L8B Introduction To Macroeconomics

Basic Macro-economics
Concepts
DR. MIRABEL A. REYES
ECO1 BASIC MICROECONOMICS
1 S T S E M E S T E R S .Y. 2 0 2 3 - 2 0 2 4
Objectives
At the end of the lesson, the students should be able to:
1. explain why the study of basic macroeconomics principles will help
entrepreneurs or business owners formulate strategies to stay in business;
2. explain how fiscal policies and monetary policies affect business.
Definition and Scope: Macroeconomics
Macroeconomics: the branch of economics that focuses on broad issues such as
growth, unemployment, inflation, and trade balance.
Macroeconomic policy pursues its goals through monetary policy and fiscal
policy.
A. Fiscal Policy: economic policies that involve government spending and taxes
B. Monetary Policy: policy that involves altering the level of interest rates, the
availability of credit in the economy, and the extent of borrowing
Macroeconomic Goals
1. Economic Growth and Economic development

2. Price Stability
3. Full Employment
4. External Balance
5. Equitable Distribution of Income
Economic Growth and Economic Development
Economic Growth is the increase in the output level of the economy.
Economic Development is the development of economic wealth of countries or

regions for the well-being of their inhabitants. Economic development is the
improvement of the economic well-being and quality of life of a community.
Economic Growth and Economic Development
Gross Domestic Product (GDP): the value of the output of all goods and services produced within a
country in a year
GDP per capita: GDP divided by the population; often used as a measure of standard of living
Standard of Living: all elements that affect people’s happiness, whether these elements are obtained
through market transactions or not
When economists talk about the standard of living, they are referring to the average quantity (and
quality) of goods and services that people in a country can afford to consume. Since real GDP
measures the quantity of goods and services produced, it is common to use GDP per capita, that is
real GDP divided by population, as a measure of economic welfare or standard of living in a nation.
Price Stability
An absence of long-term price-level uncertainty

In order to attain this goal, government should manage inflation.
Inflation is a sustained increase in the overall level of prices.
Inflation can cause three types of problems:
1. Blurred price signals
2. Unintended redistributions of purchasing power
3. Difficulties in long-term planning
Full Employment
It occurs when the economy is producing to its maximum sustainable capacity, using labor,
technology, land, capital and other factors of production to their fullest potential.
It also means that everyone who wants work and is willing to work at the market wage is in work.
In order to attain this goal, government should encourage prospective business owners to go into
business by providing a conducive business climate or environment that promotes growth in
order to provide employment to the people
Unemployment, as measured by the unemployment rate, is the percentage of people in the

labor force who do not have a job.
External Balance (Balance of Trade)
It is the favorable difference between the monetary value of exports and

imports in an economy over a certain period of time.
Trade Balance: gap between exports and imports
Trade Deficit: exists when a nation’s imports exceed its exports and is calculated
as imports – exports
Trade Surplus: exists when a nation’s exports exceed its imports and is
calculated as exports – imports
Equitable Distribution of Income
The Equitable Distribution of Income means that there is no group of citizens
should face stark poverty while others enjoy luxury .
It points out that everything should be fair and that no one will experience poverty
and that every citizen should experience luxury.
Fiscal Policy
Expansionary Fiscal Policy: fiscal policy that increases the level of aggregate demand, either through
increases in government spending or cuts in taxes. The main implementor of the Fiscal Policy is the
Congress, Senate and the Office of the President.
It includes the following:
1. increasing consumption by raising disposable income through cuts in personal income taxes or
payroll taxes;
2. increasing investments by raising after-tax profits through cuts in business taxes; and
3. increasing government purchases through increased spending by the federal government on final
goods and services and raising federal grants to state and local governments to increase their
expenditures on final goods and services.
Fiscal Policy
Contractionary Fiscal Policy: fiscal policy that decreases the level of aggregate
demand, either through cuts in government spending or increases in taxes
It is used to slow down an overheating economy. It consists of opposite actions
specified in Expansionary Fiscal Policies
Monetary Policy
Monetary Policy is a macroeconomic policy which involves the regulation of the
money supply, credit and interest rates in order to control the level of spending in
the economy. The main implementor of Monetary Policy is the Bangko Sentral ng
Pilipinas (BSP) through the Monetary Board in the Philippines
It includes the participation of the BSP in the following:
1. Open Market Operations 4.Trading in the market for FOREX

2. Changing the bank rate 5. Selective credit control
3. Change bank reserve requirement 6. Moral Suasion
Monetary Policy
Expansionary (or loose) Monetary Policy: a monetary policy that increases the
supply of money and reduces interest rates. It is applied to the economic
problem of recession and unemployment.
Contractionary (or tight) monetary policy: a monetary policy that reduces the
supply of money and increases interest rates. It is applied to the economic
problem of inflation.
References:
Books:
1. Viray, E., Marcelino R.B., Malveda, L.R., Avila-Bato, J. (2011) Macro Economics:
Simplified, National Bookstore, Mandaluyong City, Philippines ISBN 971-08-
7133-1
Website: https://ph.search.yahoo.com/search?
fr=mcafee&type=E211PH714G0&p=powerpoint+presentation+of+basic+macroe
conomic+concepts
References:
Images
https://bsmedia.business-standard.com/_
media/bs/img/about-page/thumb/620_620/1605522848.jpg
https://
www.businessstudynotes.com/wp-content/uploads/2018/11/What-is-Macroeconomics.jpg
http://gleasonak.weebly.com/uploads/5/7/8/7/57879549/7160930_orig.png
https://tse1.mm.bing.net/th?id=OIP.u2DiSot5wC_xcBD6TpdY-AHaCb&pid=Api&P=0&h=180
https://classnotes.ng/wp-content/uploads/2020/04/Economic-growth-e1590572683581.jpg
https://image1.slideserve.com/2881400/price-stability1-l.jpg
References:
Images
https://www.wallstreetmojo.com/wp-content/uploads/2022/11/Full-Employment-Meaning.png
https://www.godigit.com/content/dam/godigit/directportal/en/contenthm/balance-of-trade.jpg
https://image1.slideserve.com/2555994/equitable-distribution-of-income1-l.jpg
https://
i2.wp.com/marketbusinessnews.com/wp-content/uploads/2016/07/Types-of-fiscal-policy.jpg?res
ize=464%2C379
https://
d1e4pidl3fu268.cloudfront.net/c4ebce37-6c02-49b1-b90e-2697f71f6092/whatisfiscalpolicytypesobjec
tivesandtools3305844final5b4e4a59c9e77c005bbfde3a.crop_658x494_42,0.preview.png
References:
Images
http://
image.slidesharecdn.com/monetaryandfiscalpolicy-150107114557-conversion-gate02/95/monet
ary-and-fiscal-policy-9-638.jpg?cb=1420652874
https://cdn.educba.com/academy/wp-content/uploads/2022/10/Slide3-1024x576.jpg

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Basic Macro-economics

ECO1 BASIC MICROECONOMICS

1. Economic Growth and Economic development

Economic Development is the development of economic wealth of countries or

An absence of long-term price-level uncertainty

Unemployment, as measured by the unemployment rate, is the percentage of people in the

It is the favorable difference between the monetary value of exports and

1. Open Market Operations 4.Trading in the market for FOREX

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