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Contemporary Economic Issues

This document discusses various economic concepts related to investment and entrepreneurship in the Philippines. It defines key terms like investment, investment expenditure, and fixed and variable income investments. It also examines the determinants of investment like interest rates, future expectations, technological change, and public policy. Fixed income investments discussed include government securities, corporate bonds, and time deposits. Variable income examples provided are equities, company and corporate stocks. The document also defines concepts such as rent, economic rent, and how the demand for land is determined.

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Jessa Mae Algarme
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314 views4 pages

Contemporary Economic Issues

This document discusses various economic concepts related to investment and entrepreneurship in the Philippines. It defines key terms like investment, investment expenditure, and fixed and variable income investments. It also examines the determinants of investment like interest rates, future expectations, technological change, and public policy. Fixed income investments discussed include government securities, corporate bonds, and time deposits. Variable income examples provided are equities, company and corporate stocks. The document also defines concepts such as rent, economic rent, and how the demand for land is determined.

Uploaded by

Jessa Mae Algarme
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Jessa Mae Z.

Algarme

Contemporary Economic Issues Facing the Filipino Entrepreneur

1. Define Investment & Investment Expendeture.

Investment is a procedure of accumulating capital stock, or the expenditure


which determines the income and production of the economy and refers to the
value of machinery, plants, and buildings that are bought by firms for production
purposes. It’s money or other resources committed to something that will
hopefully provide profit in the future.

Investment Expenditure means capital spending. it is primarily originated from


accumulated savings and other sources external to the circular flow; it does not
come from current income and consumption.

2. Why 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 before gone (i.e., saved) to free up resources which can be used to
finance investment. Moreover, Investing is an essential part of the free enterprise
system. When businesses use investments to expand and grow, they create new
and better products and provide new jobs.

3. What Is Fiexed Income Investment & Give Examples

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. Moreover, Fixed income investing focuses on
investments that pay a return—whether through dividends or coupon payments
—on a fixed schedule and approach focused on preservation of capital and
income. Examples are Government Securities like treasury bonds, treasury bills
and notes, Corporate Bonds, Special Deposit Accounts offered by the Bangko
Sentral ng Pilipinas(BSP) and Foreign Currency Time Deposits.

4. What is variable income investment and give examples?

Variable-income securities are a type of investment where there is no assurance


that all of the money invested will be recovered, and the amount of any potential
returns will not be guaranteed or known in advance. The reason for this is thet
the returns from variable income investments are strongly influenced by
economic situations and the behavior of financial markets. Examples: business
ownerships in the form of equities, Company stocks and Corporate Stocks.

5. Define Investment And Interest Rates

An interest rate is either represents the cost of using or borrowing money or the
reward for saving it. It is calculated as a percentage of the amount borrowed or
saved. Interest rates play a key role in increasing capital stock, which in turn
affect investments. Interest rates play a key role in increasing capital stock, which
in turn affect investments. There is a negative or inverse relationship between
investment and interest. The higher the interest rate, the lower the quantity of
invest

6. What Is Its Role In Investment?

In economics, interest is used in two ways. It can be the price of the credit, which
is often referred to as loanable funds . It can also be the return that the capital
earns as an input in the production process. Interest rate represents the cost of
using or borrowing money.

7. WHAT IS INTEREST AS RETURNS ON CAPITAL?

Interest as the return on capital can be illustrated in the case of a printing press
owner who decides to buy additional equipment which costs Php 10,000. After a
year, he earns Php 1,000 for using the equipment in his business. The Php 1,000 is
equivalent to a 10-percent interest rate on the capital which is the equipment In
this case, interest is the return earned by the capital as an input in the production
process.
8. Discuss The Determinants Of Investments

Determinants of investments

Future expectations - reflect plans to change production capacity. As


expectations change, anticipating future returns from investments, the
investment demand curve shifts to the right. On the other hand, if there are
expectations of lower profits, the investment demand curve shifts to the left.

Level of Economic Activity - When GDP is high, the level of production


increases. This boosts demand for capital and encourages higher investments.
When household incomes increase, consumption also goes up, which further
leads to a rise in aggregate demand.

Technological Change - With changes in technology, demand for capital will


increase in order to keep up with these important developments.

Public Policy - Public policies in the form of granting incentives to firms can
significantly affect the demand for capital, thereby increasing investments.
Investment tax credits and tax holidays can encourage investments in a country

9. Define Rent, Economic Rent & Rent On Land

Rent is typically refers to the use of property for a certain amount. It is the price
paid for the use of land and other natural resources or factors of production that
is in fixed supply. Economic rent is a payment in excess of opportunity costs.
According to David Ricardo, an influential British classical economist in early
1800s, rent is a surplus of revenue over cost, which arises due to differences in
the level of usability of the land. The scarcity of land becomes the concept of rent.
Rent on Land. Land is one of the most common type of investments aside from
owning shares, cash, and securities. In order to analyze how the price for the use
of land is determined, must look at the supply of land and its level of demand.
Since the supply of land is perfectly inelastic, the level of demand is what
determines the rent on land. Since supply of land is fixed, demand becomes the
determinant of rent. Aside from renting the land out, the owner of the land can
also opt to sell the land at a higher price to earn a profit.

10. How Is The Demand For Land Determined?


Economic rent also depends on productivity differences. The following are
Several determinants indicate the productiveness of the land: Frst, Products
grown on the land mean the location attribute of the land can also be considered
for its demand. Second, Prices of other resources which are combined with the
land such as city areas have higher land rents than remote areas with difficult
access to transportation and communication

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