MACROECONOMICS
Presentation 2
CONSUMPTION, SAVINGS AND INVESTMENT
Consumption - the total value of goods and services
purchased by households
Consumption function – the relationship between
consumption and those economic variables that determine
the decision to consume.
 in general, households spend more on consumption goods
when they have higher incomes
C = Co + C1 Y
Where: Co = a positive constant; the intercept which
represents the amount of consumption when income (Y) is
zero
C1 =the marginal propensity to consume; slope of the line
IV. Macroeconomics
Slide 2
CONSUMPTION, SAVINGS AND INVESTMENT
Average propensity to consume (APC) - the fraction of
income that households spend on consumption, expressed
as a ratio C/Y.
Factors affecting the level of aggregate consumption
1. level of income
2. level of interest rate
3. increase in the level of employment
4. level of output in the economy
5. price level
6. exchange rate movement
7. foreign trade
Macroeconomics
Slide 3
INVESTMENT AND SAVING
Saving – is the part of income that is nor used for
consumption
Investment – gross private domestic investment is the total of
new plant and
equipment , non residential structures
residential structures and inventory accumulation purchased
in a given period.
Inventory accumulation – the change in business inventory
in a given period
Saving – defined as income less consumption
S=Y–C
Y = C IV.+Macroeconomics
I, which implies Y – C = I = S
Slide 4
Investment and Savings
Marginal Propensity to Consume (MPC) – the
proportion of each added dollar of real disposable
income
that households devote to real
consumption.
 the slope of the consumption function.
It
measures the dollar change in consumption for a
$1 change in income
Aggregate output = Y = C + I but Y = C + S then,
C+I =C+S&S=I
IV. Macroeconomics
Slide 5
Multiplier – the ratio of the change in the equilibrium
level of output to a
change in some autonomous
variable.
Autonomous variable – a variable that is assumed
not to depend on the state of the economy - that is
taken as given.
Investment multiplier – 1/MPS, that is ∆Y = ∆I x
1/MPS =∆I /1-MPC
IV. Macroeconomics
Slide 6
Example:
Suppose the aggregate consumption function of Filipino is:
C =5,000 + 0.75Y
a. what is the aggregate consumption when income is zero? Ans:
5,000
b. what is the marginal propensity to consume? Ans: 0.75
c. how much is the consumption expenditure when income is P1
million?
Ans: 750,000
d. derive the saving function and determine the MPS.
Ans: S = Y – C or Y – [5000 + 0.75] so that the saving function is
S = - 5000 + [1 – 0.75) Y or S = - 5000 + 0.25Y (Ans.)
MPS = 0.25
IV. Macroeconomics
Slide 7
Simple Income Determination
The national income accountants’ framework in this
economy is
Y = C + Ir’
C = consumption
Ir’ = net realized investment
Realized investment – means the net investment
regardless of whether it is intentional
or
unintentional
An income is disposable income, so that
Y = C + Sp
IV. Macroeconomics
Slide 8
Consumption Function
Algebraically, if C = 0.75Y + 25 and if I = 20 then
by substituting these quantities into the equation
Y = C + 1 we get
Y = 25 + 20 = 180
1 – 0.75
Another way of finding equilibrium is to find the
point where the schedule of intended investment
cuts the saving schedule.
In both cases
equilibrium is $180b.
IV. Macroeconomics
Slide 9
Consumption Function
IV. Macroeconomics
Slide 10
Application: Problem Solving
Example : Consider a close economy, (no foreign sector)
without government sector, that is described by the
following equation:
C = 700 + 0.6Ye
Ip = 300 + 0.2Ye – 40r
Assumed that the interest rate is fixed at 5% by the
monetary policy.
a. Calculate the magnitude of autonomous spending
b. Calculate the multiplier and the level of income that
gives goods-market equilibrium.
c. What is the level of saving in equilibrium?
d. If the level of autonomous investment, Io, were to rise to
400, what would be the effect on equilibrium income?
IV. Macroeconomics
Slide 11
Simple Income Determination
IV. Macroeconomics
Slide 12
Simple Income Determination
IV. Macroeconomics
Slide 13
MACROECONOMICS
Presentation 3
UNEMPLOYMENT AND INFLATION
The Meaning
Inflation
of
Unemployment,
Employment
and
Employment – refers to the population that is employed
Labor force – the total number of people in the economy
who are either employed or unemployed
Unemployment – a situation wherein people in the labor
force are unemployed but at actively looking for work.
Unemployment rate - the percentage of people in the labor
force who are unemployed.
IV. Macroeconomics
Slide 15
The Types of Unemployment
Frictional Unemployment – is due to the normal
workings of an economy.
1.
Frictional unemployment occurs because:
a. workers quit to find better jobs
b. employers fire workers and look for better ones to
replace them
c. consumers change the goods they buy, thereby reducing
jobs previously available in producing the goods they no
longer want but increasing jobs elsewhere, and
d. technological progress makes the skills of some workers
obsolete.
IV. Macroeconomics
Slide 16
2. Structural unemployment
2. Structural unemployment – unemployment
that is accounted for by people who are out of
work for long periods because their skills do not
match those required for available jobs.
 unemployment that arises from:
1. changes in the geographical; or
2. industrial structure of the economy.
IV. Macroeconomics
Slide 17
these two factors seriously affects certain industries,
occupations, or areas of the country so that only with
very high costs can workers relocate and/or retrain for
new careers.
IV. Macroeconomics
Slide 18
3. Cyclical Unemployment
3. Cyclical Unemployment – arises from the downturns of
the business cycle in the economy.
•
When economists say the economy is at full
employment, they mean that there is no cyclical
unemployment.
However, both frictional and structural employment can and
do exist when the economy is fully employed.
IV. Macroeconomics
Slide 19
Classification of employment status:
1. family members have jobs
2. family members are actively looking for
work
3. those who are on temporary layoff from
a job
4. do not want to take paid employment
5. are sick and unable to work
IV. Macroeconomics
Slide 20
CAUSES OF UNEMPLOYMENT
1. have quit jobs in order to look for better ones
2. discontentment with the salary/benefits receive
3. retrenchment of the company/closure of
business
4. co-terminus work status or project basedemployment
5. do not want to take paid employment
6. Incapacitated
7. under qualified/overqualified
8. no vacancy
IV. Macroeconomics
Slide 21
EFFECTS OF UNEMPLOYMENT
1. Poverty as a consequence of unemployment for
many workers
2. Unemployment also exacts a high human toll on
the unemployed
3. Unemployment results in a level of aggregate
output or real GNP which is less than the
economy’s potential aggregate output or potential
GNP
IV. Macroeconomics
Slide 22
MEASURES TO ADDRESS UNEMPLOYMENT
1. Rural agricultural mobilization
2. Promotion of industrialization and expansion of
exports
3. labor policies
4. education
5. efficient resource allocation
6. improve the political environment
7. institutional reforms
8. infrastructure improvements
IV. Macroeconomics
Slide 23
MACROECONOMICS
Presentation 2
The Meaning of Inflation
Inflation - refers to sustained increases in the
price level as measured by a price index a rise
in the overall prices, an on-going increase in
the price level
Hyperinflation – a period of very rapid
increases in the overall price level
Stagflation – a period of low economic growth
and abnormally high inflation
Deflation - a decrease in the general price
level
IV. Macroeconomics
Slide 25
The most common measures of inflation are:
1. Consumer Price Index – the index tracts the
prices of the purchases made by typical
households in a given year relative to the prices
for the same collection of goods and services in a
base year
2. Implicit price deflator for GNP - the price
level for all GNP. The deflator is computed as the
ratio of nominal GNP to real GNP.
IV. Macroeconomics
Slide 26
CAUSES OF INFLATION
1. Aggregate demand – if there are continuing
increases in aggregate demand with a fixed aggregate
supply, then prices will keep increasing.
2. Aggregate supply – a rise in the cost of goods and
services can become built-in to costs and prices so that
aggregate supply will catch up with shifts in aggregate
demand.
3. Expectation of inflation – if increases in inflation
are anticipated, upward shifts in aggregate supply can
occur even with no increase in aggregate demand, so
that inflation becomes a self-fulfilling prophecy.
IV. Macroeconomics
Slide 27
CAUSES OF INFLATION
4. Sudden contractions of the supply of specific
commodities/or shocks to aggregate supply (e.g. oil) - an
inflationary supply shock is a sudden and significant
increase in the price level at which a given level of output is
produced.
5. Increase in cost of production – inflation brought about
by increase in cost is called “cost-push or supply side
inflation”.
 bad news to policy makers because prices are
increasing at the same time output is falling(stagflation is
experienced)
IV. Macroeconomics
Slide 28
CAUSES OF INFLATION
6. Increase in money supply- this will lead to
sustained inflation or even to hyperinflation
7. Structural limitations – inability of some
industries or sectors to adjust to the changes in
the level of demand
8. Distortion of the price system mainly caused
by price support policies
IV. Macroeconomics
Slide 29
EFFECTS OF INFLATION
Economic Effects
1. living standards grew very slowly over
the decade and even decline ins some
years;
2. Unstable prices
3. Unemployment
IV. Macroeconomics
Slide 30
EFFECTS OF INFLATION
4. workers and firms change the conditions under
which they are willing to supply output
5. change in the price-setting and wage-setting
behavior
6. aggregate supply schedule keep rising overtime
(it causes the output-inflation-trade-off to shift up)
7. higher costs drive up prices with no off-setting
increases in output.
IV. Macroeconomics
Slide 31
Effects of Inflation
b. Social and Political consequences
it provides bad reputation to existing political leadership
Depreciation (of a currency) – a decline in the value of a
country’s currency relative to another.
Purchasing Power Parity - a situation in which a given
sum of money will buy the same market basket of goods
and services when converted from one currency to another
at prevailing exchange rates.
IV. Macroeconomics
Slide 32
EXCHANGE RATE
Nominal exchange rate - the exchange rate expressed in the
usual way: in terms of current units of foreign currency per
current dollar
Real exchange rate – the nominal exchange rate adjusted for
changes in the price levels of both countries
relative to a
chosen base year.
WHAT IS THE EFFECT OF INFLATION ON THE EXCHANGE RATE OF PESO TO
A DOLLAR?
Example:
The rate of inflation is 10 per cent per year in the Philippines and
three percent in the United States. The buying power of peso in the
Philippines is falling 7 per cent faster than the buying power of the
dollar in US. If the exchange rate between the pesos and the dollar
were to decline by 7 percent from one year to the next, then
American buyers would be getting 7 percent more peso for their
dollars, but the decline in the exchange rate would be exactly
undone by the changes in relative prices in the two countries.
3.3.4B. MEASURES TO ADDRESS INFLATION
1. Monetarism and market solution

maximize the role of the government in individual markets by deregulation and to
minimize the macroeconomic role of the government by replacing discretionary
monetary and fiscal policies with a fixed-rate-of-growth rule for monetary
authorities and a balanced-budget fiscal policy.
2. Demand-Management Fine Tuning
 fine-tuning the economy- is a strategy in which discretionary monetary and fiscal
measures are used to stabilize the economy and promote full employment at low
inflation rates.
Depends on the accuracy of econometric models and economic forecasts.
3.3.4B. MEASURES TO ADDRESS INFLATION
3. Managing Aggregate Supply: Income Policies
 Income policies – seek to reduce inflation and promote higher
levels of output and employment by restraining the ability of wages
and prices to rise.
 It range from voluntary compliance with wage and price guidelines
to mandatory wage and price controls.
MEASURES TO ADDRESS INFLATION CONTN…
4. Managing Aggregate Supply: Indexing
 indexing as an anti-inflationary strategy would adjust
money payments and taxes to changes in the price level.
 The logic is that this would eliminate unexpected losses
of purchasing power from unexpected inflation.
PHILLIPS CURVE
Phillips curve – a curve showing the negative relationship between inflation rate
unemployment
Figure 1 The Phillips Curve, 1961–1969
Source: Bureau of Labor Statistics.
Note: Inflation based on the Consumer Price Index.
and
3.4 MONETARY AND FISCAL POLICY
MONETARY AND FISCAL POLICY
1. Policies are categorized as follows:
 Fiscal policies – policies concerning government purchases, taxes, and
transfer payments
2. Monetary policies – policies that are used to control money supply
3.4.1.3 THE PHILIPPINE FINANCIAL SYSTEM
The financial system - is composed of different institutions serving different
markets and complementing each other in attaining the process of
intermediation, providing a link between economic units with excess funds and
those that use these funds.
Structure of present financial system
1. Central bank – at the apex and all the major institutions under its regulations
2. Expanded Commercial banks (Universal banks)

these banks can also undertake the functions of thrift banks, non-bank financial
institutions and non-bank thrift institutions
3.BANKING INSTITUTIONS
a. Commercial banks -
these are institutions that accept deposits,
including demand deposits, which are subject to withdrawal by checks
e.g. (PNB, Veterans Bank of the Phils.)
b. Thrift banks e.g. (Stock SLAs; Savings & Mortgage Banks; Private
Devt. Banks)
c. Rural banks
BANKING INSTITUTIONS CONTN….
d. Specialized banks (DBP, LBP, Phil. Amanah
Bank)
DBP – created with a specific function of
providing long term credit to finance private
development projects
LBP – set up (1970s) as a financial arm of
the Land Reform Program

PAB- created (mid 70s) especially designed
to serve the banking needs of the Muslim
areas in the South
4. NON-BANK
FINANCIAL INSTITUTIONS
a. Investment houses
f. Fund Managers
b. Finance Companies
g. Lending Investors
c. Investment Companies
h. Private Insurance
d. Securities dealers/brokers
Companies
e. Pawnshops
i. Specialized Non- banks
NIDC)
(GSIS, SSS, ACA,
CONT… PHILIPPINE BANKING INSTITUTIONS
5. Non-bank thrift institutions
a. Mutual Bldg. & Loan Assoc. b. Non-stock SLAs
3.4.2 FISCAL POLICY AND NATIONAL INCOME
Fiscal System – a collective term for the combined operations of public
expenditure, taxation and debt
Public Finance – refers in particular to the subject of financing public
expenditures
 a study of the fiscal system
3.4.2.1 COMPONENT OF NATIONAL BUDGET
Standard Components of a National Budget
1.national revenue – taxes on income, taxes on international
trade, excises and sales taxes, other taxes (taxes on property),
non-tax revenues
2.Current operating expenses of government – personnel
services, maintenance, interest, transfer of corporations,
allotment to local governments
COMPONENT OF NATIONAL BUDGET CONT……
3. Capital outlays, which are dominated by infrastructure expenses

infrastructure, other capital, capitalization (equity contributions), net lending
4. Summary of the overall deficit – foreign borrowing (net), borrowing from
banking system, other domestic borrowing (including change in treasury
cash balances)
5. Statement of the overall operating surplus, or the total revenues less
current operating expenses
TWO ASPECTS OF BUDGET:
1. Current operating expenses- provides for the maintenance of government
expenditures for the year
ex. expenditures for salaries of personnel & programs of existing offices,
departments and agencies
2. Current operating expenditures – include the costs of maintenance of buildings
and premises, interest of the public debt and transfers made by the national
government to government corporations and local governments
BUSINESS CYCLES
Business cycle- a recurring fluctuation of real GNP or aggregate output in the
economy. Each cycle consists of:
a. peak - the highest level of output and employment reached before a sustained
decline in output
b. recession or contraction – where output is falling for at least two quarters
c. trough – the low point for output
d. recovery or expansion – where output is rising

BUSINESS CYCLES
Business cycles describe the fluctuations in business activity over time.
Graph from Wikipedia
EXPLANATION OF FOUR PHASES OF BUSINESS CYCLE
1. Prosperity Phase/Expansion
When there is an expansion of output, income, employment, prices and profits,
there is also a rise in the standard of living. This period is termed as Prosperity
phase.
The features of prosperity are :1. High level of output and trade.
2. High level of effective demand.
3. High level of income and employment.
CONT… FEATURES OF PROSPERITY
4. Rising interest rates.
5. Inflation.
6. Large expansion of bank credit.
7. Overall business optimism.
8. A high level of MEC (Marginal efficiency of capital) and investment.
2. RECESSION PHASE
1. the economic activities slow down
2. When demand starts falling, the overproduction and future investment
plans are also given up.
3. steady decline in the output, income, employment, prices and profits.
RECESSION PHASE CONTN…
4. businessmen lose confidence and become pessimistic (Negative).
a. It reduces investment
b. The banks and the people try to get greater liquidity, so credit also
contracts.
c. Expansion of business stops, stock market falls.
d. Orders are cancelled and people start losing their jobs.
5. increase in unemployment causes a sharp decline in income and
aggregate demand
3. DEPRESSION PHASE

When there is a continuous decrease of output, income, employment, prices and
profits, there is a fall in the standard of living and depression sets in.
The features of depression are :
1. Fall in volume of output and trade.
2. Fall in income and rise in unemployment.
3. Decline in consumption and demand.
FEATURES OF DEPRESSION CONTN…
4. Fall in interest rate.
5. Deflation.
6. Contraction of bank credit.
7. Overall business pessimism.
8. Fall in MEC (Marginal efficiency of capital) and investment.
4. RECOVERY PHASE
The turning point from depression to expansion is termed as Recovery or Revival Phase.
1. there are expansions and rise in economic activities.
2. When demand starts rising, production increases and this causes an increase in
investment.
3. There is a steady rise in output, income, employment, prices and profits.
RECOVERY CONTN…
4. businessmen gain confidence and become optimistic (Positive).
a. increases investments.
b. stimulation of investment brings about the revival or recovery of the economy.
c. The banks expand credit, business expansion takes place and stock markets
are activated.
RECOVERY CONTN…
5. an increase in employment, production, income and aggregate demand, prices and
profits start rising, and business expands.
Thus we see that:
 a. during the expansionary or prosperity phase, there is inflation and
 b. during the contraction or depression phase, there is a deflation.
POTENTIAL OUTPUT/GNP

Potential output or Potential GNP - defined as the level of output
that
can be produced in a given year when the available capital
and labor resources of the economy are fully utilized but not over
utilized.
The output ratio – the ratio of actual output to potential output, usually
given in percent
terms
 defined as the ratio of real GNP to potential real GNP, and the ratio is
multiplied by 100 to express it as an index number
 Output ratio = output/potential output
POTENTIAL OUTPUT/GNP CONTN…
Output Gap- the difference between output and potential output
 defined either as a difference between output and potential output
or the percent deviation of output from potential output
Output gap(in base-year peso) = Output – Potential output
Output gap (in percent) – percentage difference between output and
potential output
Example: If the output ratio is 90 percent, the output gap is minus 10
percent and the GNP is 10 percent below potential GNP.
3.5 MONEY AND BANKING
3.5.1 MONEY AND MONEY SUPPLY
3.5.1.1 Money – an asset that serves as a means of payment, a store of
purchasing power, and a unit of account.
Origins of Money
1. Barter
2. A medium of exchange emerges: commodity money
3. Paper money or currency
4. Managed currency
FUNCTIONS OF MONEY
1. Money as a unit of value – the monetary unit serves as the unit of
valuation or of accounting in which the value of goods and services is
measured and expressed.
2. Money as a medium of exchange – means of payment for transactions

money facilitates the exchange of goods for goods and thereby eases the trade
FUNCTIONS OF MONEY CONTN…
3. Money as standard of deferred payments- once money is
accepted as a unit of value and as a medium of exchange, it is
inevitable that it becomes a standard for payments of debts or
contracts in which payments are deferred.
4. Money as a store of value- Money is a good store of value with
which to meet unpredicted expenditures
MONEY SUPPLY
What is a desirable supply of money?
This depends on factors that are taken into account by the monetary
authority.
Among these factors are:
1. the desired level of economic growth or growth of GNP;
2. the desired level of governmental spending and the relationship of this
with the government’s budget;
MONEY SUPPLY CONT…
3. the level of credit consistent with the requirements of the rest
of the economy to carry out normal activities;
4. the level of new money needed to meet the requirements of the
country’s international trade and payments; and
5. the velocity of circulation of money
CLASSIFICATIONS OF MONEY
Economists have invented for convenience, therefore, several
definitions of money. These are 1)general purpose of money,
M1, and 2) broad money of M2.
1. General Purpose money, M1 (narrow money) – currency in
circulation + demand deposits
 the use of money is confined to the two most commonly used
instruments of payment – cash and checks
a)coins - used to be the most important money in
circulation
b) paper money- paper currency is issued in most
countries by governments through their central
banks or monetary authorities
CLASSIFICATIONS OF MONEY CONTN…
demand deposit - a deposit which can be withdrawn by writing a check on
demand. The check can be used to pay for obligations against the
deposit in the bank.
2. Broad money, M2 – M1 + savings and time deposits
a broader definition of money to include savings and time deposits
 deposits that are very “liquid” that is, easily convertible into cash – so that
they are much like money in the sense of checking deposits.

FIAT MONEY CONTN…

Money which has no intrinsic value and cannot be redeemed for
specie or any commodity, but is made legal tender through
government decree.

All modern paper currencies are fiat money, as are most modern
coins.

The value of fiat money depends on the strength of the issuing
country's economy. Inflation results when a government issues too
much fiat money.
COMPONENTS OF THE PHILIPPINES MONEY SUPPLY
1. M1
2. M2
3. Currency in circulation
4. demand deposits
5. savings deposits
6. time deposits
7. savings and time deposits
8. deposit substitutes
9. marginal deposits
3.5.2 THEORIES ON DEMAND FOR MONEY
1. Transactions demand for Money - transaction
motives arise from the need of households and
firms to have money for the regular payments of
goods and services
2. Precautionary demand for money – people and
firms want to hold idle cash balances for
precautionary or contingency reasons
THEORIES AND DEMAND FOR MONEY CONTN….
3. Speculative demand for money- also known as “asset demand for
money”.
It stems from the preference of households and firms to hold money as
an asset that is perfectly liquid and free from risk of depreciation in
terms of money in order to take advantage of market situation.
Money velocity – the rate at which the supply of money is turning over
or used per year, in order to undertake income transaction
3.5.4 FIAT MONEY




The term fiat money is used to mean:
any money declared by a government to be legal tender.[1]
state-issued money which is neither legally convertible to any other thing,
nor fixed in value in terms of any objective standard.[2]
money without intrinsic value.[3]
CHARTALISM
Chartalism
 Chartalism is a monetary theory that states the initial demand for a fiat
currency is generated by its unique ability to extinguish tax liabilities. Goods
and services are traded for fiat money due to the need to pay taxes in the
money.
3.5.3 COMMERICAL BANKING
Commercial Bank – is a business institution that accepts deposits
and lends to borrowers.
Functions of Commercial Banks:
The functions of commercial banks are provided for under Section
31 of the general Banking Act. Such functions are as follows:
FUNCTIONS OF COMMERCIAL BANKS
1. To receive deposits;
2. To carry on the business of a commercial bank by accepting
drafts and issuing letters of credit, by discounting and
negotiating promissory notes, drafts, bills of exchange, and any
other evidence of debt;
3. To buy and sell foreign exchange and gold or silver bullion, and
4. To lend money out against personal securities or against
securities consisting of personal property or first mortgages on
improved real estate, and other insured improvements.
FUNCTIONS OF COMMERCIAL BANKS
Briefly, the major functions of commercial banks may be divided
under four broad categories:
1. depository functions
2. loan and discount functions
3. remittance and collection functions; and
4. trust or fiduciary functions
FORM IN WHICH DEPOSITS COME TO A BANK:
1. money
2. checks issued by banks
3. items for collection from banks and others
4. proceeds of loans and discounts left on deposit
FORM IN WHICH DEPOSITS COME TO A BANK CONTN…
5. traveler’s checks
6. drafts
7. promissory notes
8. money orders
TRUST FUNDS

While the common assumption is that trust funds are only for
the wealthy, a trust fund can actually be leveraged into an
effective financial tool for a larger range of income levels.

The basic concept of a trust places a separate legal entity in
control of financial assets (property, savings, etc.) for the benefit
of the beneficiary of the trust.
TRUST FUNDS



Trust funds are arrangements that allow individuals to create
sustained benefits for another individual or entity.
Ex. Parents sometimes establish a trust fund to provide some degree of financial security for their children, with
the trust providing resources to meet basic needs after the parents are deceased.
A trust fund can also be established to benefit a charity or other
non-profit organization.
TRUST FUND CONTN…
donor or grantor- refers to the individual who establishes the trust
Trustee- the group or entity responsible for managing and
executing the trust
ONE OF THE MOST COMMON GOALS FOR ESTABLISHING A TRUST:
1) to separate the benefits of property ownership into
current and future portions.
2) Common trust designs first pass trust benefits on
to one's surviving spouse, and next to the
remainder beneficiaries (children, grandchildren,
etc.).
WHAT ARE SOME REASONS FOR CREATING A TRUST FUND?
1. To help reduce certain types of estate taxes.
2. To establish supervision of your assets in case you become unable to
personally oversee them
3. To transfer your assets more easily to your beneficiaries in the event of your
death
4. To provide for minors (e.g. your children) who might lack the financial
experience needed to appropriately administer their assets
A TRUST CAN INCLUDE A WIDE RANGE OF ASSETS.
1. Cash
2. resources such as property, stocks, bond
3. any other type of financial instrument.
The trust fund may be managed by a single trustee, or be
structured to allow for more than one trustee. It is the
responsibility of the trustee to see that the resources included
in the trust fund are used in the best interests of the recipient
of the trust.
LIMITATIONS OF THE TRUST FUND:
1.the recipient may not be able to begin drawing any
type of annual income from the trust until he or she
reaches a certain age.
2. In the interim, the trustee may be empowered to
disburse funds necessary to provide food, clothing,
and shelter to the recipient, and possibly also cover
education related expenses.
3. When the recipient reaches the age cited in the
terms of the trust, he or she can normally begin to
draw a limited amount of annual income from the
trust, as well as petition for the right to assume full
control of the trust.
THE MAIN IDEA BEHIND TRUST FUND:
1.to allow grantor or donor who established the fund to
rest assured that loved ones or a particular
organization receive the benefit of his or her estate
after the grantor dies.
2. The trust is aimed at providing sustained support in
some manner, rather than simply leaving the assets
to beneficiaries through a last will and testament.
3. efficient means of making sure that children are
mature enough to manage the assets well before
placing the responsibility in their hands.
TEST TAKING PREPAREDNESS
STAY IN FOCUS
VICTORY OF PASSING THE BOARD EXAM

“A successful individual typically sets his/her next goal
somewhat but not too much above his last achievement.
In this way he/she steadily raises her/his level of
aspiration.”
“Kurt Lewin”