail in Chapter 7 ~ Labor Markets), and adjustment to the tax code. Finally, we have explained the target of the world for poverty alleviation and eradication toward economic growth and development. INTRODUCTION For some, GDP may be the easiest and most accessible measure of economic well- being of a nation that can be associated with the standard of living of its people. Standard of living as a social indicator may be attributed to the country's social mobility, environment, and even income and poverty.’ Adam Smith, the father of economics, in 1776, published a paper titled, “An Inquiry into the Nature and Causes of the Wealth of Nations” or more simply, “The Wealth of Nations,” that tackled the foundations ofa lot of economic concepts such as laissez-faire, minimizing the government intervention, free markets, the work of the invisible hands that guide the supply and demand and creation of wealth not only from land but also from assembly lines, and market systems and capitalism? This has been the foundation of the attempt to understand a nation’s wealth that is relative to the use of limited resources. In this chapter, we are going to discuss the GDP and its components, measurement, positive and negative dimensions, real and nominal GDP, and the importance of the GDP deflator in understanding inflation. This is toward policy-making. ‘World of Sociology, "Social Indicators" » Routledge Dictionary of Economics, “Smith, Adam, 1723-90" P "chapters | ANation’s Weath = 45 @ scanned with OKEN ScannerGROSS DOMESTIC PRODUCT (GDP) rs and sellers who usehold, and the and expense that * cop ‘The market is composed of buyel may be the. government, firm, or hot interaction of the two creates income a may be used to measure the goods and services that flow within the economy or the circular flow of ba income.‘ For example, Rafael sells buko pie to Ella for 3 a box. When Ella buys the pie, it becomes an expense on her part and obviously an income for Rafael. The | in one year” doesnt include transaction shows that there is an equal monetary value | goods and services that were that is involved, that is P280, and both contributed to the ibed in the circular flow of income. This conor eae of money owing in and out ofthe markets of goods and services and the markets for factors of production. Thus, this can be used to measure the gross domestic product, which is considered by economists as a major measurement of a nation’s income, of course, at a given time and at a given place or region. It is important to note that the income should always be the same as the expense, although the case is not true all the time. Every economy wants a long- term economic growth; this is an indication of development. There is a need to know if the economy is growing or contracting, and GOP is able to estimate such. GDP is the peso value of all final goods and services that are produced in one country in a year. Finished goods do not include intermediate goods, for example the car seats, window shields, rubber tires, and stereo system for cars that are locally manufactured. It is important to note that we include in the GDP only domestically produced goods and services, which would mean, for example, apple products that are known to be produced in China are not included. However, it can be comprised in the computation E> Geotssotgeee of the Gross National Product (GNP) by Gis “Peso Value” monetary volue “Final Goods and Services” Finished goods do not include intermediate goods. “within the country” domestically produced included in another year Ongar seven ‘Sons determining the difference between-the two. Goods that are already included in the GDP of the previous periods are not included, like a house purchased years back or used clothes that are sold in ukay- ukays.> Furthermore, GDP computation excludes financial . transactions like investments in stocks and bonds as there is really nothing produced here; itisjusta cect Capital transfer. Of course, non-material Figure 32. 60PApEeeEhe: on exc yee and illegal goods are not counted in the determination of the GDP, 46 | Economic Development a @ scanned with OKEN ScannerCOMPONENTS OF GROSS DOMESTIC PRODUCT This section explains the two methods, of calculating the GDP: the expenditure approach and the income approach. The first one summarizes the total expenses to buy final goods and services by households, firms, and the government. We use the formula below in computing the GDP using the expenditure approach: : GDP =C+1464(x—m) i | Where: | GDP = Gross Domestic Product | C = Total spending on consumption goods and services | |= Purchase of plants, equipment, buildings, etc. . i G = Government spending on goods and services | | . XM) = Net exports or exports less the imports Consumer spending is the peso value that households are spending for final goods and services in a year, for example, supplies used at home, food, restaurant spending, and many more. * Government spending includes both national and local government units’ spending ‘to acquire goods and services that are used for public facilities, for example, when the government hires private contractors to build bridges, roads, hospitals, and the like. Net exports are just the difference between the final goods and services derived from importations from exportations. The ideal situation isto have a trade surplus, if nota trade balance, wherein the value of exports exceeds imports, or they are equal/balanced. The other approach is the income approach. Here, we summarize the compensation of employees, net interest, rental income, corporate profits, and income of other firms. [ GDP = Total National Income + Sales Taxes + Depreciation + Net Foreign Factor Income Where: Total national income is the sum of all wages, rent, interest, and profits. | Sales taxes is the tax imposed on consumers for the'sale of goods and / | services. ; | } | | | “Depreciation ithe cost allocated to capital assets over an estimated useful life. . i Ps | ‘Net foreign factor income is the income that citizens make while abroad, | less the income generated by foreigners in the country. = \ chaptar3 | ANation’s Weal) 47 tilt @ scanned with OKEN Scanner= For example, @ country has the following data for the year 2022 (in billions of dollars). We determine the: gross domestic product in both the expenditure and the income approaches: Transfer payments $64 Interest income 60. Depreciation 26 Wages 7 Gross private investments «134 , . 210 Business profits Indirect business taxes a4 Rental income 85 \ Net exports 28 Net foreign factor income 22 Government purchases 166 Household consumption 314 Using the expenditure approach, GDP =C+G +1+(X—M), Household consumption (C) $314 Government purchases (6) 166 Gross private investment (I) 134 Net exports (X-M) ; 28 GDP (Expenditure Approach) $642 Using the income approach, GDP = NI +1 + D, where NI= W+R¥i+(X-M), Net Income = Wages, 77 + Rental Income, 85 + Interest Income, 160 + Business Profit, 210 = 532. Hence, Net income $532 Indirect business taxes 84 Depreciation 26 gaz } GDP (Income Approach) USES OF GROSS DOMESTIC PRODUCT ie We can summarize the use of the GDP in three ways, although we can have More | than these as the component variables are really vast, First, with the use of the GDP, we can compare the economic performance on an annual basis by determining the growth 48. | Economic Development — @ scanned with OKEN Scannerrate to help us understand where the economy stands. For example, we want to know the percentage increase or decrease of GDP before the pandemic in 2019 and during the pandemic in 2020. Using the data provided by the World Bank, we can compute: GDP Current — GDP Previous Percentage Change Increase/Decrease inGDP_ = “HEE = $362.248-$376.88 337688 The answer is a percentage decrease of approximately 3.86%. Second, to assess the efficiency and effectiveness of government policies, GDP is an indication of a positive or negative effect of the policy as an indicator of its success or failure and the extent of how the economy is helped or hurt by this policy. In effect, the government learns to refine and repeat the successes, and of course, stop the mistakes and identify the economic stimulants that impact them. Of course, this is just a minor indicator of efficiency and effectiveness that may be used. Third is to compare the GDP with that of other countries. A higher GDP growth means a better quality of life and a higher standard of living, in general. We determine the superpowers, tigers, rising tigers, etc., boosting the economic reputation and enhancing more business transactions with them. REAL VERSUS NOMINAL GDP Changes in volume of output as well as in price largely affect the total spending over a period of time. For example, an increase in production would increase the total spending, and the same is true when the price is increased on the same good and service. In order to measure the total spending that is minimally affected by the changes in the prices of goods and services, economists have come up with a measure they cali real GDP that evaluates current production using constant prices. In order to understand real and nominal GDP, let us take:a look at this example of mangoes and guyabanos. Let us assume that these are the only two products that the country produced from 2017 to 2021. i 2017, | 2018 | 2019 | 2020 | 2021 Price of Mangoes fl P15 p25 P35 P40 P50 Quantity of Mangoes in Tons 25 30 35 40. 45 Price of Guyabanos _ [ss P65 Pos | P70 Pas. Guantty sf Guyatianas n't 5 8 10 » 20 Chapter3 | ANetion’sweatth * 49 © scanned with OKEN Scannerwe Nominal GDP of production given in a period of ti prices and the volume of spending \ iply the volume are used to multip| rrent prices aré we take note that the ime. In the ven below, i ie example gi hence, the nominal GDP In computing the nominal GDP, the cu, increased from 2017 to 2021; also increases. We can also say that the increase is partly attributable to the increase in’ price and partly to the increase in spending, 2017 2018 2019 2020 | _ 2021 ¥ (P15*25) + * 40%40) + | (P50*45) + ‘Computation (P25*30) + | (p35%35) + | (P. Pi (P55*5)_| (ress) (peset0) (p70*12)_|_(P85*20) Nominal GDP PESO P270 | pie7s | P2aao | P3950 Real GDP In computing the real GDP, we use the base price: fg 2017 4 2018 2019 2020 2021 5 (P15*25) + | (P15*30) + | (P15*35) + | (P15*40) + | (P15*45) + Computation (pss*s) | (pssts), | (pss*10) | (P55*212) | (P55*20) Real GDP PESO 890 P1075 | P1,260 | 4,775 GDP DEFLATOR Implicit price deflator or GDP deflator is a metric used by economists to understand ‘the changes in prices of products that are produced in one country. It is easier to appreciate the economic activities in various timelines in order to adjust a specific policy toward economic growth. Some economists believe that this measurement is more reliable than the Consumer Price Index (CPI) which only relies on the basket of goods and services when it comes to the gross effect of inflation. The CPI is a measure of the average change in the prices paid over time by urban households for a market basket of goods and services.* NominalGOP . 499 550. | Economie Development DP Deflator = Nominal GDP sl ar Real GDP : 2017 2018 2019 2020 2021 650 3,950 Computation | pg50 *100| "227? x 109 ae 100] £240.10] FI? 100 5 é |GDP Deflator | . 100 143 174 194 223 = Offenberg, "Consumer Price Index id © scanned with OKEN ScannerInflation rate in year'2 = S2PDeflator in year 2-GDP Deflatorinyeart 499 GDP Deflator in year 1 2017 2018 2019 2020 2021 13-100, og | = : = Computation | No ata | #2292, 300] 81 00 | SII | 228-28 00 Inflation Rate | No Data 43% 22% 11% 15% GDP PER CAPITA GROSS DOMESTIC PRODUCT AND INFLATION Two methods of calculating GDP: 1. Expenditure Approach — the sumn of all expenditures to purchase finial - _ Boods and services by consumers, businesses, and government GDP =C+1+G+4(X-M) Where, C = consumption expenditures (total household spending on consumption goods and services) - |= Investment (firm's purchase of plants, equipment, buildings, and addition to inventories) G = Government purchases (government spending on goods and services) (X=M) = Netexports (exports minus imports or “foreign sales” less “foreign purchases”) 2. Income Approach — adds the compensation of employees, net interest, rental income, corporate profits, and proprietor’s income Inflation exists when there is a sustained increase in the price level. The price level is the average level of prices. The inflation rate is computed as follows: Inflation rate = (CP! this year) —(CPllastyear) 199 CPI last year The labor force equals the sum of employed plus unemployed workers. = Number of people.unemployed 5 _ Unemployment rate = Me feos x00 Productivity function: Y = TF{LK,H,N} Whete: quantity of labor (L), quantity of physical capital (k), quantity of human ~ capital quantity of natural resources (N), 2nd technological advances (1) Chapter’3. | ANation’s Wealth St / @ scanned with OKEN ScannerCitizens. For example, we are comparing tw countries with the same GDP, but with highly different populations, The one with the higher population obviously will have a lower GDP Per capita and thus would mean a lower standard of living, as the denominator used in the Computation of the GDP per capita is the country's population. OTHER MEASUREMENTS OF A NATION'S INCOME/WEALTH [Gross National Happiness Gross National Product. This is the sum of all the finished by the citizens of a country overseas and domestically,” Personal Revenue Progress, Indicator Boods and services produced ‘Net National Product. This isthe sum of all the finished goods an \d services produced by the citizens of a country overseas and doy mestically less depreciation,® National revenue. This is part of the national budget of a f country that is composed of all revenue sources to be used in national expenditures. Personal revenue. This is the sum of an indi ; ; lividuals or citizen's earnings from salary, wages, and investment during a period of time? - Disposable personal revenue. This is the sum of an individual's or citizen’s earnings from salary, wages, and investment di luring a period of time less current individual taxes, 1° Boomsbury Guide to Human Thought. Gross Natal Proc (cy © The Macmillan Encyclopedia, ‘Net National Product A * Gale Encyclopedia of US. Economic History, "incomes id 52 | EconomicDevelopment aa @ scanned with OKEN ScannerGROSS NATIONAL HAPPINESS The Kingdom of Bhutan i applitin of 2 unique metic for the nee wealth and well-being—the Gross : ce Happiness (GNH). It attracted the attenti a world recently, and in 2012, the United Nations asked it i develop the guiding alles for happiness in the world. Bhutan believes that the GNH is a more important tool to use than GDP. They believe that happiness is living in harmony with nature while serving the people, including economic inputs. There are nine domains, and out of these are around two to four indicators for each one, for a total of 33 indicators to measure the GNH. They have learned from the mistakes of the western capitalist and pursued development without compromising the values of the -couritry. Economically, GNH is founded on the basics that happy people live longer and thus will need Jess public health funding. They can achieve more interms of the productivity of goods and services. Happy people are more generous, and they are more likely to conserve natural resources, thereby promoting sustainability. GNH reflects the normative values of culture and traditions. It should be statistically sound, reflecting happiness correctly, relevant for the action of the government, and of course, understandable to the people as they are the ones doing a self- reflective survey for themse eriodic surveys of then came up with the GNH.Itis only re policy-making. For now, they use it considered cause or causes of unhaP! us on insufficient com areas, they need to foc! being. In rural Bhutan, they should focus on Bhutan held Pp he a Dorf, Linke, and Sheld * Happiness. Bhutan” ad Ives. 7 the population, atively recent that Bhutan utilized tht asa tool to ide piness. For example, they have munity vitality, culture, living standards and batanc fon, tHalf Century of Protected Area D) eT —— | DOMAINS OF GNH Psychological Well-being Health Education Time Use Cultural Diversity and Resifience Good Governance Community Vitality. y and Resilience exnaveawne Ecological Di |. Living Standards (2 lee » ——— GNH SCORE CHART as per INDICATOR Unhappy: < 50% of the indicators Narrowly happy: 50-65% of the indicators Extensively happy: 66-76% of Deeply happy: more than 77% of the indicators ev like in 2006, 2008, and 2010, and e GNH in their tify what aspects to focus on that are recognized thatin urban and psychological well: ved use of time. marie te County of ISH National wi 38 Mt™ capter3 | Anat’ We @ scanned with OKEN ScannerNI area CUetvOn® Is impressed with the GNH as 2 metic for the nation’s wealth. Some 'rgue that the measurement is relative and that the factors used are subjective, like in th® standard of living and work-life balance, which is based on perception and self-assessment There is a question on the proper identification of what to measur measured the right way and at the right time? They say itis only academic and proves nothing because of the weak evidence that it shows, still, Bhutan admittedly pronounces that happiness is still @ hope for their country.” GENUINE PROGRESS INDICATOR jency of GDI Iternative metric called the stainable economic welfare and growth. the former is the gross revenue and the, environmental and social Some economists believe in the deficis P as a measure of the performance of the economy. Hence, they suggest an a genuine progress indicator (GPI). This is founded on the index of st If we are to make an analogy of GDP and GPI, GP is said to be the net revenue when all negative impacts of externalities are considered. As such, GPI uses the data that is derived from the GDP, just suing the good and bad effects of production and consumption like pollution and social impacts like poverty and the attempts to internalize those externalities, like the costs to repair and control poverty and pollution.” Both the GDP and the GPI are measured in terms of monetary value; hence, it becomes easy to compare with other forms of metrics in understanding economic stability and performance. However, GPI includes non-material aspects such as environmental damage, depletion of non-renewable resources, dependence on foreign aid, and crime rate, among others-in GDP, capital is included just once, but in the computation of the GP, it takes into consideration the ongoing effect of the use of capital. Some economists argue that the .GPI uses quite subjective data, as the value given by the respondents of the survey for GPI can be biased and may not represent the entire economy (Pais et al, 2019). Besides, it is more expensive to derive the GPI and time consuming as compared to the GDP. It needs to survey. households, firms, and governments and their view on how much are the costs of externalities like pollution and poverty and how much is the internalization applied to them. National Hamines ns Harta-Karp, "National Propress. Sustainability and Higher Goals: The Case of Bhutans Gross "als, Tiago, No, and Fuinhas, “Are Economic Growth a = Fi », and Fuinhas, and Sustair Jeveloprne ing? Ev from the Comparable Genuine Progress Incato oF Orton fr Eoomar ty Sone le a Pa for Economic Co-Operation and Development 54. | Economic Development aa @ scanned with OKEN Scanner| MSG RECVD ‘Name: Melani. Allen , Professional Background: Finance Professional in the USA on brain on the right track in terms of continued economic growth? 5s /@ are currently on the right track in the Philippines and the US. eyes soertece it the importation of goods from abroad, do you think we are importing more imate’ svowith in Phin ‘Yes, we do. As a matter of fact, the Philippine Statistics Authority recently showed ae electrical eliBPine imports than exports. We've imported more telecommunication equipment, ‘machinery, food and live animals, and plastics during February. How can the country fully recover from all the financial debts it incurred from the pandemic? In my opinion, sustained improvements in managing the pandemic and a possible economic rebound will help our country recover from all the financial debts. The government should improve fiscal policy by adjusting the spending levels and collecting more taxes; coupled with a balanced monetary policy. - Do you think itis wise for future leaders to continue the “Build Build Build” Program as an expansionary solution to the economy? Yes, BBB Program should be continued because itis one of the key drivers of our country’s economic recovery. It helps in shaping a better connected Philippines. It's a good .” Infrastructure investment that improves the lives of many Filipinos and has created millions of jobs since 2016 and will create more employment in the future. it will increase government spending which will be good for economic growth. This will stabilize and boost economic activities in the country. Do you advise the students and candidates to work in public service/government in the future? Yes, the younger generation should consider working in the public service in the future. The country will | definitely benefit from technologically savy future leaders who are flexible, mobile, highly educated, > and always striving for continuous development. 3 era Pn AGIIVITY. GROSS DOMESTIC PRODUCT Discuss with your classmates the following situation and answer the requirements completely and accurately. certain economy was selling only three goods: cheese, butter, and 8 Cee the next page. A typical resident regularly buys 2kilos of cheese, ‘bread in one year. As an economist, you are tasked to analyze 2019. 6 Assume tha’ bread, with prices given.o" " 5 kilos of butter, and 3 kilos the following using the base year, a ae 5S © scanned with OKEN ScannerCheese Butter 7 Bread Price Quantity |" Price | Quantity | Price cuantity rice 2019 20 P100 10 elt PSO 2020 30 P120 15 — = P100 2021 50 P50 25 P75 40 Discussion: 1, What was the real GDP in 2021? 2, What was the nominal GOP in 2020? 3. What was the GDP deflator in 2021? 4. - What was the percentage change in nominal GDP from 2020 to 2021? 5. What was the percentage change in real GDP from 2020 to 2021? 6. What was the percentage change in nominal GDP from 2019 to 2020? 7. What was the GDP deflator in 2020? ‘8. Why do we need to study GDP? 9. _ Differentiate real and nominal GDP. 10. Do you think GDP per capita is the best measurement for the nation’s true wealth? Why? Why not? CASE VIDEO . HOW VIETNAM BECAME AN ECONOMIC = = MIRACLE? Search the video titled, “How Vietnam Became an Economic Miracle?” on the Internet and answer the questions that follow. Vietnam's GDP per capita increased from $95 to over $2,700 since 1990 despite its population growing by a quarter. Even after accounting for inflation and local Purchasing power, Vietnam experienced a fot vears, being the to avoid a recession in 2020? To answer this, we nee Vietnam's economy after the Vietnam wars "Economies ltSimpied, How Vietnam Became an Ec Mi omic Miracle? 56 | Economic Development © scanned with OKEN Scannerdl Let Us React! ' What are the lessons that we can derive fro sc m this case video on “How Vietnam Became REMEMBER GOP In Numbe 37 chapter | ANation's Wealth i EB © scanned with OKEN ScannerCHAPTER EXERCISES i i th A. Scrambled Words. Unscramble the words below and discuss briefly what they mean, NSMOIPNOUCT PINUROOCDT REPTUNEDXEI Pw N HDULEOHSO VNERENOTGM TNOLNFAII FICCFNEYEL VERSSIEC pep Naw ALNONMI 10. IPPSSAEHN ‘True or False. Write True if the statement is acceptable or False if otherwise. 1. What makes GNP and GDP different is the depreciation. 2. ies in general are all included in the computation of 3. One of the weaknesses of the com; putation of the GDP is that it overlooks the distribution of income. i 4. Income from the underground economy and th is e black market is not reflected in the GDP, market is ni mputed livic a multiplied by 100, uted 85 Feal GDP divided by nominal GDP GOP in base-year prices is what we know as real GDP. 58 | Economic Development © scanned with OKEN Scannerne New house and lot are considered consumer durables. , P tha opens in London, UK. The sales of the fastfood chain are : \cluded in the Philippine GDP and the UK GNP. L f +1. Retained earnings are subtracted from the national income to arrive at personal income. 12. 13. Net national product (NNP) is GDP plus depreciation. sok market transactions are included in the computation of the INP, — 4 The income of Overseas Filipino Workers (OFW) working abroad is included in the computation of the Philippine GDP. 15. GDP is simply the total income and spending of everyone. C, Word Search. Highlight the words that are considered measures of the nation’s wealth. There may be more than two words taken as one. Clue: There can be 10 highlights. Smon> zzrcorDV PPM OVE HAO 4KROKF ZO or-cr»ezx%z2>000rO- DN ao ma>d ZrrarromeEorovHamz po-vzxaOORXZOENEVMNAG xenmnmodoczxvHEWV< ZF OXONNEHEN Cx SEmrCHENOTMEEWHSSMETS 400M E-CTAMNFONXXFER meoomvevoo-FAXOXPFOMAR ~EzQOLCVAOO 59 cnapter S| A Nation's Wealth @ scanned with OKEN Scanner—_ D. Multiple Choice. Choose the best answer from the choices given below, then discuss it with the professor for clarification. 1. The possible meaning of gross domestic product (GDP) is a. Total income of everyone in the economy b, All outputs in the economy ¢. Total expenditures of everyone in the economy d. Allofthe choices 2. The income that is earned by OFWs in Bahrain is included in a. Bahrain GNP b. Philippine GNP c. Philippine GDP d. Both Philippine and Bahrain GDP 3. Exports are equal to: a. Net exports + imports b. Net exports—imports c. Imports —net exports d. Imports + (exports + imports) The net investment in 2021 is P500 trillion, and the gross investment in the same year is P1,000 trillion. What is the depreciation in 2021? a. P1,500 trillion b. P500trillion c. P1,000 trillion d. 2,000 trillion . 5. The value of the net exports is negative, then : a. _ Imports are more than exports b. Exports are equal to zero ¢c. Exports are more than imports d. Imports are equal to exports : 6... If the GNP is P900 billion and the depreciation is P300 billion, what is the net national product? a P1,200 billion + B. P600 billion © P300 billion d. P3 billion 60 | Economic Development f- @ scanned with OKEN Scanner10. lf the GDP deflator is more ‘than 100, then Nominal GDP is less than real GDP b. Nominal GOP is more than real GDP ¢ Prices went down twice between the current and base years d. Nominal GDP is equal to real GDP SDP on the basis of the base year is a. Real GDP b. Nominal GDP © GDP ata fixed rate d. Current @Dp Compute the GDP if GNP is 1,000 billion, receipts of income from abroal! are P100 billion, and payments all over the world are P250 billion. a. P1,150 billion b. P1350 billion ¢. -P65O billion dP 1,250 We can avoid double counting by ion a. — Including intermediate goods in the production year and not the selling year b. — Excluding the intermediate goods in the GDP c. _ Including intermediate goods in the period d.. Including intermediate goods.in the GNP but not in the GDP Caselet. Answer the following requirements from the information given: i 2. P Billions Services 00 Exports. ¥ 700 Investment of a foreigner 350 Durable goods 400 Purchase of goods (National) 50 Purchase of goods (Local) 30 Non-durable goods 200 Change in business inventories 100: Imports 500 Residential investment 150 How much is the government spending in P billions? How much is the gross domestic product in P billions? hapter3, | ANation’sweath 64 @ scanned with OKEN Scanner3. How much is the personal consumption expenditures in P billions? 4, How much is the net exports in P billions? 5. How much is the gross private domestic investment in P billions? REFLECTIVE DISCUSSIONS 1.__ Differentiate gross domestic product from gross national product. Which is a better measure of a nation’s wealth? Why? 2: Using the diagram below, explain why the expenditure approach is relative to the product market and the income approach to the factor market. Goods & Services a HOUSEHOLD OVERNMENT eS e Stones 3. The GDP is'a measure of a nation’s income that t is used in most countries around the world, except notably, the Kingdom of Bhutan to name one, Why is this the case? 4. Explain the difference between real and ni jominal GDP. What is the i DP deflator and how do we use it in our decisi 's the meaning of 6 ion-making? Discuss each one of these metrics in determining a nation’s wealth: &, Disposable personal revenue b. Gross National Happiness (6NH) Genuine progress indicator (GP!) 62 | Economic Development <> © scanned with OKEN Scanner10. a How does carbon tax impact the GDP of a Country when it is imposed? Why do most economists say that the GDP per capita projects a much clearer picture of a nation’s wealth than merely determining the GDP? Do you think the Gross National Happiness can be imposed on the country? Why? Why not? How did Vietnam become an economic miracle? How can improvement in the factors of production contribute to the wealth of the nation? a. Land b, Labor c. Capital d. Entrepreneurship @ scanned with OKEN ScannerREFERENCES Allen-Tilles, Malani, (Finance Professionalin the USA). In Email Interview with the Author. June 2021, Hove, Tulsito C. The Economics of Secondhand Retail rade: An Analysis of the Market for Ukay, Ufa. St. Louis: Federal Reserve Bank of St Louis, 2007. 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