2 PNG Economy - An Overview

Question 1

List the different types of economies.

Answer 1

1. Barter economy.
2. Cash Economy
3. Market Economy
4. Command Economy
5. Mixed Economy

Question 2

Barter Economy?

Answer 2

Exchange of goods and services for other goods and services.

Question 3

Cash Economy?

Answer 3

This is where cash serves as the medium of exchange.

Money serves as a medium of exchange, measure of value and store of wealth

As economies mature, they moved from barter to cash economies

Question 4

Market Economy?

Answer 4

Freedom of consumption for goods and services by consumers Freedom of enterprise for producers and distributors

Also known as a “consumer economy”, capitalism and capitalist economy.

Power of the invisible hand; supply and demand (laissez faire )

Large role of the public sector and less government involvement

Question 5

Command Economy

Answer 5

This is the opposite of the market economy where the state is in control of the factors of production and distribution (labour, capital, land and technology)

Everyone shares equally in the the limited resources.

The power of the “Visible Hand” of the State

Also known as a “centrally planned economy”

Question 6

Mixed Economy?

Answer 6

This economy is a mixture of Market and Command economies. That is there is the involvement of both the private sector and the state of government. Most countries in the world are under this category including PNG.

Question 7

What are the general Characteristics of the PNG Economy?

Answer 7

1. Large subsistence and informal economy
2. Large Agricultural Sector
3. Exports are dominated by primary commodities
4. High dependence on Imports
5. Majority Young Labour force

Question 8

What are factors of production?

List them down.

Answer 8

Factors of production are resources (inputs) used in production of goods and services, which are needed for economic and social development.

There are primary and secondary factors of productions.

Primary factors include: labour, land, capital

Secondary factors include: technology, human capital and entrepreneurship

Question 9

Land as a primary factor of production, what does it include?

Answer 9

1 Fertile land for growing crops and rearing animals for consumption of sale
2 Marine resources
3 Forests
4 Mineral resources such as gold copper silver nickel etc
5 Petroleum and gas
6 Scenic views and biodiversity

Land resources become economic good or products when they are produced for consumption and other uses.

Question 10

Explain GDP, Revenue, Expenses and Surplus/ Deficit.

Answer 10

Gross Domestic Product (GDP) is the value of final amount of goods and services produced (by both nationals and foreigners) within PNG for a particular year. It shows the strength of the economy.

Revenue is what the government earns in the form of taxes and non tax revenue.

Expenses is what the government spends on public goods and services

The difference of the above can be be a surplus of deficit.

Question 11

What are some of the developmental challenges that PNG faces?

Answer 11

1. Inadequate development of key enablers
2. Environmental issues
3. Dual economy disparities
4. Population growth
5. Translating economic growth into real growth