ECONOMICS

1. How do we level up, as a country, given the UN Sustainable Development Goal 17 of economic
growth? Are we on the right track toward the achievement of this goal? If yes, explain the
policies that are geared toward the achievement of the goal.

Leveling up as a country and achieving sustainable economic growth, as outlined in UN Sustainable

Development Goal 17, requires a comprehensive and integrated approach that involves various
stakeholders, including government, private sector, civil society, and international organizations. Some
of the key policies and strategies that countries can implement to achieve economic growth and
progress toward this goal include:

1. **Investment in infrastructure development**: Building and improving infrastructure such as

transportation networks, energy systems, and communication facilities can enhance productivity,
promote trade, and attract investment, thus driving economic growth.

2. **Promotion of innovation and technology**: Encouraging research and development, promoting the
adoption of technology, and fostering innovation can drive economic growth by improving
competitiveness, creating new industries, and increasing productivity.

3. **Support for small and medium-sized enterprises (SMEs)**: Providing access to finance, technical
assistance, and training for SMEs can stimulate entrepreneurship, create jobs, and drive economic
growth, particularly in developing countries.

4. **Trade liberalization**: Removing trade barriers, enhancing market access, and promoting
international trade can boost economic growth, increase export revenues, and attract foreign direct
investment.

5. **Promotion of sustainable agriculture and food security**: Investing in agriculture, promoting

sustainable farming practices, and improving food security can drive economic growth, reduce poverty,
and promote sustainable development.

6. **Investment in education and skills development**: Providing quality education, training, and skill
development opportunities can enhance human capital, increase productivity, and drive economic
growth.
7. **Financial inclusion**: Promoting access to financial services for all segments of the population,
especially the unbanked and underprivileged, can stimulate economic activity, promote
entrepreneurship, and spur economic growth.

8. **Environmental sustainability**: Implementing policies and initiatives that promote environmental

sustainability, address climate change, and reduce carbon emissions are crucial for long-term economic
growth and development.

It is important to assess whether countries are on the right track towards achieving these goals by
monitoring progress, evaluating outcomes, and adjusting policies and strategies as needed.
Collaboration, transparency, and accountability among all stakeholders are key to ensuring effective
implementation of policies geared toward achieving economic growth and sustainable development in
line with UN Sustainable Development Goal 17.

2. The years 2020-2021 have been a rough journey for almost all countries around the world in
dealing with the COVID-19 pandemic. How did the economy perform in terms of its public
health policy in dealing with this health crisis? What are the notable steps undertaken and their
impact on economic growth?

The COVID-19 pandemic has had a significant impact on global economies, with many countries
implementing various public health policies to mitigate the spread of the virus and minimize its
economic impact. The effectiveness of these policies in terms of their impact on economic growth has
been mixed, depending on the specific measures implemented and the circumstances of each country.

Some notable steps undertaken by countries in dealing with the pandemic and their impact on
economic growth include:

1. **Lockdowns and restrictions on economic activity**: Many countries implemented strict lockdowns
and restrictions on economic activity, such as closure of non-essential businesses, travel restrictions, and
social distancing measures, to curb the spread of the virus. While these measures were necessary to
protect public health, they also led to significant disruptions in economic activity, resulting in job losses,
reduced consumer demand, and decreased economic output.

2. **Fiscal stimulus and monetary policy measures**: Governments around the world implemented
fiscal stimulus measures, such as direct cash transfers, wage subsidies, and loan guarantees, to support
households and businesses affected by the pandemic. Central banks also implemented monetary policy
measures, such as interest rate cuts and asset purchases, to provide liquidity to financial markets and
support economic activity. These measures helped to mitigate the economic impact of the pandemic,
but also resulted in increased government debt and potential inflationary pressures.
3. **Vaccine rollouts and reopening strategies**: As vaccines became available, many countries
implemented vaccine rollouts and reopening strategies, such as phased reopening of businesses and
relaxation of social distancing measures, to allow for a gradual return to normal economic activity. These
measures helped to restore consumer confidence and support economic growth, but also led to
renewed outbreaks in some cases, requiring further restrictions and mitigation measures.

4. **Digital transformation and remote work**: The pandemic accelerated the adoption of digital
technologies and remote work, as many businesses and individuals were forced to work from home and
adopt digital solutions to continue operations. This trend is likely to continue, as it offers benefits such
as increased productivity, reduced costs, and improved work-life balance. However, it also raises
concerns about digital inequality and the need for investment in digital infrastructure and skills
development.

The impact of these policies on economic growth has been mixed, with some countries experiencing
significant economic contraction in 2020, while others were able to mitigate the impact of the pandemic
on their economies. Factors such as the severity of the pandemic, the effectiveness of public health
policies, and the strength of the economy prior to the pandemic all played a role in determining the
impact of these policies on economic growth.

In summary, the pandemic has presented unprecedented challenges for global economies, requiring a
coordinated and multifaceted response from governments, businesses, and individuals. While the
impact of these policies on economic growth has been mixed, it is clear that a holistic and integrated
approach, combining public health measures, fiscal stimulus, monetary policy, and digital
transformation, will be necessary to support economic recovery and resilience in the face of future
crises.

3. What are the mediating variables in determining economic growth in terms of government
policies? How was each one of the following affected by a sudden change of market behavior of
international magnitude?
1) Savings and Investment: A sudden change in market behavior of international magnitude,
such as a financial crisis or a pandemic, can significantly impact savings and investment. During
times of uncertainty or economic downturns, individuals may decrease their consumption and
save more, leading to an increase in savings. However, businesses may also reduce investment
due to decreased demand, lower profits, or increased uncertainty. The net effect on investment
and economic growth depends on the specific circumstances of the crisis and the policy
responses implemented by governments. For example, during the 2008 financial crisis, many
governments implemented fiscal stimulus measures aimed at increasing investment in
infrastructure projects and supporting businesses affected by the crisis. These measures helped
to mitigate the impact of the crisis on economic growth and promote recovery.
2) Education: A sudden change in market behavior of international magnitude, such as a
pandemic, can also impact education and human capital development. School closures and
disruptions to education systems can lead to decreased learning outcomes, particularly for
disadvantaged students, and long-term economic costs. However, governments can also
implement policies to mitigate the impact of the crisis on education, such as providing remote
learning resources, investing in digital infrastructure, and supporting teachers and students
affected by the crisis through financial assistance or other forms of support. These measures can
help to promote resilience and ensure that students are able to continue their education and
develop the skills they need to succeed in the future.

3) Research and Development: A sudden change in market behavior of international magnitude,

such as a pandemic, can also impact research and development (R&D) and innovation. During
times of crisis, there may be increased demand for new products, services, and technologies, as
well as increased investment in R&D by businesses and governments. For example, during the
pandemic, there has been a significant increase in investment in R&D related to vaccines,
treatments, and diagnostic tools. However, there may also be disruptions to R&D processes due
to supply chain disruptions, reduced access to research facilities, or decreased collaboration and
knowledge sharing among researchers. Governments can implement policies to support R&D
during times of crisis, such as providing funding for research and development, promoting
collaboration and knowledge sharing among researchers, and investing in digital infrastructure
to support remote work and collaboration.

4) Health and Nutrition: A sudden change in market behavior of international magnitude, such
as a pandemic, can also impact health and nutrition. During times of crisis, there may be
increased demand for healthcare services, as well as increased investment in healthcare
infrastructure and research. However, there may also be disruptions to healthcare systems due
to increased demand, reduced access to healthcare facilities, or decreased availability of
healthcare workers. Governments can implement policies to support health and nutrition during
times of crisis, such as providing financial assistance to healthcare workers, investing in
healthcare infrastructure and research, and promoting healthy behaviors and lifestyles through
public health campaigns and education programs.

5) Foreign Direct Investment (FDI): A sudden change in market behavior of international

magnitude, such as a pandemic or a trade war, can also impact FDI. During times of crisis, there
may be decreased FDI due to increased uncertainty, reduced demand, or decreased access to
capital. However, there may also be increased FDI due to opportunities arising from the crisis,
such as increased demand for certain products or services, or reduced competition in certain
markets. Governments can implement policies to support FDI during times of crisis, such as
providing financial assistance to businesses affected by the crisis, promoting investment in
certain sectors or regions, and implementing policies to support the development of local
industries and supply chains.

In summary, a sudden change in market behavior of international magnitude can impact various
mediating variables in determining economic growth, such as savings and investment,
 education, research and development, health and nutrition, and FDI. The net effect on economic
growth depends on the specific circumstances of the crisis and the policy responses
implemented by governments. By implementing policies to support these variables during times
of crisis, governments can help to promote resilience and ensure that their economies are able
to recover and grow in the long term.

4. The countries that are considered poor almost always have workers in less capital- intensive
production processes like agriculture. It is simpler and it entails fewer tasks. Explain this using
the O-Ring model.

The O-Ring model, introduced by economists Michael Kremer and Eric Maskin in the 1990s, explains the
importance of complementarities in the production process and how even a single low-skilled task can
have significant implications for overall productivity and output. In the context of less developed
countries where workers are often engaged in less capital-intensive production processes like
agriculture, the O-Ring model provides insights into why these economies may struggle to transition to
higher value-added activities.

In the O-Ring model, production is depicted as a series of interdependent tasks, where each task
contributes to the overall production process. For a final output to be of high quality, all tasks need to
be performed successfully. The model suggests that even a single mistake or failure in a critical task can
lead to a substantial decrease in output and overall productivity. This is analogous to the failure of an O-
ring in a spacecraft, which can lead to catastrophic consequences.

In the context of less developed countries with workers engaged in less capital-intensive production
processes like agriculture, these tasks typically involve lower levels of complexity and skill requirements
compared to tasks in more advanced industries. As a result, the consequences of failure in these tasks
are less severe compared to tasks in more advanced industries where the cost of failure is higher.

Additionally, in less developed countries, where access to technology, education, and infrastructure is
limited, workers may not have the necessary skills or resources to engage in more complex or capital-
intensive production processes. This limits their ability to move up the value chain and engage in higher
value-added activities.

Furthermore, the presence of workers in less capital-intensive production processes like agriculture can
create a self-reinforcing cycle of low productivity and low wages. Since these tasks are less skill-intensive
and require fewer tasks, the incentives for workers to acquire additional skills or for firms to invest in
more advanced technologies and processes are reduced. This perpetuates a situation where the
economy remains stuck in low-productivity, low-wage activities, hindering overall economic
development.
In conclusion, the O-Ring model provides a useful framework for understanding why countries with
workers in less capital-intensive production processes like agriculture may struggle to transition to
higher value-added activities. The model highlights the importance of complementarities in the
production process and the impact of skill levels, technology, and infrastructure on productivity and
economic development. To break out of this cycle, investments in education, technology, infrastructure,
and institutions are crucial to enable workers to engage in more complex and high-value activities,
leading to sustained economic growth and development.

5. On the assumption that the economy is closed and no technological progress is going on, explain
the relationship of depreciation, capital, and output in a graph. Why is capital, at a certain level,
diminishes in value on a certain point of steady state?

In a closed economy with no technological progress, the relationship between depreciation,

capital, and output can be illustrated using a graph called the capital-output ratio (C/Y) graph.
The C/Y ratio shows the amount of capital required to produce a unit of output in an economy.

Assuming a constant savings rate, the C/Y ratio is determined by the depreciation rate (d) of
capital goods, the growth rate (g) of output, and the capital-output ratio (v) at the steady state.
The steady state is the long-run equilibrium where the economy is growing at a constant rate.

The C/Y ratio can be calculated as follows:

C/Y = (d/g) * v

The C/Y ratio is negatively related to the growth rate of output (g) and positively related to the
depreciation rate of capital goods (d) and the capital-output ratio at the steady state (v).

In the C/Y graph, the horizontal axis represents the capital-output ratio (v), while the vertical
axis represents the C/Y ratio (C/Y). The steady state is represented by a point on this graph
where output (Y) grows at a constant rate (g). The steady state C/Y ratio (C/Yss) is determined
by the depreciation rate (d) and the growth rate (g) as follows:

C/Yss = (d/g) * vss

At the steady state, the economy is in equilibrium, and the capital-output ratio is constant. Any
deviation from this ratio will result in a disequilibrium, and the economy will move towards the
steady state.

As the capital-output ratio (v) increases, the C/Y ratio (C/Y) also increases, indicating that more
capital is required to produce a unit of output. This is because the capital-output ratio is a
measure of the efficiency of capital in producing output. As the capital-output ratio increases,
the efficiency of capital decreases, and more capital is required to produce a unit of output.
 At a certain point on the C/Y graph, the C/Y ratio reaches a maximum value (C/Ymax) where
capital becomes increasingly less productive. This is because at this point, the economy has
reached its maximum capacity to utilize capital, and any additional capital does not result in a
proportional increase in output.

Beyond this point, any further increase in capital results in a decrease in output due to
diminishing returns to capital. This is represented by a downward sloping curve beyond the
maximum C/Y ratio.

In summary, in a closed economy with no technological progress, the relationship between

depreciation, capital, and output is represented by the capital-output ratio (C/Y) graph. The C/Y
ratio is determined by the depreciation rate (d), the growth rate (g), and the capital-output ratio
(v) at the steady state. At a certain point on the C/Y graph, the C/Y ratio reaches a maximum
value (C/Ymax) where capital becomes increasingly less productive due to diminishing returns to
capital. Beyond this point, any further increase in capital results in a decrease in output.

6. How does external debt affect the economic growth and development of a country?
External debt refers to the money borrowed by a country from foreign lenders, such as
international financial institutions, commercial banks, or governments of other countries. While
external debt can provide a country with much-needed resources for development, it can also
have significant impacts on economic growth and development, both positive and negative.

Here are some ways external debt affects economic growth and development:

1. Financing development projects: External debt can provide a country with the necessary
resources to finance development projects, such as infrastructure development, education,
healthcare, and poverty alleviation programs. These projects can contribute significantly to
economic growth and development by increasing productivity, reducing poverty, and improving
the standard of living.

2. Crowding out domestic investment: However, if the external debt is too high, it can lead to
crowding out of domestic investment as resources are diverted towards debt servicing rather
than productive investment. This can result in lower economic growth and development as
there are fewer resources available for investment in productive sectors.

3. Debt servicing costs: High levels of external debt can also result in high debt servicing costs,
which can divert resources away from other important sectors, such as education, healthcare,
and infrastructure. This can lead to a vicious cycle of debt accumulation, as the country may
need to borrow more to service the existing debt, leading to further debt accumulation.

4. Debt default: If a country is unable to service its external debt, it may default on its debt
obligations, leading to a loss of credibility and access to international capital markets. This can
result in a significant economic and financial crisis, as the country may face sanctions, trade
restrictions, and other economic penalties.
 5. Exchange rate fluctuations: External debt can also affect a country's exchange rate, as debt
servicing requires the repayment of foreign currency, which can put pressure on the country's
foreign exchange reserves. This can lead to fluctuations in the exchange rate, which can have
significant impacts on economic growth and development, as it can affect the cost of imports,
exports, and foreign investment.

In summary, external debt can have significant impacts on economic growth and development,
both positive and negative. While external debt can provide a country with much-needed
resources for development, it can also lead to crowding out of domestic investment, high debt
servicing costs, debt default, and exchange rate fluctuations. Therefore, it is crucial for countries
to manage their external debt carefully and prudently to ensure that it contributes to economic
growth and development rather than hinders it.

7. Can you still remember the factors of production? Each one of them plays an important role in
economic growth and development. Explain each.

a. Land: Land refers to all natural resources that are used in the production process, such as agricultural
land, forests, water, minerals, and other natural resources. Land is a fixed factor of production and is
essential for the production of goods and services. Land is important for agriculture, mining,
construction, and other industries. Sustainable management of land resources is crucial for long-term
economic growth and development.

b. Labor: Labor refers to the physical and mental efforts of people who are involved in the production
process. Labor includes both skilled and unskilled workers. Labor is a mobile factor of production that
can move between different sectors of the economy based on demand. Labor is essential for the
production of goods and services and plays a significant role in driving economic growth. Investing in
education and training can enhance the productivity and efficiency of labor, leading to higher economic
output.

c. Capital: Capital refers to the man-made resources used in the production process, such as machinery,
equipment, buildings, and infrastructure. Capital is a more durable factor of production compared to
labor and plays a crucial role in enhancing productivity and efficiency. Investment in physical capital can
lead to technological advancement, innovation, and increased production capacity, all of which are
essential for economic growth and development.

d. Entrepreneurship: Entrepreneurship refers to the ability of individuals to take risks, innovate, and
organize the other factors of production to create goods and services. Entrepreneurs play a crucial role
in driving economic growth by identifying opportunities, mobilizing resources, and creating value.
Entrepreneurship is essential for innovation, job creation, and economic dynamism. Encouraging
entrepreneurship through supportive policies and institutions can lead to increased productivity,
competitiveness, and economic growth.

8. Is the study of economic growth and development more inclined to microeconomics or

macroeconomics? Why?
Both microeconomics and macroeconomics are important in the study of economic growth and
development, and there is no clear preference for one over the other. Here's why:

Microeconomics focuses on individual decision-making and market behavior, while macroeconomics

deals with the behavior and performance of the entire economy. Both microeconomics and
macroeconomics are essential in understanding economic growth and development because:

1. Microeconomics helps to explain the factors that drive individual productivity and innovation, which
are crucial for economic growth. For example:

- Human capital theory in microeconomics emphasizes the importance of education and skills
development in increasing productivity and economic growth.

- Entrepreneurship theory in microeconomics highlights the role of entrepreneurship in driving

innovation, job creation, and economic dynamism in a country's economy

2. Macroeconomics helps us understand the aggregate effects of economic policies and institutions on
economic growth and development. For example:

- The Solow model in macroeconomics explains how capital accumulation, technological progress, and
population growth contribute to economic growth over time

- The endogenous growth theory in macroeconomics emphasizes the importance of knowledge creation
and diffusion as drivers of economic growth

In summary, both microeconomics and macroeconomics are essential in understanding economic

growth and development because they help us understand different aspects of economic behavior at
different levels of analysis - individual behavior versus aggregate economic performance. Therefore, a
holistic approach that combines both microeconomics and macroeconomics is necessary for a complete
understanding of economic growth and development.

9. The Philippines currently has a program called, "Build Build Build," geared toward more
infrastructure projects, especially in the rural areas, Research how far we have come so far and
what the future entails when this is completed.

The "Build Build Build" program, launched by the Philippine government in 2016, aims to accelerate
infrastructure development in the country, particularly in rural areas. The program aims to address long-
standing infrastructure gaps and improve connectivity, mobility, and access to basic services in various
regions.

As of 2021, the program has made significant progress, with over 200 infrastructure projects worth PHP
4.1 trillion (approximately USD 80 billion) already implemented or underway. Some of the notable
projects include:

1. Subic-Clark Railway: A 140-kilometer railway line connecting Subic Bay and Clark Freeport Zone,
expected to reduce travel time between the two areas from four hours to just 30 minutes.

2. Metro Manila Subway: A 36-kilometer underground railway line connecting Quezon City to Taguig
City, expected to reduce travel time between these areas from one hour to just 30 minutes.

3. Cebu-Cordova Link Expressway (CCLEX): A 8.5-kilometer cable-stayed bridge connecting Cebu City and
Cordova City, expected to reduce travel time between the two areas from 45 minutes to just 15
minutes.

4. New Clark City: A 2,300-hectare smart, green, and disaster-resilient urban development project in
Pampanga, which will serve as a new administrative, commercial, and residential center for the country.

5. Rural Development Projects: The program has also allocated significant resources for rural
infrastructure development, including farm-to-market roads, irrigation systems, bridges, and water
supply systems.

The completion of these projects is expected to have a significant impact on the Philippine economy,
particularly in terms of:

1. Improved connectivity: The new infrastructure projects will improve connectivity between various
regions, reducing travel time and costs, and facilitating the movement of goods and people.

2. Increased productivity: Improved infrastructure will lead to increased productivity, as businesses will
have better access to markets, raw materials, and suppliers.
3. Job creation: The construction and operation of these infrastructure projects will create a significant
number of jobs, particularly in the rural areas.

4. Economic growth: The improved infrastructure will contribute to economic growth by facilitating the
expansion of various industries, such as manufacturing, logistics, and tourism.

In conclusion, the "Build Build Build" program has made significant progress in addressing long-standing
infrastructure gaps in the Philippines, particularly in rural areas. The completion of these projects is
expected to have a significant impact on the Philippine economy, contributing to improved connectivity,
increased productivity, job creation, and economic growth.

10. How do we balance between health security and economic growth relating to our experience
during the quarantine periods of 2020 to 2021?

Balancing health security and economic growth during quarantine periods has been a major challenge
for many countries, including the Philippines, due to the COVID-19 pandemic. Here are some ways that
policymakers can balance these two objectives:

1. Prioritize health: The most important priority during quarantine periods is to protect public health and
prevent further spread of COVID-19. Policymakers should prioritize measures that reduce the
transmission of the virus, such as social distancing, mask-wearing, and quarantine measures.

2. Communicate effectively: Policymakers should communicate effectively with the public about the
reasons for quarantine measures, the risks and benefits of these measures, and the steps being taken to
mitigate the economic impacts of these measures. This can help to build trust and support for these
measures.

3. Provide economic relief: Policymakers should provide economic relief to individuals and businesses
affected by quarantine measures, such as cash transfers, loan guarantees, and tax breaks. This can help
to mitigate the economic impacts of these measures and prevent further economic damage.

4. Focus on essential services: Policymakers should prioritize the provision of essential services, such as
healthcare, food, and water, during quarantine periods. This can help to ensure that people have access
to the basic necessities they need to survive.
5. Plan for recovery: Policymakers should also plan for the recovery of the economy after the quarantine
period. This can involve measures such as targeted investment in key industries, support for small and
medium-sized enterprises, and measures to promote job creation and economic growth.

6. Collaborate with stakeholders: Policymakers should collaborate with stakeholders, such as businesses,
civil society organizations, and international organizations, to develop effective strategies for balancing
health security and economic growth during quarantine periods. This can help to ensure that all
perspectives are taken into account and that effective solutions are developed.

In summary, balancing health security and economic growth during quarantine periods requires a
holistic approach that prioritizes health, communicates effectively with the public, provides economic
relief, focuses on essential services, plans for recovery, and collaborates with stakeholders. By following
these principles, policymakers can help to mitigate the economic impacts of quarantine measures while
protecting public health.