Reaction Blog Post

NEDA chief says economy likely grew by 6.5% in Q4

ECONOMIC GROWTH likely stayed steady at 6.5% in the last three months of 2010, a Cabinet official yesterday said, allowing for full-year growth of slightly above 7% that tops the government’s 5-6% target.

(Read the full article here: http://www.bworldonline.com/content.php?id=24915)

This article is contradictory to the news I've been hearing lately.  There are a lot of price hikes going on in the country (taxi fares, for example).  In other news, Philippine stocks have fallen almost 10% (read this article: http://www.businessweek.com/news/2011-01-21/indonesia-philippine-indexes-drop-at-least-10-from-records.html )
I may not be an economic analyst, but I do know that when prices rise, people are less inclined to purchase. I do agree with one statement in the article, though:

University of the Philippines economist Benjamin E. Diokno, however, said holiday spending alone would not be enough to keep growth at 6.5%.

(Let's face it. It's the culture of the Filipinos to be willing to buy no matter how expensive for the holidays. )

How is it possible that the economy will grow if prices have become relatively expensive? The rising price of gas, for example, has caused  some sort of domino effect: fuel is an input product for public vehicles, now we have a 10-peso price hike for taxis (buses and jeepneys will likely follow in a few weeks); the production of food also requires fuel; producing electricity also requires fuel.

Here's a quote from the other article I read:

“Inflation is the biggest threat and concern in the market now,” said Julian Tarrobago, who helps oversee $200 million in assets at ATR KimEng Asset Management Inc. in Manila. “The market is well aware that inflation will come after rapid growth and it has now reached a point that it has become an issue.”

Indeed. This makes me wonder how the Philippines will be in the months to come...  Inflation will only worsen the situation of the many Filipinos who are still struggling to make their ends meet; and I shouldn't forget to mention that the salary for Filipino workers have not increased yet, and it's likely that companies will be forced to reduce employees to reduce costs; which will result to even more problems for the country.  I shudder at the thought that the people who are hungry now will likely suffer from complete starvation.

The economy is what keeps people alive, and our country needs to have a good economy.


To be honest, I'd like to be optimistic about the Philippines this year.  Unfortunately, the news I'm reading isn't helping at all.

So....

My latest grade was 48/50.

Because I attended class today, I got 2 extra points.

*wink  *wink

The deadline for this post is today, the 30th of December.

(I'm in an internet cafe right now, my laptop died a week ago.)


Economic Issue: Emerging Markets: Sri Lanka


The Article:

After Decades of War, Sri Lanka Bounces Back
Billions of Foreign Money, especially from China, are pouring in
by Frederick Balfour


source:Bloomberg Businessweek

"The ADB expects Sri Lanka's economy to grow as much as 8 percent this year and next. Colombo's stock market is the world's second-best performer (after Mongolia) in 2010, more than doubling in value even as many investors wait to see whether the stability holds. Visits from foreigners have increased 40 percent so far this year and are expected to top 600,000 for 2010. The government hopes that number will hit 2.5 million by 2016 as word spreads about the white sand beaches, rainforests teeming with wildlife, and ancient temples nestled in the lush hillsides of the newly peaceful island nation. "Sri Lanka has been a closed shop for 30 years," says Joseph Michael Suresh Brito, chief executive officer of Colombo-based Aitken Spence Hotel Holdings, which is working with a Thai company on a $40 million community of luxury villas on the south coast. "People will come with no fear." 

My Reaction:

Sri Lanka's economy and government is very similar to our own country (it's a democratic republic, and its GDP is $106.46billion, just slightly smaller than our country's GDP of $161 billion).

I haven't read or heard any good news about the Philippine economy this year. In fact, I haven't read or heard any developments in our country this year (who cares about the President's fashion, the weddings he attends-- it's all nonsense and unnecessary.)

I think Sri Lanka should be a good example for our country. We do almost have the same geographical location, the same climate, the same kinds of people, maybe even more-- Filipinos have talent and skills that not a lot of other people of other countries have.  The only problem is that the government isn't doing a lot.
What's worse for us is that Sri Lanka is bouncing back from DECADES of civil war. What did we have? We didn't have suicide bombers all over the place, we're a more peaceful country, it was only in the 80's when the country was really chaotic. Why hasn't our country become an 'emerging market' yet?

That being said, I think our government should plan their investments wisely. Just recently they've released new-generation Philippine Peso bills (they say you should look at the new security features instead of the erroneous content of each bill). To be honest, I think the bills look nice, but it is not the time to invest on printed money. What about reforms in agriculture? Education? What about infrastructure and houses for people? Have they even planned for sustainable jobs for the citizens?  We may not have suffered years of civil war, but I think we've suffered years of inefficient planning from our government.

Chapter 3 Answers

1.

The production possibilities frontiers used to explain trade in the text are straight lines because: a. the author assumes the farmers can switch at a constant rate from producing meat to producing potatoes. b. that's how it turns out to be when the same person produces the two goods. c. one farmer is better than the other in producing both goods. d. the gains of trade will benefit both farmers.

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2.

The principle of Absolute Advantage refers to the situation in which one producer: a. can produce a good in greater quantities than other producers. b. can produce a good using fewer resources than other producers. c. is able to produce exactly the same quantity of a good as other producers. d. has access to more resources than other producers.

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3.

The principle of Comparative Advantage refers to the situation in which one producer: a. has a lower opportunity cost than other producers in the production of a good. b. can produce a good in greater quantities than other producers. c. has access to more resources than other producers. d. can produce a good using fewer resources than other producers.

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4.

Which of the following is true regarding the principle of Absolute Advantage? a. Nations should specialize in producing those goods for which they have a lower opportunity cost. b. Nations should export goods for which they do not have an Absolute Advantage. c. Nations should specialize in producing those goods for which they have an Absolute Advantage. d. Nations should export goods for which they have a higher opportunity cost.

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5.

Which of the following is true regarding the principle of Comparative Advantage? a. Nations should specialize in producing those goods for which they use the least amounts of resources. b. Nations should specialize in producing those goods for which they have the lowest opportunity cost. c. A nation has nothing to gain from trade if it uses fewer resources than other nations to make any good. d. A nation has nothing to gain from trade if it uses more resources than other nations to make any good.

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6.

The boy next door has offered to mow Tiger Woods' lawn. It will take this boy twice as long as Tiger Woods to mow the lawn. Would Tiger Woods let the boy mow his lawn, instead of doing it himself? a. Yes, as long as the boy's opportunity cost is less than half of Tiger Woods' opportunity cost. b. Yes, because the boy next door needs the money and Tiger Woods can help him out that way. c. No, because it will be more efficient if Tiger Woods mows his own lawn, since he can do it faster. d. No, because Tiger Woods has better things to do with his money than pay the boy to mow the lawn.

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7.

Suppose that engaging in free trade means we have to stop making cars, which will cause bankruptcies and will make people lose their jobs. Is it still worth having free trade? a. Yes, because in spite of the lost jobs, we still want to get along with other nations. b. Yes, because the gains outweigh the losses: new businesses and new jobs will flourish in other industries. c. No, because we need to protect our jobs. d. No, because our wages would have to fall drastically to make us remain competitive with low wage countries.

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8.

Suppose that Jill can type 10 pages per hour in the computer, while Jim can only type 8. Further suppose that Jill can review 5 articles per hour while Jim can only review 2. If they are working on a final project together, who should specialize in what task in order to be as productive as possible? a. Jill should specialize in typing and Jim in reviewing articles. b. Jill should specialize in reviewing articles and Jim in typing. c. Jill should perform both tasks, since she is better at both than Jim. d. Jim should perform both tasks, since he is better at both than Jill.

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9.

Suppose that Jill can type 10 pages per hour in the computer, while Jim can only type 8. Further suppose that Jill can review 5 articles per hour while Jim can only review 2. Based on this, we can say that: a. Jim has a comparative advantage over Jill in reviewing articles. b. Jill has an absolute advantage over Jim in reviewing articles. c. Jim has an absolute advantage over Jill in typing. d. Jill has a comparative advantage over Jim in typing.

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10.

The principle of Comparative Advantage argues all of the following, EXCEPT: a. specialization allows producers to produce goods for which they have a lower opportunity cost. b. free trade tends to cause bankruptcies and high unemployment in the long run. c. free trade allows producers to specialize. d. as producers specialize, overall production increases, making everybody better off.

Chapter 2 Answers

Answers in RED AND UNDERLINED.

1.

Which of the following is FALSE, regarding economics as a science? a. Economic knowledge is obtained through the scientific method, just as in any other science. b. It is difficult to conduct experiments in economic matters. c. Economists pay close attention to natural experiments resulting from historical events. d. Economic theories represent irrefutable facts.

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2.	Economists use assumptions in order to: a. recreate real situations accurately, with all their complexity. b. avoid dealing with issues they would rather not talk about. c. simplify economic theories, so as to make it possible to answer economic questions. d. make their theories more realistic.

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3.	Economic models are: a. simplified versions of economic theories. b. created by making assumptions. c. usually composed of diagrams and equations. d. all of the other options are true.

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4.

All of the following are characteristics of the Circular Flow Model of the economy, EXCEPT: a. the model has two markets: one for goods and services and one for factors of production. b. the model includes two sectors: the Firms sector and the Households sector. c. the model describes two circular flows: one for inputs and one for resources. d. the two flows described by the model move in opposite directions.

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5.

The circular flow model of the economy demonstrates that: a. the economy actually has only two sectors: firms and households. b. dollars in the economy are used over and over in an endless cycle. c. firms produce and provide factors of production. d. government is the source of revenue for households to purchase goods and services from firms.

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6.

Which of the following is true regarding the Production Possibilities Frontier Model of the economy? a. Any point along the PPF represents an efficient level of production. b. Any point in the area below the PPF represents a combination of production that is not feasible. c. The opportunity cost of producing one more unit of one of the goods represented in the PPF remains the same at any point along the PPF. d. Increases in the resources available for production will cause the PPF to shift towards the origin.

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7.	Economic growth in the economy can be portrayed in the Production Possibilities Frontier model as a: a. movement up and to the left along the PPF. b. shift of the PPF away from the origin. c. movement down and to the right along the PPF. d. shift of the PPF towards the origin.

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8.	Microeconomics is the study of: a. how governments can get the economy out of a recession. b. economy-wide phenomena, including inflation, unemployment, and economic growth. c. how households and firms make decisions and how they interact in markets. d. how governments can reduce inflation.

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9.

Which of the following is an example of a normative statement? a. Higher interest rates will cause people to borrow and invest less. b. The government should increase spending during recessions, so that the economy recovers quickly. c. When the price of a good increases, consumers respond by reducing the quantity that they want to purchase of the good. d. Over the past 50 years, the number of women that participate in the labor force has increased dramatically.

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10.

Economists tend to disagree with each because: a. different economists espouse different theories, so they believe different things are going on in the economy. b. different economists make different assumptions, leading them to different conclusions in economic matters. c. different economists have different values and priorities in economic matters. d. all the other options are true.

Chapter 1 Answers

Answers underlined and in Red

1. Government policies designed to promote efficiency:

a. usually do so at the expense of equity. b. tend to cause the economy to grow more slowly. c. always fail. d. require very high taxes.

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2.	All of the following can be considered a student's costs of going to college, EXCEPT: a. textbooks. b. tuition and fees. c. room and board (that costs her about the same as she was paying before entering college). d. the student's time, which can no longer be devoted to earning a salary.

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3.

An airline's plane from Los Angeles to New York is about to take off, but it still has a few seats empty. If the average cost per seat is $500, what price should the airline charge passengers in standby to fill in those remaining seats? (Consider that quantitative decisions are made at the margin) a. At least $500. b. Exactly $500. c. Any price above zero that will entice standby passengers to take the flight. d. Slightly less than $500.

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4.

The Federal government enacted regulation in the 1960s requiring people to wear seatbelts in their cars. All of the following resulted from this regulation, EXCEPT: a. overall deaths due to car accidents changed very little in the United States. b. fewer deaths occurred per accident. c. fewer pedestrians were killed in car accidents. d. the frequency of accidents increased.

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5.	When two persons trade goods: a. one person always gains at the expense of the other. b. both persons usually gain from the exchange. c. one person usually gains at the expense of the other. d. the overall well being of the two persons remains unchanged.

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6.	In a market economy, the decisions of what and how much to produce are made by: a. voters in elections. b. all producers and consumers. c. the government only. d. non governmental agencies.

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7.

Even though markets do a great job in organizing economic activity, governments are needed to do all of the following EXCEPT: a. establish and enforce property rights. b. intervene when markets fail due to externalities. c. intervene when markets fail due to market power. d. decide what and how much should be produced.

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8.

Living standards in the United States have risen tremendously over the years, mainly due to: a. relentless increases in the productivity of labor over the years. b. the forceful efforts of labor unions. c. successive increases in the minimum wage. d. trade protection from competition from countries with low wages, such as China.

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9.	Rapid and persistent inflation occurs mainly due to: a. high wage increases demanded by labor unions. b. greedy firms that abuse consumers with higher-than-necessary prices. c. rapid increases in the quantity of money in the economy. d. trade with other countries.

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10.	A government that implements a policy designed to reduce inflation can expect unemployment to: a. increase in the short-run. b. decrease in the short-run. c. increase in the long-run. d. decrease in the long-run.

:(

My score isn't on the list! : (
Why isn't my score on the list? : ( I only got seven mistakes, why am I not on the list? : (