Principles of Economics Submitted to: Prof. Tessie Sagadraca Submitted by: Mary Chris ALmoite Rechilla Jean Cabiso Alexander Maneclang Daniel Valdez IV-CCNA University of Makati

1. EXCHANGE AND
INTERNATIONAL
ECONOMICS

2. B
A
R
T
E
R
.

3. BARTER
A method of exchange by which
goods or services are directly
exchanged for other goods or
services without using a
medium of exchange, such as
money.
.

4. MERCANTILISM
Economic nationalism for the
purpose of building a wealthy
and powerful state.
It was believed that national
strength could be maximized by
limiting imports via tariffs and
maximizing exports.
.

5. ADAM SMITH
coined the term
“mercantile system”
to describe the
system of political
economy that sought
to enrich the country
by restraining
imports and
encouraging exports.
.

6. MONEY
An article which may be used as
a universal passport to provide
everything except
HAPPINESS.

7. Functions of Money
Means of payment for buying
things and for paying debts.
Standard value or a unit of
account serves as a common
denominator in which the
value of all goods and services
are expressed.
.

8.  Money as a means of storing
wealth.
Money facilitated trade and
commerce transactions.
.

9. LAWS OF MONEY
 GRESHAM’S LAW
“Poor or bad money drives the
good or better money out of
circulation.”
-- Sir Thomas Gresham
.

10. Quantity TheorY
of Money
• States that there is a direct
relationship between the
quantity of money in an
economy and the level of prices
of goods and services sold.

11. • The calculation behind the quantity
theory of money is based upon Fisher
Equation:
MV=PT
Where:
M - represents the money supply.
V - represents the velocity of money.
P - represents the average price level.
T - represents the volume of transactions
in the economy.

12. BANKS
 The word “bank” was derived
from Italian word banco which
means “bench or desk”, used
during the Renaissance era
by Florentine bankers, who used
to make their transactions above
a desk or bench covered by a
green tablecloth.

13.  Business establishment that
safeguards people’s money and
uses it to make loans and
investments.
 An establishment authorized
by a government to provide
financial services to its
customers.

14. CLASSIFICATION OF BANKS
 COMMERCIAL BANKS
It is a bank that lends money and
provides transactional, savings, and
money market accounts that accepts
time deposits.

15.  THRIFT BANKS
Include savings and mortgage banks,
savings and loan associations and
private development banks.

16.  RURAL BANKS
Commonly referred to as the
regional unit bank.
Provide adequate credit facilities to
farmers and merchants or to
cooperatives and, in general, to the
people of the rural communities of
which the rural bank operates in.

17. FUNCTIONS OF BANKS
1. Banking and Exchange
2. Furnishing of Currency by Banks
3. Deposit Functions of Banks
4. Lending and Discount Functions
5. Remittance and Collection Function
6. Fiduciary Function

18. CENTRAL BANK
The entity responsible for
overseeing the monetary
system for a nation.

19. OBJECTIVES OF CENTRAL BANK
Maintain internal and external
monetary stability in the
Philippines, and preserve the
international value of peso.
To foster monetary, credit, and
exchange conditions conducive to a
balances and sustainable growth of the
economy.

20. Bangko Sentral
ng Pilipinas
(Central bank of the Philippines)
Bank of the banks in Philippines
that provides the regulations and
procedures for its member banks.

21. WORLD BANK
Makes loans throughout the
developing world to finance
specific capital projects.
The World Bank's official goal is
the reduction of poverty.

22. THE INTERNATIONAL
MONETARY FUND
Is an organization of 188
countries, working to foster global
monetary cooperation, secure
financial stability, facilitate
international trade, promote high
employment and sustainable
economic growth, and reduce
poverty around the world.

23. Objectives of IMF
1. To promote international monetary
cooperation through a permanent
institution.
2. To facilitate the expansion and
balanced growth of international
trade.
3. To promote exchange stability.

24. 4. To assist in the organization of a
system of payment.
5. To give confidence to member
countries
6. To shorten the duration and reduce
the degree of disequilibrium in the
International Balance of Payments.

25. CREDIT
It is the power to obtain goods at
present in exchange for a promise
to pay in the future.

26. 4 C’s of Credit
1. Character
2. Capacity to pay
3. Capital
4. Collateral or the security in
case that debt can not be paid.

27. Advantage of Credit
1. It facilitates exchange.
2. It increases the volume of
production.
3. It eliminates the risk involved
in making payments to distant
places.
4. It economizes the use of coins
and paper money.

28. 5. It eliminates the danger of
being robbed
6. It makes possible the
accumulation of capital to
finance an enterprise

29. Disadvantages of Credit
1. It facilitates the overexpansion of
business activity.
2. A too liberal credit encourages
extravagance.
3. It increases business risk.
4. Easy borrowing of the
government often leads to
wasteful use of public funds.

30. Monetary Policy
Refers to the country’s central
bank role to determine the amount
of money and the cost of credit
interest rate.

31. Theory of comparative
advantage
 States that it is better to specialize
in those activities in which the
advantage over others is greatest or
in which the disadvantage compared
to others is the smallest.

32. FOREIGN EXCHANGE
The conversion of one
country's currency into that of
another.

33. BALANCE OF TRADE
(BOT)
The difference between a country's
imports and its exports.
It is the largest component of a
country's balance of payments.

34. IMPORT
-Goods and services of foreign
countries that one country purchases,
or the total value of such expenditures.
EXPORT
-One country’s goods and services that
are sold to other countries, or the total
value of such sales.

35. Balance of payments
(BOP)
Systematic record of all the economic
transaction of the country on the
receipts from and payments to
foreign countries.

36. The transactions in Balance of
Payments are generally classified into
three categories:
1. Transactions in goods and services.
2. Transfer payments
3. Transactions in capital and monetary
gold.

37. SURPLUS
-It is when receipts are more than
payments.
DEFICIT
-It is when disbursements exceed
receipts.

38. INFLATION
This is the rate of upward movement
in the general price level for an
aggregate of goods and services.

39. variations on inflation
Deflation is when the general level of
prices is falling. This is the opposite of
inflation.
Hyperinflation is unusually rapid
inflation. In extreme cases, this can lead to
the breakdown of a nation's monetary
system.
Stagflation is the combination of high
unemployment and economic stagnation
with inflation.

40. DEMAND PULL INFLATION
Summarized as "too much money
chasing too few goods". In other
words, if demand is growing faster
than supply, prices will increase.

41. Graph that shows Demand Pull Inflation:

42. COST PUSH OR SUPPLY
SIDE INFLATION
 A phenomenon in which the general
price levels rise due to increases in
the cost of wages and raw materials.

43. Graph that shows Cost Push or Supply
Side Inflation:

44. Inflation Rate
The percentage by which prices of
goods and services rise beyond their
average levels.
Inflation Rate = (Po- P-1)* 100 / P-1
Where:
Po = the present average price
P-1 = the price that existed last year.

45. trade
 “Primary instrument of development.”
The transfer of ownership of goods and
services from one person or entity to
another by getting something in
exchange from the buyer.

46. Free trade
 Occurs when the government has
placed to tariffs on imports and no
restrictions on exports

47. Three ways in which free
trade can be achieved
1. Unilaterally or when one country
reduces its trade barriers regardless of
the practices of the other country.
2. Bilaterally or when two countries agree
to remove tariff barriers between them.
3. Multilaterally or when many countries
agree to lower tariffs at the same time.

48. REASONS FOR INTERFERING
WITH FREE TRADE
1. Mercantilism
2. National Defense
3. Infant Industries
4. Protecting the wages of labor
5. Protecting the jobs of labor

49. Importance of Free
Trade
1. It would be necessary to find substitutes
for some product we enjoy.
2. More money would have to be spent to
produce things that could be imported at
less cost.
3. The economy of other countries that
depend on our trade would be hurt.

50. Trade barriers
1. Tariffs – excise taxes on imported goods.
2. Import Quotas – Specify the maximum
amounts of commodities which may be
imported in any period.

51. 3. Nontariff Barriers (NTBs) – refer to
licensing requirements, unreasonable
standards pertaining to product quality or
safety, or unnecessary bureaucratic red
tape customs procedure.
4. Voluntary Export Restrictions (VERs)
- trade barriers by which foreign firms
voluntarily limit the amount of their
exports to a particular country.

53. SUBMITTED TO:
Prof. Tessie Sagadraca
SUBJECT: Principles of
Economics

54. SUBMITTED BY:
Almoite, Mary Chris M.
Cabiso, Rechilla Jean B.
Maneclang, Alexander Jr.
Valdez, Daniel
IV-CCNA
University of Makati