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System
Money- anything used by society as a
medium of exchange, and is widely
acceptable for the payment of goods
and services without questioning the
integrity of the person offering it.
money
without
significant and must be made of the same material
inconvenience or loss of time.
and possess equal value.
Money- ultimate goal in liquidity.
in
System.
Involuntary Paper Standard- adopted by
a country that finds itself in a dilemma
of not being able to redeem its currency
in either gold or silver and so is forced
by
circumstance
to
adopt
the
involuntary paper standard; often
comes about during wartime.
Managed Currency Standard- espouses
the use of an inconvertible and
irredeemable paper money that is
issued against no gold or silver
standard
is
further
Aa
divided into
(1) Gold Standard
(2) Silver Standard
Gold standard is divided into
(1) Gold bullion standard
(2) Gold exchange standard
Silver standard is divided into
(1) Silver bullion standard
(2) Silver exchange standard
Classification
of
Gold
Exchange
Standard
(1) Automatic Gold Exchange Standard
(2) Managed Gold Exchange Standard
accounts
Deflationcharacterized
by
an
uncontrolled decline in the general
price level as a result of undersupply of
money.
Depression- recession that last longer
and has a larger decline in business
activity; any economic downturn where
real GNP declines by more than 10%,
where as a recession in an economic
downturn that is less severe.
Monetary theory- the analysis of the
relationship between the nations
money supply and economic activity.
The aggregate demand- aggregate
supply framework- the basic model of
total demand and total supply that
shows the nations price level on the
vertical axis and its real output on the
horizontal axis.
A rightward shift of the AD curve,
increases both the equilibrium price
level and the level of real output.
are
level.
Common stocks are less liquid than
bonds.
output
demanded,
other
factors
remaining
constant.
Price
level=
independent variable, real output
demanded= dependent variable
Wealth effect of a lower price levelincreases consumers demand for
goods and services.
Aggregate supply curve- relationship
between the nations price level and
the amount of output firms collectively
desire to produce, other factors
remaining constant.
Inflation- other term for a persistent
increase in the nations price level.
Consumer
expendituresinclude
disposable income, wealth, interest
rates, and consumer confidence which
shift the AD curve rightward.
When
the
government
purchases
increase, the AD curve shifts rightward.
A lower Philippine peso stimulates net
exports and aggregate demand for its
goods and services.
Capital deepening- increasing the
amount of capital per worker;
stimulates productivity and shifts the
AS curve rightward
An increase in input prices makes
production less profitable at each
possible general price level, shifting the
AS curves leftward.
Improvements in technology increase
MVYPY
M= average money supply in existence
in a given year
VY= income velocity of money, or the
number of times the average peso is
spent on final goods and services per
year
given
interest
rate
and
improvement
of
business
confidence
(3) Providing capacity to meet future
market demand
(4) An increase in expected sales
and/or in the capacity utilization
rate will stimulate investment.
(5) Tax
policy
toward
business
influences investment spending.
time
Credit is always expressed in terms of
money.
Credit has always been based on trust
and confidence.
Commercial
creditgenerally
unsecured short-term type of credit
an
to
of
a
by
Maximum
loan
commitmentthe
borrower can obtain funds from the
creditor up to a certain amount agreed
upon
of
the
Capitalcan
be
determined
by
deducting the total liabilities from the
total assets
Collaterals- properties of value pledged
to secure a loan
exorbitant
of
ask
Bond
certificatesindebtedness of a
bondholders
evidences
corporation
of
to
of
Sinking
Fund
bondsbonded
indebtedness requiring the compulsory
maintenance of a sinking fund to
redeem the bonds at a maturity
Stock
certificatesevidences
ownership in a corporation
Guaranteed
bondsbonds
whose
principal and interest payments are
of
assignments-
debt
instruments
that
evidence
lawful
ownership of the holder to the extent of
the Peso value indicated on the face of
the instruments or a batch of an
original lump sum of promissory notes
Certificate
of
participationdebt
instruments which evidence lawful
ownership of the holder to the extent of
the Peso value indicated on the face
Treasury bills- carry any original
maturity but typically are issued to
mature beyond ten years
Bonds- long term indebtedness issued
by any government entity
ACA Notes- issued by the Agricultural
Credit Administration
EPZA Bonds- issued by the Export
Processing Zone Authority to finance
housing development in Bataan Export
Processing Zone
NFA Bonds- issued by the National Food
Authority
NDC
Bondsissued
Development Company
by
National
LRT
Notes- issued by the Railways
Transit Authority to meet funding
requirements
Bahayan Certificates- issued by the
National
Hone
Mortgage
Finance
Corporation to fund housing loans
applied by PAG-IBIG members
Lending investors- organized single
proprietorships on partnerships using
their own capital for the purpose of
extending all types of loans
Dealer- intermediary in the exchange
payee
type
of
defraying
business
Documented
draftsdrafts
that
necessitate
Qualified endorsement- constitutes the
endorser a mere assignor of the
instrument; one which restrains, limits
or qualifies the liability of the endorser
in any manner different from what the
law imports as his true ability,
deductible from the nature of the
instruments
Endorsement
without
recourseindicates a purpose not to assume the
liability for its payment and is sufficient
to transfer title, and provided there is
no
fund,
concealment,
or
misrepresentation
Conditional endorsement- the person
required to pay the instrument may
instruments
(1) Credit instruments with general
acceptability
(2) Credit instruments with limited
acceptability
Credit money may be in the form of
(1) Bank notes
(2) Treasury certificates
Two subdivisions/ Two types of credit
instruments with limited acceptability
(1) Credit instrument for investment
purposes
(2) Credit instrument for commercial
purposes
Credit instruments for
purposes
(1) Stock certificates
(2) Money market bills
investment
(12)
Profit-sharing bonds
expenses
(2) To accommodate customers who
do not have checking accounts
but who are constrained to pay in
checks
Other institutions
(1) DBP
(2) LBP
Two things that the bank certifies
(3) Philippine Amanah Bank (Islamic
(1) Amount
Bank)
(2) Signature of drawer
Credit
instrument
for
purposes subdivisions
(1) Promise-to-pay
(2) Order-to-pay
commercial
Kinds of drafts
(1) Demand draft
(2) Time draft
(3) Bank draft
(4) Commercial or trade draft
(5) Acceptance draft
(6) Documented draft
(7) Clean draft
Two types of money orders
(1) Bank money order
(2) Postal money order
Kinds of endorsement
(1) Special or full endorsement
(2) An endorsement in lank
(3) Restrictive endorsement
Definite advantages of promissory note
(4) Qualified endorsement
over an open book account
(5) Conditional endorsement
(1) Very good proof of existence of
indebtedness
(2) Debtor is obliged to meet it when Other rules on endorsement
(1) Endorsements of instruments
due
payable to bearer
(3) Can
be
discounted
or
(2)
Endorsement where payable to
rediscounted with the Central
two or more persons
Bank for funding
(4) Could be sold for a higher price;
saleable
Advantages of checks
(1) Easy and safe means of paying
(2) Easily negotiated
(3) Convenient to use for large
payments
(4) Drawers can put a stop payment
on their check in case of loss,
robbery or theft, and noncompliance of commitment
(5) Forged checks paid by bank is
responsibility of the bank
Financial
intermediariesuseful
organizations that contribute materially
to the economic process and facilitates
the flow of funds from a surplus unit to
a deficit spending unit, improving
economic efficiency in the process
Development
Bank
of
the
Philippines(DBP)- provides loans for
development purposes, gives loans to
the agricultural sector, commercial
sector and the industrial sector
Investment House- any enterprise
which
engages
in
underwriting
securities of other corporations
Financing
Companies-
any
business
loans
to
Investment intermediaries
(1) Mutual funds
(2) Finance companies
(3) Money market mutual funds
Benefits of intermediation
(1) Benefits to surplus units
(2) Benefits to deficit units
Benefits to surplus units
(1) Pooling the funds of thousands of
individuals
(2) Overcome the obstacles that
stop savers from purchasing
primary claims directly
Benefits to deficit units
(1) Broaden
the
range
of
instruments, denominations, and
maturities an institution can
issue, which significantly reduces
transaction costs
(2) Increases economic efficiency
(3) Boost economic activity
(4) Elevate living standards
Types of intermediary
(1) Depository institutions
(2) Contractual savings institutions
(3) Investment intermediaries
Commercial banks
(1) Commercial banks
(2) Savings and loan associations
(3) Mutual savings banks
(4) Credit unions
Contractual savings institutions
(1) Life insurance companies
(2) Fire and casualty insurance
companies
(3) Private
pension
funds
and
government retirement funds
(3) Thrift banks
banks
may
earns interest
Chain banking- independent unit banks
which are owned by a group of people;
monopoly of the banking business is
the main objective of this banking
system
Privately owned banks- banks owned by
private individuals; main purpose is to
provide commensurate returns of the
investors capital
Government owned banks- owned by
the state or banks with a minimum
private capital
Domestic bank- bank incorporated
under the laws of the country where it
is doing business
Foreign bank- bank incorporated under
the laws of other countries that do
business here
Mortgageecontract
bank
in
mortgage
(2) Transactions
with
foreign Three parties in a trusteeship
currency deposit units
(1) Trustor
(3) Transactions with residents other
(2) Beneficiary
(3) Trustee
than FCDU and other OBU
Classification
according
to
form
of
organization
(1) Unit bank
(2) Branch banking system
(3) Group banking
(4) Chain banking