Peng Kungkea

Chapter I: Economic Context1.1 Introduction• Starting the experience of savings, growth, stability,

employment and equity, economics is scientifically the norm of leadership and solving problems of cross cutting issues.

• Prof. Adam Smith (1723-90) said economics is one of important social sciences indicating individuals and society in their selections, and using scarce resources to satisfy the human unlimited wants.

• Prof. Mc. Connell said economics is the study of human behaviour in producing, distributing and using scarce resources.

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nigsmFm’ esdækic©viTüa)ankøayCamuxviCa¢sñÚlmYykñúgkardwknaMCati nig cat;EcgBaNiC¢kmµ CaBiessbBaðacMruH ¬Cross Cutting Issues¦

tamelak Adam Smiths (1723-90) esdækic©viTüa KWCaviTüasaRsþ sgÁm EdlkñúgenaHbuKÁl nigsgÁmeFVIkareRCIserIs nigeRbIR)as;Fn FankMr edIm,IbMeBjtMrUvkarminkMNt;rbs;mnusSelak.

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Adam Smith (Classical Economists)

Mc. Connell (Neo Classical Economists)

Selection BehaviourSatisfy wants Producing and Distributing

Scarcity ScarcityDemand Analysis vs Supply Analysis

Microeconomics is the study of consumers and firms’ behaviour and interaction towards their

decision makingMacroeconomics is the study of whole economy

such as GDP, unemployment, inflation, International Trade…

Adam Smith (Classical Economists)

Mc. Connell (Neo Classical Economists)

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rplit nigEbgEck

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ccitþma:RkUesdækic©viTüa

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1.2 Economic Systems• Economic system = Allocated ways of distributing

resources and products based on national policy or ideology or doctrines. It influences on forms of governing, market structures, distribution and social norms. It passes through:– Traditional Economics is the processes of economic

management in early century to 16th century where industrial revolution began.

– Modern Economics is the processes of economic management covered the period of industrial revolution to the present. It passes through:• Planned Economies: states owned, managed and targeted markets • Mixed System: government and private shared ownership,

responsibility and profit. • Free Market Economies: privatization and competition

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• RbB½n§esdækic©manBIrdMNak;kal³– esdækic©bUraN³

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1.3 Foundation of Macroeconomics

Macroeconomics lies within growing and stabilizing economy, circulating flows of economy, governing roles in economy, developing economy, trading internationally, and globalizing economy. F1: Economic Growth and Productivity- Economic growth is the result of productivity

growth, economic roles of citizen (human capital), and creative and effective resource uses towards social and environmental harmonization. It can be measured by Gross Domestic Product.

1>3 mUldæanRKwHénma:RkUesdækic©viTüamUldæanRKwHénma:RkUesdækic©viTüa KWkarsikSakMeNInesdækic© esßrPaBma:RkU esdækic© lMhUresoKVIesdækic© muxgaresdækic©rbs;rdæaPi)al karGPivDÆ esdækic© biryakasBaNiC¢kmµGnþrCati nigesdækic©sakl.mUldæanTI1³ kMeNInesdækic© nigplitPaBktþaCamUldæanénkMeNInesdækic© KWkMeNInplitPaBplitkmµ muxgar esdækic©Blrdæ ¬mUlFnmnusS¦ nigRbsiT§PaBénkarbegáIt nigeRbIR)as; FnFan edIm,IsuxdumrmünIykmµsgÁm nigbrisßan. eKvas;EvgkMeNIn esdækic© edayEp¥keTAelIkMeNInplitplsrubkñúgRsuk rW p>s>s ¬Gross Domestic Products = GDP¦.

• The Production Possibility Frontier (PPF Curve) indicates the all forms of goods and services can be produces based on the existing resources and technology (Explain in the Class).

• The PPF can be positively signaled by an increase in demand, production efficiencies, and enabling business environment.

• Sustainable Economic Growth is considered to be a significantly dedicated effort made by the leading government roles to deliver the positive economic outcomes to their citizen and society as a whole to be free from negative impacts of the high tights of economic fluctuations.

• Prof. Pilzane Paulzer, New York University said the next millionaires are Nutritionists and Technologists

• kMeNInesdækic©Gacdwgtamry³kMeNInExSekaglT§PaBplitkmµ Edl bgðajGMBIkareRbIR)as;FnFan nigbec©kviTüaEdlmanRsab; edIm,I plitTMnij nigesvakmµcMruH ¬Bnül;bEnßmkñúgfñak;¦.• sBaØaNénkMeNInlT§PaBplitkmµ³ kMeNIntMrUvkar

RbsiT§PaBén karplit nigbriyasGMeNaypldl;kMeNInplitkmµ. • kMeNInesdækic©RbkbedaynirnþPaB

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University )anbBa©ak;muxrbrénmhaesdæIsm½yfµI KWGñkplites,og-fñaMsgáÚv nigGñkplitplitplbec©kviTüa Nutritionists and Technologists

F2: Stabilizing MacroeconomicsMacroeconomic stabilization can be achieved via the stability of financial markets, balance of trade, and social stability.• Financial market stability reflects the government efforts

to stabilize the exchange rate, regularly progress in financial investment, minimizing the fluctuation of interest and inflation rates.

• Balance of trade is the efforts to gain equilibrium in the export and import of goods and services among the trade partners.

• Social stability is a collective social equity in terms of employment, industrial relations, growing social investment and social safety nets.

mUldæanTI2³ esßrPaBma:RkUesdækic©esßrPaBma:RkUesdækic© KWCakarFana[)annUvesßrPaBTIpSarhirBaØvtßú tulüPaBCBa¢IgTUTat; nigesßrPaBesdækic©sgÁm.• esßrPaBTIpSarhirBaØvtßú

KWCakarsikSaGMBIkic©RbwgERbg edIm,I[man lMnwgénGRtabþÚrR)ak; vDÆnPaBeTotTat;énCMnYjenAkñúgTIpSarhirBaØvtßú nig rkSaGRtakarR)ak; nigGtiprNa[mankRmitTabbMput.• tulüPaBCBa¢IgTUTat; KWCakarRKb;RKgBaNiC¢kmµ

edayeFVIya:gehac Nas;smta rvagnIhrN nigGahrN.• esßrPaBesdækic©sgÁm KWCakic©RbwgERbg

edIm,Ikat;bnßyPaBGt;kargar ¬GnikmµPaB¦ siT§iesrIPaBénTMnak;TMngviCa¢CIv³ kMeNInya:geTogTat; énkarvinieyaKsgÁm nigsMNaj;suvtßiPaBsgÁm.

Discussion• Why the government does attempt to reduce inflation?– Minimizing the effect of trade and business transaction– Reducing on the heavy burden of expenditure on

consumption– Minimizing the negative impact on production costs and

levels of unemployment– Others……..

• Why the Central Bank do minimize the interest rates on loan?– Initial capital for investment– Business expansion– Increase in job creation– Strengthening competition

DiscussionThe poverty is our real enemy due to- Poor of landlessness and wealth- Poor of Unemployment- Poor of inequalityImprovement of industrial relations will reduce second and third poverty?- Employability and Decent Working Conditions- Wages and bargaining system

F3: Circular Flow of EconomyCircular flow of economy is a currently transferable economic activity between agencies and institutions which is necessary creating wealth and cash flows through the demand and supply units. • Private sectors represent an important partnership in

the free market economy such as enterprises, institutions, firms, families in which there are demanding production factors and supplying goods and services.

• Public sectors are the major forces to foster the economic flows through demanding goods and services, collecting taxes and coordinating all economic activities.

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KWCaGñkCMruj[manlMhUresdækic©tamry³tMrUvkar plitpl nigRbmUlBn§ ehIyCaynþkarsRmbsRmÜl.

¬BinitürUbPaBesoKVIlMhUresdækic©xagelI¦

17

Consumption Purchases

Goods and Services

Business SectorHousehold Sector

Factor Services (Land, Labor, Capital & Enterprise)

Factor Income (Rent, Wages, Interest & Profit

Flow Chart 3.1

F4: Roles of Governments in EconomyGood public institution governances and economic functions of the nation are important to accelerate economic growth, and create jobs and social equity as stated in the government policy. • Developing legal and policy frameworks are the

core value for managing national economy, society, and protecting the best interest of the people.

• Strengthening competiveness is an institutional capacity building and promoting skill development of the nation to produce better goods and services for growing trade and economic activities.

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KWkarksagsmtßPaBsßab½n nigviCa¢Civ³ Blrdæ edIm,IGPivDÆplitpl nigesva EdlCMruj[mankMeNIn BaNiC¢kmµ nigskmµPaBesdækic©

• Resource allocation and income redistribution are a systematic management of revenues and expenditure to promote social equity and to reduce vulnerability through:– Transfer payment to poor and vulnerable persons for their

rehabilitation– Market intervention to promote working conditions and

social harmonization– Taxing on taxable persons or tax bearers, introducing new

types of tax, removing trade barriers, retargeting tax for social justice and integrating globalization

– Taking actions on externality either market failure or public goods to be free from the issues of negative effects on environment, free-riding horse concept, unfair business practices.

• viPaCn_FnFan nigEbgEckcMNUleLIgvij KWCakarRKb;RKgRbB½næ cMNUl-cMNay nigkarkat;bnßyvismFm’ CaBiessKMlat nig PaBgayrgeRKaH tamryH³– karepÞrcMNay tamryHmuxsBaØagayrgeRKaH

nigkarsþanItism,Ta– kic©GnþraKmn_enAelITIpSar

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nigkMNt;RbePTBn§fµI Edl beRmI[kMeNInesdækic© karlubecalrnaMgBaNiC¢kmµ rkSayutþiFm’sgÁm nig smahrNkmµesdækic©tMbn; nigsakl –

kic©GnþraKmn_eTAelIkarbraC½yTIpSarenAeBlmanlMhUrxageRkA nig FnFansaFarN³ dUcCa³ plb:HBal;brisßan TsSnHCwHesHE;lgéd nig karTTYlsiT§iminesµIKñakñúgCMnYj

• Negative impacts of externality can be removed via law enforcement and special taxes.

• Provisions of subsidies to consumers, producers and state providers can also reduce the negative impacts of externalities. These can encourage an increase in demand and supply both public and private sectors.

• Income redistribution is the practice of turn-over wealth and revenues from private to public sectors to be aimed at reducing the gap between rich and poor, unemployment and inflation.

Discussion: Ordering tax on commodities that can have negative effect on environment, and luxury goods.Note that although governments need votes from their people in the democratic regime, their intervention might be surplus or deficit or nepotism.

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F5: Economic DevelopmentEconomic development is an application of economic theories and methods to deal with development issues. This can be done if we have discovered the challenges, sources, and strategies of developing economy. • Challenges in development are:– Poverty and low income of citizen,– Low education and skill,– Weak in health, nutrition, and infant mortality rate

protection,– Inadequate infrastructure– Corruption and regime– Socio-economic and investment conditions

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• Sources of Development are:– Human Capital– Social Investment and Expenditure– Resources and Environment– Foreign Aid and Efforts to Be Financial Independent

State• Development Strategies are:– Promoting the Agricultural Development– Fostering the Industrial Development and Forming the

New-Economic Streams– Developing Export Opportunity and Import

Substitution– Moving towards the System of Transparency,

Accountability and Purity

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F6: International Business Environment

IBE refers to the management of cross-border business operations or transactions under the competitive and globalized environment. • Major forces to challenges over globalization:– Accelerating export promotion and trade balance,– Promoting competitiveness and creative citizen,– Strengthening legal and negotiation frameworks ,– Entering the global and regional integration,– Improving international trade policy, and– Complying as UN member state and trade dispute

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1.4 Importance of Economics• Economic theory can support analytical methods and right

decision making whether it is normative for economic reasoning or positive for economic policies to grow, stabilize, create jobs, and be social safety and equity.

• Economics is more larger scope for preparing learners to be consultant, researcher, manager and economist or be able to apply economic methodology (Indicators, Modeling, and recommendation) contributing to expand market sizes and trade, create more jobs, produce agricultural and industrial products, establish rural society productivity, flow investment, and promote development, business law, property right and environmental conservation.

1>4 GtßRbeyaCn_énesdækic

©viTüa• CMnYydl;karviPaK bkRsay nigseRmccitþ[suRkittamryHRTwsþI esdækic© ¬Positive

Economics of Thoughts/Theories¦ nigeKaln>b esdækic© ¬Normative

Economics for Policy Makers¦ edIm,IkMeNIn kargar esßrPaB suvtßiPaB nigsmFm’rbs;GgÁPaB nigsgÁmTaMgmUl• visalPaBTUlMTUlay kñúgnamCaGñkRbwkSa

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1.5 Economic Targets

• Analysis of Gross Domestic Product and Circular Flow of Economy

• Unemployment and Labour Management• Inflation and Financial Market Stability• Economic Policy for Growth, Employment and

Equity• Perspective Economic Policy, Foreign Policy and

International Trade Policy

1>5 eKalbMNgénma:RkUesdækic©viTüa

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