This document discusses approaches to measuring gross national product (GNP). It explains that GNP can be measured using the factor income approach, which involves adding up all income received by the factors of production - compensation of employees, entrepreneurial income, corporate income, and government income. This sums to national income. To calculate GNP, national income is further adjusted by adding indirect business taxes and capital consumption allowance. The factor income approach provides a formula to precisely calculate GNP based on incomes from various economic factors.

1. In Partial Fulfillment of the
Requirements in Major 10
(Production of Social Studies
Instructional Materials)
CARIE//
GUILBERT/// and
PRINCESSES///

2. Am I SEXy?

3. Laguna State Polytechnic University
San Pablo City Campus
San Pablo City
Guilbert Kaligayahan

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5. Are u ready 2 listen?...

7. Chapter 34

9. Factors of Production
• Production is the combination and use of all factors
producing goods and services that will satisfy the needs of
man. Factors of production are used to produce products and
services, there are four factors of production:
land, labor, capital, and entrepreneur. Land is the
nonrenewable resource where the raw materials needed in
production come from. This factor cannot be increased
according to the desire of the individual. It is a natural factor
of production. Labor or labor force, whether physical or
mental, are the talents and strength necessary in production.
Capital is the material things created by man.
Entrepreneur is a factor of production and is called captain
of the industry.

10. The Circular Flow of Products and
Services
Business Products and
Services
Firms
Market for Market for
Factors of Finished
Production Products
Land, Labor,
Capital, Household
Entrepreneur

11. Flow of Money as Payments for Two
Sectors
Business
Profit, rent,
Firms
Income
wages interest
Market for Market for
Factors of Finished
Production Products
consumption
Income
Household

12. Flow of Savings and Investments
Business
Profit, rent, wa
Firms
Income
ges interest
Market for Market for
Factors of Finished
Production Products
consumption
Income
investment
Household
Market
for
Savings Capital

13. The government’s role in the circular
flow
Business
Profit, rent,
Firms
Income
wages interest
subsidiary
Tax
Market for Market for
Factors of Government Finished
Production Products
payment
Transfer
Tax
consumption
Income
investment
Household
Market
for
Savings Capital

14. Role of the Foreign Market in the
Circular Flow
Business
Profit, rent, wa
Firms
Income
ges interest
subsidiary
Tax
Market for Market for
Factors of Government Finished
Production Products
payment
Transfer
Tax
consumption
Income
investment
Household
Market
Foreign for
market Savings Capital

15. Chapter 35

16. Economic Indicators
Economic progress can be traced through the
economic performance of the country. It serves as
gauge for the government and other sectors if they are
performing well. In measuring the economic
performance of the country indicators are being used.
The indicators describe the condition of the country.

17. Gross National Product (GNP)
Gross National Product (GNP) is considered the
most important indicator in measuring the development
of the economy. In GNP, the overall production of the
country is studied and examined. It is the accumulation
of all the products and services produced in the country.

18. GNP
GDP

19. If the GNP measures the total
production of the country in a
year, Gross Domestic Product
(GDP) refers to the total
market value of goods and
services produced within the
country for one year
. All production within
the country is included
in our GDP, even if a
foreigner produces it
as long as it is done
inside our country.

20. Difference of GNP and GDP
In general, all the produced goods and services of
the Filipinos inside the Philippines is both included in
GNP and GDP. As we deduct the income earned by the
Filipinos abroad from the income earned by the
foreigners in our country, we will get the Net Factor
Income from Abroad (NFIA). When the income of the
foreigners are higher than the income of the Filipinos
abroad, the NFIA has a negative decrease compared to
GDP.

21. Potential and Actual GNP
The number of workers, their working hours, machine-
ries, and technology used and the natural resources in the country
are the basis in estimating the total production of the economy.
Every country has a target quantity of production based on its
capacity. Potential GNP is the estimated total production of the
country based on the productivity and capacity of the factors
mentioned earlier. It is the goal of the economy for a year. At the
end of the year, the production of the country is being
measured, and it represent the actual GNP. Actual GNP is the
amount of the produced goods and services attained in a country
for one year. It serves as a barometer if the economy has been
effective in maximizing the use of the natural
resources, machineries, and workers in achieving the potential
GNP.

22. Chapter 36

23. Approaches to GNP Measurement
Factor Income Approach:
Each factor of production receives payment for its services and this serves as income.
The various payments are rent for land, wages for workers, interest for capital, and
profit for entrepreneur. If the factor incomes are combined together, the result is the
national income.re are the main component of national income:
a) Compensation of Employees (CE) – it includes the all the
benefits, commission, allowance like Cost of Living Allowance
(COLA), clothing and, transportation allowances, personal emergency
allowance or PERA, nonmonetary benefits, payments according to the contract
of the employees, and salaries that employees receive on specific time represent
the compensation of employees.
b) Entrepreneurial Income (EI) – this is the payment received by an individual
which is not classified as wage salary. This is the income of the entrepreneur as a
factor of production .
c) Corporate Income (CI) - income received by corporations and intended for
business expansion represent the corporate income.
d) Government Income (GI) – all the incomes received by the government such as
taxes, income of government owned and controlled corporations and the interest

24. Factor Income Approach
The combination of all the components mentioned
above will sum up as National Income. This formula
for National Income (NI):
NI = CE+EI+CI+GI
NI = 110+50+15+22 =
For example, if CE is
197million pesos
Php110million, EI = 50 million
pesos, CI = 15 million pesos and GI
= 22 million pesos, then, ………

25. To be able to measure the GNP, we will add the other
production expenses such as:
1. Capital Consumption Allowance (CCA). It refers to
the fund for depreciation intended for buying new
machineries and facilities.
2. Indirect Business Taxes (IBT). Indirect tax imposed
on the products and services made after the subsidy
has been deducted.
In general, GNP can be measured with the use of the
formula : . . . .

26. GNP = NI+IBT+CCA
For example, if NI = 197 million pesos, IBT = 5
million pesos and 12 million pesos for CCA, then GNP
is equal to 214 million pesos.
Factor Income Approach shows the GNP using
the different income received in the economy.

27. Final Expenditure Approach
The economic sectors like household, government,
business firm, and foreign market have their own
expenses, which are significant in measuring GNP,
a. Government expenditure (G)
b. Personal expenditure (P)
c. Business expenditure (B)
d. Net export (X)(M)
e. Net Factor Income from Abroad (NFIA)
f. Statistical Discrepancy (SD)

29. If all the expenditures mentioned above are put
together, GNP will be computed. The formula for
measuring the GNP using this approach is:
GNP = G+P+B+(X – M)+NFIA+SD
For example:
G = 34 million pesos
P = 130 million pesos
B = 59 million pesos Using the formula in measuring
M = -7 million pesos GNP at Factor Income Approach,
X = -7 million pesos the amount is…
NFIA = -5 million pesos
SD = 3 million pesos

30. Industrial Origin Approach
It is also called value added approach where all
the contributions of each industry like agriculture,
industry, and services are computed. The value of the
products depends on the contribution of every sector in
the processing and production of goods and services.

31. Limitations in Measuring the GNP
GNP alone is not enough to measure the development
of the economy. Even if the government stated that the GNP
achieved a five percent increase, the reality speaks the
truth, the common man still not experience and feel the said
increase in his daily living. Still the lives of many Filipinos
are falling into poverty.
In GNP measurement, not all commodities are
included in the total market value of products and services.
There are products and services which are not included in
the computation because they are not recorded or they are
not paying the required tax. This kind of activities include in
the underground economy.

32. Chapter 37

33. Price Increases
The continuing increases in the general price
level of commodities are called inflation.
As of now, inflation cannot be prevented. It
remains big problem o the economy. The basic
commodities like sugar, rice, beef, milk, cooking oil and
etc. are affected by price increases. So many consumers
cannot afford to satisfy their basic needs in life.

34. Types of Measuring Instruments of
Price Changes
1. GNP deflator or GNP Implicit Price Index – it is the
average price index used to adjust the current GNP
against constant GNP. The GNP deflator is being
used to know the value of GNP based on the
previous year. This formula being used:
In short, it is used for anyGNP at Current Prices in the
changes in price
computation of GNP.
GNP at constant prices =
GNP deflator

35. 2. Wholesale Price Index and Retail Price Index – it shows and
measures the changes in the price of finished
products, intermediate goods, and crude materials in wholesale
and retail trading. Wholesale is the price of every piece of
goods.
3. Consumer Price Index (CPI) – it is the most popular
instrument in measuring inflation. The CPI measures the
average percentage in the change of retail prices of
commodities usually purchased by consumers. It describes the
present living condition of the consumers according to
changes on price. The commodities, which the CPI
measures, are those products that are included in the market
basket of goods. The inflation rate depends on the CPI.

36. Computation of CPI
Hypothetical Data
PRICE
Commodities Unit Weight
2005 2004
Rice Kilo 40 25 28
Sugar Kilo 5 19 22
Fish Kilo 10 60 80
Meat Kilo 15 85 110
Cooking Oil Kilo 20 25 32
Coffee Kilo 10 40 45

37. 1. Computation of Weighted Price – the first step is to multiply
the weight and price (w x p) to get the weighted price, we
will get the WP in the year 200 and 2005.
Commodities 2004 2005
Rice 1,000 1,120
Sugar 95 110
Fish 600 800
Meat 1,275 1,650
Cooking Oil 500 640
Coffee 400 450
TWP 3,870 4,770
2. Total Weighted Price (TWP) – after getting the weighted
price of the commodities, combine the entire weighted price
to get the total weighted price (TWP) of 2004 and 2005.

38. 3. Consumer Price Index (CPI) – if the TWP is already
computed, then the consumer price index (CPI) of
2004 and 2005 can be computed by using this
formula:
TWP2005 (present year)
CPI =the CPI of 2005 is 123.25
So,
TWP2004(base year)
based on the computation. The
total of CPI should not be rounded
off.
4,700
x 100 = 123.25
3,870

40. Purchasing Power of the Peso (PPP)
In computing the PPP, the formula 100/CPI is
used to determine the real value of the peso compared to
a base year. For example, if the base year is 2000 and
the CPI of May 2005 is 128.3, the real value of the peso
in May 2005 is 0.78 compared to the base year. What is
the implication of this? The value of the peso in 2000
went down to 0.78 in May 2005. there is a decline in the
purchasing power of peso.

41. Chapter 38

42. 1. Demand – pull – all
sectors of the economy,
household, business firm,
and government have their Kinds of
own demand. The demand
of these sectors comprises Inflation
the aggregate demand of
the economy. The demand
– pull inflation happens id
he sectors desire to buy
products and services
more than the available
supply in the market. In
short it is the condition
where aggregate demand
is more than the aggregate
supply.

43. The total expenditure of Quantity of goods to be
consumer, business, firms, and produced and distributed by the
government businessmen
Aggregate Demand Aggregate Supply
>
= Demand Pull Inflation
According to monetarists headed by Milton Friedman, an economist, excessive
money supply or money in circulation causes the increase in the demand of
each sector. Higher income or excess money leads to consumption of more
products and services by households. As a result, the demand is pulling the
prices of the commodities become higher. This condition prevails as long as
the people continue to consume more products and services.

44. Cost - Push
• The increase in the
production costs of firms
leads to price increases.
Income in wages,
purchases of raw materials
and machineries, and the
desire to have more profit
are the main reasons why
the price of the
commodities increases,
particularly if the factors of
production ask for high
payment for the services.

46. Inflation
High Wage
prices increase

47. The increase in the normal price
of commodities is a result of an
imbalance and abrupt increase of Structural
demand and supply of the different
sectors of he economy. There is Inflation
competition among wage earners and
profit earners. There is competition
between the private and public sectors in
getting the share of the country’s
resources. Every action and movement
of each economic sector causes an
increase in the price of commodities.
This is called Structural Inflation.

48. Examine if the following are effects of inflation or causes of
inflation. Write EI if it is an effect and CI if it is a cause.
____1. consumers cannot afford to buy many products
in the market
____2. a big portion of our budget is allocated for the
payment of foreign debt
____3. a huge amount of bonus is given to workers
____4. corruption in the government is so rampant
____5. increase in the production level of the country.

49. Chapter 39

50. Groups that usually benefit during
Inflation
1. Borrowers
2. Speculators
3. People without Fixed income
4. On people with Fixed income
5. On lenders

51. The causes and solutions of inflation
CAUSES RESULTS POSSIBLE SOLUTIONS
Excess money in Increase in demand Improve a tight money policy
circulation
High production cost Decrease in supply Increase production by maximizing the
use of resources
Export orientation Shortage of supply in the Give priority to the needs of the local
local market market
Import dependence Oversupply of imported Utilize and maximize the local
products resources
Monopoly and cartel Price is manipulated and Enforce penalty to the members of
controlled cartel
Middlemen The price of goods is Impose price control
increasing
Loan payment The amount is not utilized Set aside a small part of the national
for the development of the budget for debt services
industries
Military expenses Buying unnecessary military Use the money in agricultural
equipment development

52. A. Fill in the blanks with correct answer.
____1. the evidence of government credit to the public
____2. experience bankruptcy during inflation
____3. strategy of Banko Sentral ng Pilipinas to
monitor and control the money supply
____4. specific amount of money that depreciates if
left in the bank
____5. businessmen who buy products when the price
is increasing.

53. Chapter 40

54. What is income?
• Income is the money received by an individual as
payment for producing goods and services. Per
Capita income (PCI) is the income received by an
individual if the total population divides the total
production. It is also known as GNP per capita. In
computing the per capita income use he formula:
GNP
= GNP per capita
Population

55. Income distribution
Refers to show the national income is divided
among all sectors of the economy. A study of the
statistical report of NEDA shows that the target of the
national economy is very far from being realized.

56. Lorenz Curve
Income distribution in a country
is illustrated in a curve called Lorenz
Curve, which was formulated by Conrad
Lorenz, an American statistician.
Lorenz curve consist of two axes:
the horizontal that represents the
percentage of population by income group
and the vertical, which represents the
percentage of income received.
In constructing the Lorenz curve ,
it is necessary to get the cumulative
percentage of income and population.

57. Chapter 41

58. For you.. What is development and
progress …?

59. • The term Development and Progress are
frequently used in economics. The two
terms are interrelated but they have
different characteristics
What is development and what is
progress?
Economic progress can be easily measured.
It is the result of a process that shows
changes in the economy.
While…
Economic development is not only the idea
of improvement of the economy cut also
the enhancement of human dignity,
security, justice, and equality.

60. Progress leads to Development
Development
Social
Changes
Progress

61. The Principle Theories on progress and
Development
Physiocrats, composed of economist led by
Francios Quesnay, believed in the rule of nature.
Physiocrats agreed hat industrialists and
businessmen must have the freedom to intensify the
industries. They supported the Laissez Faire doctrine
because they believed that the expansion of industries is
vital to economic development.

62. Model of Physiocrats
Agriculture Laissez Faire
Physiocrats

63. Theory of Adam Smith
Adam smith is popularly known as he Father of
“Modern Economics”.
The principle of Adam Smith centered on the
development of production through specialization.
Specialization is the division of work based on capacity
and ability. Job specialization is necessary in improving
and fact tracking work.

64. Theory of David Ricardo
The physiocrats influenced David
Ricardo on the idea of development. His
theory centered on the advantages
provided by the possession of natural
resources, particularly land. The rapid
increase of population is the main reason
why lands are cultivated even if they are
not fertile land. People have to do it in
order o have a plantation for agricultural
products, which will satisfy he needs of the
individual.

65. Neoclassical School
This group economists follows the ideas of the
classicists. Neoclassicists believe that are underlying
factors that contribute to the development and progress
of the country.
Competition No Monopoly
Free Trade Aid from the Government

66. One important mechanism that motivates
businessmen and consumers to improve their activities is
competition. Competition can only be achieved if there is
no monopoly or oligopoly in the market that causes crisis
in the economy.
Free trade is an effective method in the exchange
goods services among countries without setting up barriers
like quotas and tariffs. Quotas are limitations in the
quantity of products that can be exported or imported while
the tariffs are tax levied on imported products. The
aforementioned factors are necessary to increase the
revenue of the economy in order for it to achieve
progress, according to neoclassicists.

67. Identify whether development or progress is
happening. Write P for progress and D for
Development.
____1. the government constructed a skyway.
____2. investment is increasing
____3. the people are fully employed
____4. the government allocates a big budget for the
improvement of health services
____5. each family has remote control appliances

68. Chapter 42

69. Models on Progress and Development
Model on Capital
Model on technology
Model on cumulative process

70. Model on Capital
Roy Harrod of England and Evsey Domar of USA
state that abundant and sufficient capital is
vital for economic progress. This was
explained through the relationship of input
and output.
INPUT
Machineries OUTPUT
Buildings
Production Finished Products
Equipment
Workers and abilities
And skills and services

71. Model on Technology
Nicholas Kaldor emphasized the important role of
technology. Technology involves the use of capital. It is
necessary to develop technology as part of investment.
According to Kaldor, if technology develops faster than the
stock of capital, additional productivity occurs and it will
continue increasing. And the result is more investment.
One good example of the importance of technology on
economic progress and development is the case of Japan,
which is considered the richest and most progressive
country in Asia. The government of Japan set aside a big
budget on research and technology to help he industries to
prosper. They use robots in hospital, offices, and factories
as workers. They introduce new inventions and
technological breakthroughs.

72. Model on Cumulative Process
Gunnar Myrdal believed in the cumulative process as they key to
economic development. His ides were formulated based on his observation and
studies of several countries in Asia. He wrote his book entitled Asian Drama to
reveal the economic conditions of Asian countries.
Opportunity
to save
Individuals
Resulting to
will have big
big capital
income
Having more
production

73. Five Stages of Growth
The The pre – The take Off The drive to Age of high
traditional conditions maturity mass
society for Take Off consumption

74. Theory of Karl Marx
The economic point of view of Karl
Marx was derived from the beliefs of the
classicist. Marx gave emphasis on labor.
According to him, workers were the real
producers of the products, but the profit
goes to the capitalists and not to the
workers. As a result, differences between
the workers and capitalists exist.

75. Relationship of workers and capitalists
Workers (thesis)
Capitalists (Anti – Thesis)
New System (Synthesis)

76. Any Question???????

77. Explain your answer.
1. Do you agree that workers play an important role in
the development of the economy as what Karl Marx
stated? Why?
2. Why should the government intensify the
accumulation of capital?
3. How does technology help in the development of
the economy?
4. Why should the government support the
entrepreneur or innovation?

78. Arrange the following sentences by putting number 1 – 5
according to their importance to economic development.
Use number 1 as most important.
_____ use of modern equipment in production
_____ development of other economic sectors
_____ overflowing foreign investment
_____ agreement between workers and capitalists
_____ support of the government to Filipino inventors

79. Finish?
If yes … exchange papers…

80. That’s all…..

81. End…

82. SPECIAL THANKS TO:
•ATE MARFIL
•SIR TENORIO
•MORPHEME & APOLLO
•KUA KEN
•BSED, II – T
•BSED, III – T, Math Majors
•RIZZA U
•DING
•And to CARIE heheh!

83. Thank you 4 oL ur SupporT..