Economic Development: Midterm Examination Reviewer

Etymology of “Economics”
o comes from the Greek word “oikos” meaning house, and “nomos” meaning
management.
o “oikonomia" means household management.
Difference between microeconomics and macroeconomics
MICROECONOMICS MACROECONOMICS
Concerned with actions of individuals Focused on the actions that government
and businesses and countries take to influence broader
economies
Focuses on individuality Focuses on economy as a whole
Adam Smith and his famous book
o Adam Smith’s famous book, widely known as “The Wealth of Nations” has its
full title called "An Enquiry into the Nature and Causes of Wealth of
Nations" which was published in 1776.
Resource Scarcity implication
o It implies us that not all we want can we get.
Main function of financial system
o The main function of financial system is to use the savings of households
into investment for those who need it.
Government deficit
o it means that the government purchase is greater than the government
revenue
Concept of crowding out
o When the interest is high, the investment declines
o When the investment declines, crowding out will happen to finance budget
deficit
Bond
o Is a certificate of indebtedness that specifies the obligations of the
borrower to the holder
Stock
o Is a claim to a share of the profits of a firm. It is also an ownership
in a firm that could be used as an equity finance
Financial Intermediaries
o financial institutions through which savers can indirectly provide funds
to borrowers
Gross Domestic Product (GDP)
o Formula: Y = C + I + G + NX
o Components: Consumption, Investment, Government purchases, and Net
Exports
Concept of Annuity
o a series of equal payments to be received at a common interval during a
period of time.
 Annuity Due - they occur at the beginning of each period
 Ordinary Annuity - they occur at the end of each period
Enumeration Part (Included in the exam)
o Theories of Microeconomics
o Factors of Production
o Accounts excluded in measuring GDP
Problem Solving (Remember the formulas)
o Gross Domestic Product o Zero-growth perpetuity
o Gross National Product o Unemployment Rate
o Net National Product o Labor force participation rate
o National Income
o Personal Income
o Disposable Income
o Labor Productivity
o Multifactor Productivity
o Present Value, Lumpsum
o Future Value, Lumpsum