After your research, write a short essay (1–2 paragraphs) explaining how political instability affects monetary policy and why trust is important in maintaining a stable economy.

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Please answer using your own knowledge and understanding; don't use any AI Tools.

THANK YOU, GRADE 9- MABOLO AND YAKAL!

-Teacher Shaina

• The debt crisis - Which followed heavy borrowing in the 1970s to fund projects, Which ultimately led to the debt crisis which started in the early 1980s

• inflation - Reaching levels as high as 50% in 1984 because of the currency, economic mismanagement etc.

• unemployment - The economy plummeted resulting in a slow economy during the mid 1980s which hindered manufacturing leading to wide unemployment

Political instability makes things harder to manage for the monetary policy. If our politics are careless with the money of our country then it will be far more difficult to manage the supply of money. At the same time if our government isn't responsible with our money in instances such as borrowing and spending then that makes it harder for the monetary policy to make their goal of price stability and low inflation come to life. If the government keeps the situation of instability so rampant all the time then they are forming obstacles for the monetary policy to deal with.

On the contrary if we have trust worthy and responsible politics who cooperate with the needs of the monetary policy we can see the betterment and economic uprise our country needs. Instead of spending and borrowing money carelessly a trust worthy politic knows how to wisely manage the countries money. which is why a government we can trust in is important for maintaining a stable economy. The President who has multitudes of power has the ability to make or break the economy. By using their power and status for good they can contribute to an outstanding economic uprise, While by using their power for personal gain they risk the danger of leaving their country in shackles of poverty and burdens

Political instability has a huge effect on monetary policy as it weakens confidence among national and international investors in every market. During the 1980's of the Philippines, government leadership and political righteousness were questioned about their true motive and service for the country. Not only that abrupt policy shifting cause the soaring of inflation and cheapen currency values, which makes it harder for the central banks to keep stability. Fiscal pressure from high debt servicing forced a downturn of the monetary measures, such as high interest rates, which worsened the economic activity and unemployment. Under all of these shocks, discouraged businesses, such as investments, distorted the functioning of markets, and showed how fragile confidence in the government can disrupt basic economic tools.

Now we have trust, which is very crucial in keeping a stable economy, because it ensures that civilians and businesses have confidence in the value of money and in the government's commitment. When this trust is destroyed, it may be corruption, political turmoil, or abrupt leadership changes. No matter what happens, the economy should be trustworthy to gain, invest, or buy goods & services to grow the economy and development of the country.

After the 1986 People Power Revolution which brought Corazon Aquino to power, the economy began a slow recovery despite continued political challenges such as coup attempts. After that, Democratic institutions were restored, and economic reforms were introduced to stabilize inflation, restructure debt, and rebuild investor confidence. Political instability directly affects monetary policy because uncertainty can cause investors to withdraw capital, weaken the currency, and force central banks to raise interest rates to control inflation or defend the currency.

Political instability often makes inflation targets difficult to manage. This drives the currency value and credibility of banks to lessen. Moreover, it hinders banks to transmit the effective policy, resulting to short-term, substandard solutions. Meanwhile, trust is named the hidden tool of a stable economy because it guarantees long-term transactions and smoother exchanges. Addtionally, this improves efficiency and motivates innovation.

After 1986, the government faced the daunting task of stabilizing the economy amid lingering debt burdens and restoring investor confidence. Political instability during the final years of Martial Law weakened trust in the economy, leading to capital flight and reduced investment. Monetary policy became challenging because high debt levels limited the government’s ability to stimulate growth without risking inflation. Confidence from citizens and international investors helps maintain stable prices, encourages investment, and supports economic growth. When people trust that a government can manage its money responsibly and maintain political stability, inflation is more likely to stay low and unemployment down, helping the economy recover from crises like that of the 1980s.

So in esence, political stability is a very important component to a prosperous nation/state since political instability is the fastest way to speedrun running your country into the ground, an example of which is Russia during the 1990s, Zimbabwe after hthe ZANU-PF won and Venezuela right now, where prolonged political and institutional crises are linked to ongoing hyperinflation, rapid currency depreciation, and external isolation that damage economic prospects.

A great example of this is how Philippine debt grew so quickly when Marcos declared Martial Law - the power that came with it allowed Ferdinand Marcos to borrow plenty of money, specifically "petro-dollars" (excess money that oil-producing countries at the time needed to lend out) which were particularly easy to borrow. This money did in fact spark economic growth early in Martial Law. But since the way the money was used did not yield much return, it led the Philippine economy to suffer greatly and accumulate incredible amounts of debt in the later years of martial law; which brought plenty of problems to the economy on top of that.

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Trust allowing a country to borrow money is very important - practically every country borrows money, but how they handle it is much more important. If a country has plenty of trust, in their own government and economy and with other countries, they can grow very well, spend the borrowed money properly, and show to other countries that this country and its economy is good with handling loans and money - things necessary with maintaining a stable economy.

Additionally, trust in a government can hold it together tightly, even in conflict, and allow it to make decisions that would be impossible to make without confidence in each other. On top of that, having the trust of foreign countries can also attract foreign investors to do things in an economy, further sparking economic growth.

Just like how a group project turns out good when all the members have chemistry with each other, and trust each other to do things, having trust economically can help an economy to grow and to stabilize.

Although the economic conditions of both Martial Law and 1986(Post-Marcos Period) were severe, they both differed based on the different problems the government was facing. During Martial Law, they faced the initial problems of the country. During 1986, they experienced the consequences of these conflicts while trying to recover from Martial Law.

An unstable government can create severe problems in our economy. They affect monetary policy through the large debt caused by corruption. This creates a dishonest environment especially to the politicians who organize the funds for government projects.

Maintaining a stable economy requires trust because it avoids doubt between the government, businesses and the citizens and instead gives them the confidence to spend and manage money in the economy. This creates a better outcome that can improve the economic growth of our country.

Political instability makes it difficult for a country to maintain a stable economy. Frequent changes in leadership and a lack of public trust can weaken the central bank’s ability to manage money and control inflation,while businesses may hesitate to invest. Trust is essential because when people and investors believe the government can manage the economy responsibly, prices stay more stable, businesses invest, and the economy can grow. Without trust, economic problems get worse and people suffer more.

During Martial Law

• Heavy foreign borrowing

• Infrastructure development, but backed by debt

• Declining trust after political unrest

• Inflation

After Martial Law

• inherited foreign debt

• Focus on restructuring and restoring credibility

In the Philippines’ 1980s crisis, political turmoil under Martial Law and the assassination of political opposition figures undermined confidence, worsened capital outflows, and limited the central bank’s ability to control inflation and support growth. This erodes trust in institutions and in the value of money making it harder to stabilize prices or attract long-term investment. Stable economies rely on trust in policy predictability, in the rule of law, and in transparent governance because confidence encourages spending, saving prudently, investment, and cooperation with monetary authorities. When that trust breaks down, inflation spikes, unemployment rises, and debt becomes a political and economic burden rather than a tool for development.

Political instability makes it hard for a country to manage its money because people and investors feel unsure about the future. When there is no trust in the government, people may avoid spending or investing, which slows down the economy. Trust is important because it helpskeep prices stable, encourages businesses to grow, and makes people feel confident about saving and spending money.