BASIC EDUCATION DEPARTMENT MARFRANCISCO, PINAMALAYAN,

Senior High School ORIENTAL MINDORO

043-284-7504

Abada College Basic Education Department

ABADA COLLEGE
Date of Submission: March 26, 2022

MODULE 2

APPLIED ECONOMICS

GRADE 12
PREPARED BY:

REYNAN D. GUINTO
ABM TEACHER

A W A R E N E S S. C O M M I T M E N T. E X C E L L E N C E. SERVICE
ABADA COLLEGE
SENIOR HIGH SCHOOL
BRGY. MARFRANCISCO PINAMALAYAN 5208, ORIENTAL MINDORO PHILIPPINES

Contemporary economic issues affecting

Lesson Filipino entrepreneur:
• PESO EXCHANGE RATE
7 • SAVING AND INVESTMENT
• TAXES

CONTENT STANDARD:

The learner demonstrates an understanding of contemporary economic issues

affecting the Filipino entrepreneur.

PERFORMANCE STANDARD:

The learners shall be able to conduct a survey of current economic situations

within the vicinity.

At the end of this module, the students are expected to:

• define the exchange rate, saving, investment and taxes;

• understand the peso appreciation and depreciation;
• analyze the effects of peso appreciation and depreciation;
• understand the importance saving, investment and taxes;
• realize the effect of the contemporary issues to the Filipino
entrepreneur; and
• appreciate the advantage of awareness on how the contemporary issues
affects in real life scenario.

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ABADA COLLEGE
SENIOR HIGH SCHOOL
BRGY. MARFRANCISCO PINAMALAYAN 5208, ORIENTAL MINDORO PHILIPPINES

Trading with other countries is also an important

economic activity that impacts the economy. The
selling locally made products mean we earn dollars as
payment for these goods bought by foreign buyers. In
the same manner, we buy goods from other countries. When we trade
with other countries, we need to use a common currency to pay the
goods we bought from them, likewise, they have to pay the goods we
sell to them.

An exchange rate is the value of one nation's currency versus the

currency of another nation or economic zone (Chen, 2020). In the
Philippines, we adopt an exchange rate system called free-floating. A
free-floating exchange rate will rise and fall due to the changes in the
foreign exchange market. It means that the rise or fall of the currency
is based on supply and demand. For example, if the US dollar is in
demand, the price of the dollar will increase and will be reflected in a
higher exchange rate in favor of the dollar, which means one will need
more pesos to buy dollars.

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ABADA COLLEGE
SENIOR HIGH SCHOOL
BRGY. MARFRANCISCO PINAMALAYAN 5208, ORIENTAL MINDORO PHILIPPINES

The International Organization for Standardization (ISO) currency

codes are the three-letter alphabetic codes that represent the various
currencies used throughout the world (Scott, 2019). For Philippine
currency, we used the ISO code
.
BANGKO SENTRAL NG PILIPINAS
FINANCIAL MARKETS
REFERENCE EXCHANGE RATE BULLETIN
04 March 2022
COUNTRY UNIT SYMBOL EURO U.S.DOLLAR PHIL.PESO

EQUIVALENT EQUIVALENT EQUIVALENT

I. CONVERTIBLE CURRENCIES WITH BANGKO SENTRAL:

1 UNITED STATES DOLLAR USD 0.903506 1.000000 51.4700

2 JAPAN YEN JPY 0.007825 0.008661 0.4458
3 UNITED KINGDOM POUND GBP 1.206541 1.335400 68.7330
4 HONGKONG DOLLAR HKD 0.115600 0.127946 6.5854
5 SWITZERLAND FRANC CHF 0.985177 1.090394 56.1226
6 CANADA DOLLAR CAD 0.712544 0.788644 40.5915
7 SINGAPORE DOLLAR SGD 0.666203 0.737354 37.9516
8 AUSTRALIA DOLLAR AUD 0.662179 0.732900 37.7224
9 BAHRAIN DINAR* BHD 2.396694 2.652661 136.5325
10 KUWAIT DINAR KWD N/A N/A N/A
11 SAUDI ARABIA RIYAL SAR 0.240819 0.266539 13.7188
12 BRUNEI DOLLAR BND 0.663757 0.734646 37.8122
13 INDONESIA RUPIAH IDR 0.000063 0.000070 0.0036
14 THAILAND BAHT**** THB 0.027723 0.030684 1.5793
15 UNITED ARAB EMIRATES DIRHAM AED 0.246013 0.272287 14.0146
16 EUROPEAN MONETARY UNION EURO EUR 1.000000 1.106800 56.9670
17 KOREA WON KRW 0.000750 0.000830 0.0427
18 CHINA YUAN** CNY 0.142942 0.158208 8.1430

II. OTHERS (NOT CONVERTIBLE WITH BSP)

19 ARGENTINA PESO ARS 0.008364 0.009257 0.4765

20 BRAZIL REAL BRL 0.179552 0.198728 10.2285
21 DENMARK KRONER DKK 0.134398 0.148752 7.6563
22 INDIA RUPEE INR 0.011897 0.013168 0.6778
23 MALAYSIA RINGGIT MYR 0.215917 0.238977 12.3001
24 MEXICO NEW PESO MXN 0.043788 0.048465 2.4945
25 NEW ZEALAND DOLLAR NZD 0.614384 0.680000 34.9996
26 NORWAY KRONER NOK 0.101434 0.112267 5.7784
27 PAKISTAN RUPEE PKR 0.005090 0.005634 0.2900
28 SOUTH AFRICA RAND ZAR 0.059451 0.065800 3.3867
29 SWEDEN KRONER SEK 0.092822 0.102735 5.2878
30 SYRIA POUND SYP 0.000360 0.000398 0.0205
31 TAIWAN NT DOLLAR TWD 0.032199 0.035638 1.8343
32 VENEZUELA BOLIVAR*** VEB 0.000004 0.000004 0.0002

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ABADA COLLEGE
SENIOR HIGH SCHOOL
BRGY. MARFRANCISCO PINAMALAYAN 5208, ORIENTAL MINDORO PHILIPPINES

The above table shows the lists of various currencies into

which the Philippine peso is convertible. The most commonly
traded currency is the US dollar. As shown in the table, we
need ₱51 to buy a US dollar. The country needs less local
currency to buy foreign currency – which makes the local
currency stronger. Likewise, this is the effect of the forces of
demand and supply in the market. When the supply of a
currency increases, its value tends to decrease and we have
to pay a lower price for it. When the demand for a foreign
currency increase, its value will increase and we pay a higher
price for it. Currency appreciation is an increase in the value
of one currency about another currency (Sharma, 2020).
Other the other hand, currency depreciation is a decrease in
the value of one currency against the other.

Effects of the Exchange Rate on Businesses

The exchange rate will play an important role for the firms that are
engaged in exporting goods and importing raw materials. Below are
the effects of peso appreciation and depreciation.
• An appreciation makes exports more expensive and reduces the
competitiveness of exporting firms. However, at least raw materials
(e.g., oil products) will be cheaper following an appreciation.
• A depreciation of peso will make exports cheaper and exporting
firms will benefit. However, firms importing raw materials will face
higher costs of imports.

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ABADA COLLEGE
SENIOR HIGH SCHOOL
BRGY. MARFRANCISCO PINAMALAYAN 5208, ORIENTAL MINDORO PHILIPPINES

Activity 1: Impact on Businesses

Directions: Explain the effects of peso appreciation and depreciation
in the following entities. Write your answer in a separate sheet of paper.

Economic Entity Appreciation Depreciation

1. Importers of raw materials

2. Exporters of good

3. Overseas Filipino Workers

4. Consumers who like

imported products.

Saving
Saving is setting aside the money you don’t spend now for
emergencies or a future purchase. It is the money you want to access
quickly, with little or no risk, and with the least amount of taxes. Financial
institutions offer several different savings options.
The Savings Ratio is the percentage of income that is saved. The
Philippines’ Gross Savings Rate decreased to 11.6% in March 2020.
People have been discouraged to spend more due to the pandemic.
The levels of savings are influenced by the following indicators:
1. Interest rates – A high-interest rate will inspire households to save
more.
2. Confidence – A low confidence can encourage households to
save.

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ABADA COLLEGE
SENIOR HIGH SCHOOL
BRGY. MARFRANCISCO PINAMALAYAN 5208, ORIENTAL MINDORO PHILIPPINES

Investment
Investment, in economics, is defined as an addition to the capital
stock which is known as Gross Fixed Capital Formation. For example,
the investment can involve spending on factories or new capital. The Philippines’
Gross Fixed Capital Formation decreased gradually to 22 USD Billion in
March 2020.
For individuals, investment is buying assets such as stocks, bonds,
mutual funds, or real estate with the expectation that the investment
will make money in the future. Investment can also involve spending on
human capital such as investment in training and education.

The levels of investment are affected by the following indicators:

1. Interest rates – A high-interest rate makes investment more

expensive (cost of borrowing goes up).
2. Confidence – If the firms are confident, they are more willing to
invest.
3. Economic growth – An increase in the rate of economic growth will
encourage firms to invest to meet future demand.

Saving and Investment

In neoclassical economics, it is assumed that the level of saving is
equal to the level of investment. This is because the investment is
determined by available savings in the economy.
If there is an increase in savings, then banks can lend more to firms to
finance investment projects. In a simple economic model, we can say the
level of saving is equal to the level of investment (S=I).

Activity 2: Bounce Back

Directions: Explain the effects of saving and investment on the following
economic entity. Write your answer in a separate sheet of paper.
Economic Entity Saving Investment

1. Consumers

2. Businesses

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ABADA COLLEGE
SENIOR HIGH SCHOOL
BRGY. MARFRANCISCO PINAMALAYAN 5208, ORIENTAL MINDORO PHILIPPINES

3. Financial Institutions

4. Government

It is a system of compulsory contributions levied by the government

or other qualified bodies on people, corporations, and property to fund
public expenditures. An inherent power of the state to raise income
and to demand enforced contributions for public purposes.
The purpose of taxation is to raise revenues for public needs so that
people can live in a civilized society. The government increases taxes
in order to stabilize prices and stimulate greater production. Taxation is
an instrument of fiscal policy that influences the direction and structure
of money supply, investments, credits, production, interest rate, and
inflation.
In the Philippines, the legislative branch enacts laws to continually
revitalize the taxation policy of the country. Meanwhile, the Bureau of
Internal Revenue (BIR) is mandated to comprehend the assessment
and collection of all national internal revenue taxes, fees, and charges
to promote sustainable economic growth. The collection of taxes is
categorized as direct and indirect tax. Direct Tax is demanded from the
person who shoulders the burden of the tax. While, Indirect Tax is
demanded from a person in the expectation and intention that he/she
shall protect himself/herself at the expense of the other, falling finally
upon the ultimate purchaser or consumer.
Taxation on goods, income, or wealth influences economic
behavior and the distribution of resources. For example, higher taxes on
carbon emissions will increase the cost for producers, causing shifts in
demand towards alternatives. Likewise, a high-income tax can enable
redistribution of income within society but may have an impact on
reducing the incentives to work and supply of labor.

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ABADA COLLEGE
SENIOR HIGH SCHOOL
BRGY. MARFRANCISCO PINAMALAYAN 5208, ORIENTAL MINDORO PHILIPPINES

Effects of Taxation
Direct Tax – Income Tax
Income tax is a levy on income earned. In the Philippines,
households who are receiving a daily wage rate below ₱685.00 are
exempted from income tax effective January 1, 2018, to December 31,
2022. The main purpose of the tax is to raise income for the government
which can lead to higher spending on health care and education. The
impact depends on how the government spends the funds. For
example, it may be necessary for public sector investment (repairing
roads) or it could be to fund shortages in pension funds. These are the
effects of the government increases the income tax.
a. Substitution effect. Higher tax leads to lower wages – and work
becomes relatively less attractive than leisure. The substitution
effect of a higher tax is that workers will work less.
b. Income effect. If higher tax leads to lower wages, then a worker
may feel the need to work longer hours to maintain his target level
of income. Therefore, the income effect means that higher taxes
may mean that some workers feel the need to work longer.
The Philippines adopts progressive taxation. A progressive tax takes a
higher percentage of tax from people with higher incomes. It means
that as your income increases, the tax you need to pay also increases.
Indirect Tax
The impact of indirect tax is more of a microeconomic issue. A
higher tax on a good will cause the supply curve shifts in the left resulting
to a higher price and a less in demand. The graph below shows the impact
of an ad valorem tax (20%) on a good.

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ABADA COLLEGE
SENIOR HIGH SCHOOL
BRGY. MARFRANCISCO PINAMALAYAN 5208, ORIENTAL MINDORO PHILIPPINES

INFLATION

A rise in tax (excise or VAT) can lead an increase in prices.

Therefore, it will cause cost-push inflation. Cost-push inflation occurs
when the overall prices increase (inflation) due to the increase in
cost of wages and raw materials. The higher costs of production would
result in a decrease in aggregate supply (the amount of total
production). Since the demand for goods hasn't changed, the price
increases from production are passed on to consumers creating cost-
push inflation.

Activity 3: LEVY ON ME
Directions: Put a checkmark (/) on the appropriate column if you agree
or disagree with the economic issues and explain your stand. Write your
answer in a separate sheet of paper.

Economic Issues Agree Disagree Explanation

1. Imposing a tax on
barter trade through
an online platform

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ABADA COLLEGE
SENIOR HIGH SCHOOL
BRGY. MARFRANCISCO PINAMALAYAN 5208, ORIENTAL MINDORO PHILIPPINES

2. Imposing a tax on
online business
marketing and
purchases.

3. Imposing a tax on
junk foods.

4. Imposing tax on
informal businesses
such as taho, fishball
vendor, and the like.

GOOD LUCK

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ABADA COLLEGE
SENIOR HIGH SCHOOL
BRGY. MARFRANCISCO PINAMALAYAN 5208, ORIENTAL MINDORO PHILIPPINES

PREPARED BY:

REYNAN DELOS REYES GUINTO

SHS TEACHER
EMAIL - ynan.blantyre@gmail.com
FB MESSENGER – ynan20

Checked by:

MR. VINCENT ROI D. MENDIZABAL

SENIOR HIGH SCHOOL COORDINATOR

Noted by:

MS. CATHERINE L. VENZON

ACADEMIC COORDINATOR

Approved by:

MRS. EMELYN MARASIGAN NARRA

BASIC EDUCATION PRINCIPAL

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ABADA COLLEGE
SENIOR HIGH SCHOOL
BRGY. MARFRANCISCO PINAMALAYAN 5208, ORIENTAL MINDORO PHILIPPINES

A W A R E N E S S. C O M M I T M E N T. E X C E L L E N C E. SERVICE

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