Assignment in Economics IV

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Aggregate Expenditure is a measure of national income. It is a way to measure the GDP or Gross Domestic Product (A measure of the level of economic activity). It is defined as the value of planned goods and services produced in an economy.

Aggregate Expenditures is defined as C + Ip + G + NX, where:

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C = Consumption Expenditure Ip = Planned Investment G = Government spending NX = Net exports (Exports-Imports)

A stock market is a public market for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately. Function and purpose

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The stock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional capital for expansion by selling shares of ownership of the company in a public market. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. An economy where the stock market is on the rise is considered to be an up and coming economy. In fact, the stock market is often considered the primary indicator of a country's economic strength and development. The smooth functioning of all the stock market facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity.

The Philippine Stock Exchange was formed from two stock exchanges, the Manila Stock Exchange (MSE), established on August 8, 1927, and the Makati Stock Exchange (MkSE), which was established on May 27, 1963. Although both the MSE and the MkSE traded the same stocks of the same companies, the bourses were separate stock exchanges for nearly 30 years until December 23, 1992, when both exchanges merged into the present-day Philippine Stock Exchange. In June 1998, the Philippine Securities and Exchange Commission granted the PSE a "Self-Regulatory Organization" (SRO) status, meaning the bourse can implement its own policies and establish penalties on erring stock brokers, traders, and companies. In 2001, one year after the enactment of the Securities Regulation Code, the PSE was transformed from a non-profit, no-stock, member-governed organization into a fledgling revenue-earning corporation headed by a president and a board of directors. The PSE eventually listed its shares on the exchange (traded under the ticker symbol PSE) and eventually ventured on into new fields such as debt securities.

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The Philippine Stock Exchange is the primary stock exchange in the Philippines. Aside from being one of the major stock exchanges in Southeast Asia, it is also the first and the longest one operating since 1927. The PSE is known for having one of the shortest trading hours of any stock exchange in Asia, only trading from 9:30 am to 12:10 pm The stock of a business entity represents the original capital paid or invested into the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors. Stock is distinct from the property and the assets of a business which may fluctuate in quantity and value. Stock typically takes the form of shares of either common stock or preferred stock. As a unit of ownership, common stock typically carries voting rights that can be exercised in corporate decisions. Preferred stock differs from common stock in that it typically does not carry voting rights but is legally entitled to receive a certain level of dividend payments before any dividends can be issued to other shareholders. Rationale in Stock Investing: Make money investors in the stock market make money through dividends and capital appreciation. When a listed company declares dividends, its shareholders increase their investing power. An investor who buys into the company at a low market price and sells it at a higher price will gain capital appreciation. Ownership in a company - when an individual invests in the stock market, he automatically becomes a stockholder of a particular listed company. As a stockholder, he is entitled to the following benefits: a.1) voting

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rights; a.2) dividends to be declared by the corporation; and a.3) share of the remaining assets of the company if it is to be liquidated. Liquidity of Funds a stock market investor has an easier access to funds. Compared to banks which require high minimum conditions for deposits and credit, an individual can start an investment for as low as Php 1,000 and can expect high yields for his initial investment. He can always cash in or out his funds anytime, during trading hours, through his broker.

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Unemployment occurs when a person is available and willing to work but currently without work.

10. Kinds of Unemployment: Frictional unemployment - arises because of the incessant movement of people between regions and jobs or through different stages of the life cycle. Even if an economy were at full employment, there would always be some turnover as students search for jobs when they graduate from school or parents reenter the labor force after having children. Because frictionally unemployed workers are often moving between jobs, or looking for better jobs, it is often thought that they are voluntarily unemployed. Structural unemployment - signifies a mismatch between the supply of and the demand for workers. Mismatches can occur because the demand for one kind of labor is rising while the demand for another kind is falling, and supplies do not quickly adjust. Cyclical unemployment - exists when the overall demand for labor is low.

11. Effects of Unemployment

12. Inflation is a rise in the general level of prices of goods and services in an economy over a period of time.
13. Types of Inflation

Wage Inflation: also called as demand-pull or excess demand inflation. This type of inflation occurs when total demand for goods and services in an economy exceeds the supply of the same. When the supply is less, the prices of these goods and services would rise, leading to a situation called as demand-pull inflation. This type of inflation affects the market economy adversely during the wartime. Cost-push Inflation: if there is increase in the cost of production of goods and services, there is likely to be a forceful increase in the prices of finished goods and services Pricing Power Inflation: often called as administered price inflation. This type of inflation occurs when the business houses and industries decide to increase the price of their respective goods and services to increase their profit margins. A point noteworthy is pricing power inflation does not occur at the time of financial crises and economic depression, or when there is a downturn in the economy. Sectoral inflation: takes place when there is an increase in the price of the goods and services produced by a certain sector of industries.

14. Causes of Inflation 15. Stabilization policies of the Govt