Monetary Policy, Central Banking, and Public Finance Reviewer

Vocabulary flashcards generated from lecture notes covering money, monetary policy, central banking (BSP), public finance principles, tax laws, and Philippine fiscal management.

Money

Anything people regularly use to buy goods and services from other people.

Barter System

The direct exchange of goods and services without using money.

Problems of Barter (D-V-S)

Double coincidence of wants, difficulty in valuing things exchanged, and slowing down trade.

Medium of Exchange

A function of money used to buy and sell goods and services.

Unit of Account

A function of money serving as a standard numerical unit for measuring the market value of goods and services.

Store of Value

A function of money that transfers purchasing power from the present to the future.

Standard of Deferred Payment

A function of money used to settle debts in the future.

Full-Bodied Money

Money whose face value is equal to its intrinsic value, such as precious-metal coins.

Representative Full-Bodied Money

Currency that represents a fixed amount of a valuable commodity.

Credit Money

Money whose intrinsic value is much lower than its face value, such as IOUs, bonds, and money markets.

Fiat Money

Government-issued money declared legal tender that is not backed by gold or silver and has no intrinsic value.

Gold Coin Standard

A metallic-based monetary system where gold circulates as currency in the form of coins.

Gold Bullion Standard

A metallic-based monetary system where paper money is convertible to gold.

Gold Exchange Standard

A metallic-based monetary system where monetary reserves are based on claims against another country's gold holdings.

Money Supply

The total stock of money available in the economy.

$M_1$ Money Supply

A measure of money supply calculated as $\text{Currency} + \text{Demand Deposits}$.

$M_2$ Money Supply

A measure of money supply calculated as $M_1 + \text{Savings} + \text{Time Deposits}$.

$M_3$ Money Supply

A measure of money supply calculated as $M_2 + \text{Deposit Substitutes}$.

$M_4$ Money Supply

A measure of money supply calculated as $M_3 + \text{Dollar Deposits}$.

Fractional Reserve System

A banking system in which banks keep only a fraction of deposits as reserves and lend out the rest.

Money Velocity Formula

The formula $MV = Y$ or $MV = PQ$, where $M$ is Money Supply, $V$ is Velocity of Money, $P$ is Price Level, $Q$ is Quantity of Goods/Services, and $Y$ is Income.

Money Multiplier

The formula calculated as $\frac{1}{\text{Reserve Requirement}}$; for example, a reserve requirement of $20\text{\%}$ results in a multiplier of $5$.

Central Bank

An institution that regulates the flow, composition, and distribution of money through the banking and credit system.

Bangko Sentral ng Pilipinas (BSP)

The central bank of the Philippines whose primary objective is to maintain price stability conducive to balanced and sustainable economic growth.

Monetary Policy

Policy used by the Central Bank to regulate money through the credit and banking system to control money supply, influence credit, and maintain stability.

Rediscounting

A short-run monetary policy tool through which the Central Bank injects money into the banking system by rediscounting loan papers.

Open Market Operations (OMO)

A short-run monetary policy tool involving the buying and selling of government securities by the Central Bank to adjust money supply.

Department of Finance (DOF)

The core institutional pillar operating under the 1987 Constitution responsible for revenue generation, resource mobilization, and debt management.

Commission on Audit (COA)

The constitutional body under Article IX that examines and audits all accounts pertaining to government revenues and expenditures.

Bureau of Internal Revenue (BIR)

The primary revenue agency responsible for levying and collecting national internal revenue taxes such as income tax and VAT.

Bureau of Customs (BOC)

The revenue agency responsible for regulating and collecting taxes on import tariffs and duties.

Bureau of the Treasury (BTr)

The institutional agency responsible for managing cash balances and public debt.

National Economic and Development Authority (NEDA)

The institutional agency responsible for macroeconomic planning in the Philippines.

Medium-Term Fiscal Framework (MTFF)

The framework guiding Philippine fiscal strategy with targets including fiscal consolidation, debt-to-GDP ratio reduction, and maintaining infrastructure spending at $5.5\text{\%}$ to $6\text{\%}$ of GDP.

Development Budget Coordinating Committee (DBCC)

The government body that sets macro-fiscal targets, revenue projections, and expenditure ceilings.

AmBisyon Natin 2040

The long-term development vision aimed at realizing a strongly rooted, comfortable, and secure life (matatag, maginhawa, at panatag na buhay).

Fiscal Adequacy

A principle of a sound tax system requiring that tax revenues must be sufficient to meet expanding government expenditures and public debts.

Theoretical Justice

A principle of a sound tax system stating that the tax burden must be equitable and proportionate, relying on the taxpayer's progressive ability to pay.

Administrative Feasibility

A principle of a sound tax system requiring tax laws to be simple, clear, and convenient, minimizing costs for the state and enforcement burdens on the public.

Lifeblood Doctrine

The principle asserting that taxes are the lifeblood of the government, without which it cannot survive or provide public services.

Benefit Received Theory

A theory of government cost allocation stating that the more benefit one receives from state services, the more taxes they should pay.

Ability to Pay Theory

A theory of government cost allocation asserting that taxpayers contribute according to their capacity to sacrifice, structured via vertical equity and horizontal equity.

Taxation Power

An inherent state power that enforces proportional contributions from citizens to fund public services.

Police Power

An inherent state power to enact laws to protect the people and promote public welfare.

Eminent Domain

An inherent state power to take private property for public use upon payment of just compensation.

Impact of Taxation

The legislative stage of taxation that involves the levy or imposition of taxes.

Incidence of Taxation

The administrative stage of taxation that encompasses tax assessment and collection.

TRAIN Law (RA 10963)

Tax legislation that restructured individual tax brackets and exempted annual taxable income up to $\text{P}250,000$ from income tax.

CREATE MORE Act (RA 12066)

Tax legislation that optimized business incentives, lowered corporate income tax rate to $20\text{\%}$ for select registered enterprises, and clarified local VAT exemptions.

VAT on Digital Services (RA 12023)

Tax legislation expanding the $12\text{\%}$ VAT regime to mandate compliance from non-resident digital platforms serving Philippine consumers.

Capital Market Efficiency Promotion Act (RA 12214)

Legislation that reduced the tax transaction rate from $0.6\text{\%}$ to $0.01\text{\%}$ and standardized the withholding tax rate on passive income to $20\text{\%}$.

Tax Evasion

Illegal tax dodging that results in a loss of government income.

Tax Avoidance

Legal tax minimization techniques used by taxpayers to reduce tax liabilities.

Tax Amnesty

A general pardon granted by the government to erring taxpayers covering both criminal and civil liability, operating retrospectively upon conditional payment.

Tax Condonation

The prospective forgiveness of a tax obligation based on justifiable grounds, applying to civil liability only and requiring no payment.

Shifting

The transfer of tax burden (forward, backward, or onward) that does not result in a loss of government income.