Chap 1

PRINCIPLES OF
MACROECONOMICS
Lecturer: Pham Xuan Truong
Foreign Trade University, Faculty of International
Economics
Email: [email protected]
Course content
Chapter 1 Introduction to macroeconomics
Chapter 2 Data of Macroeconomics
Chapter 3 Economic growth
Chapter 4 Saving, investment and financial system
Chapter 5 Unemployment
Chapter 6 Aggregate demand and Aggregate supply
Chapter 7 Aggregate expenditure and Fiscal Policy
Chapter 8 Money and Monetary Policy
Chapter 9 Inflation and Phillips curve
Chapter 10 Macroeconomics in open economy
Objectives
Acquire basic background of macroeconomics (GDP,
CPI, AD-AS model, unemployment, inflation, foreign
exchange rate, fiscal policy, monetary policy)
Use knowledge of the course to study other specialized
economics (e.g. development economics, public
economics, environmental economics, econometrics)
Apply academic background to practices (understand
what financial and economic news imply, explain what
happens in the economy, estimate or forecast economic
policy)
Course implementation
Teaching and learning methods: In class contact
hours, there will be lectures, discussions and
assistance with student’s assignment works,
reading and using books. During the seminars the
students will be expected to discuss the provided
topics on the problems of real economy
Assessment methods: There is a written
assignment and final examination. It is worthy
30% and 60% respectively. Class participation is
10% .
Reading Textbooks
1 N.Gregory Mankiw,Principle of Macroeconomic,
International Student Edition,Third edition,Worth
Pulisher,2003.
2 600 câu hỏi trắc nghiệm kinh tế học vĩ mô cơ bản, NXB
Thông tin và truyền thông, 2012.
3 Frank and Bernanke, Principles of Macroeconomics
Third edition, 2007.
4 Glenn Hubbard and Tony O’Brien, Macroeconomics,
Second edition, 2008.
5 D.Begg,S Fisher,R.Dorchbusch,Economics,Third
edition,McGraw-Hill Book Company,1991
Other references
1 The richest man in Babylon – Geogre Sclason
2 Naked Economics – Charles Wheelan
3 The Undercover Economist – Tim Harford
4 80/20 Principle – Richard Kock
5 Currency War – Song Hongbing
6 The exlusive quest for growth – William Easterly
7 Blue Ocean Strategy – Wchankim, Renee Mauborgne
8 Good luck – Alex Rovira, Fernando Trias de Bes
9 How to stop worrying and start living – Dale Carnegie
10 If you want it done right, You don’t have to do it yourself – Donna
M.Genett
11 Who moved my cheese – Spencer Johnson
12 More sex is safer sex – Steve E. Landsburg
13 Three idiots (Indian version) film
Useful Websites
Domestic statistical websites
http://www.gso.gov.vn/default.aspx?tabid=217
http://www.customs.gov.vn/Lists/TinHoatDong/TinTuc.aspx?
Category=Th%E1%BB%91ng%20k%C3%AA%20H
%E1%BA%A3i%20quan
http://www.mof.gov.vn/portal/page/portal/mof_vn/1351583
http://fia.mpi.gov.vn/Default.aspx?
ctl=FIAs&TabID=4&mID=265
http://www.vietnamtourism.gov.vn/index.php?cat=2020
http://vneconomy.vn/tai-lieu.htm
http://www.vnep.org.vn/vi-VN/Trang-chu/.htm
Useful Websites
Foreign statistical websites
http://pwt.econ.upenn.edu/
http://www.oecd.org/statsportal/0,3352,en_2825_293564_1_1_1_1_1,00.html
http://www.adb.org/Economics/
http://www.imf.org/external/data.htm
http://www.un.org/en/databases/ http://data.worldbank.org/data-catalog/world-development-indicators
http://www.bis.org/statistics/index.htm
http://finance.yahoo.com/actives?e=us
http://www.mhhe.com/economics/dornbusch8e/quizzes/quizzes.mhtml
http://stat.wto.org/CountryProfile/WSDBCountryPFReporter.aspx?Language=E
http://www.trademap.org/tradestat/Country_SelProduct_TS.aspx
http://www.gapminder.org/data/
http://www.amis-outlook.org/
http://www.numbeo.com/common/
Economic information website
http://cafef.vn/
http://gafin.vn/
http://vneconomy.vn/
http://www.vnep.org.vn/vi-VN/Default.html
http://ecna.gov.vn/Pages/Index.aspx
Chapter 1 Introduction to
macroeconomics
Mentor Pham Xuan Truong
[email protected]
Content
I Basic concepts in Economics
1 Scarcity
2 Opportunity cost
3 Three fundamental questions in economic
II Overview of macroeconomics
1 What is macroeconomics
2 Objects and methods of research
3 Macroeconomic system
4 Objectives and policy tools of government to adjust
macro-economy
I Basic concept in Economics
1 Scarcity
- Definition: The situation in which unlimited wants
exceed the limited resources available to fulfill those
wants
- The law of diminishing marginal returns/ product/
productivity
2 Opportunity cost
- Definition: The value of the next-best alternative
that must be forgone in order to undertake the activity
- The law of increasing opportunity cost
Scarcity → Trade off (make a choice) → Optimal (max
benefit, min cost, max net benefit (benefit – cost)) →
economics
1776 – The wealth of nation book written by Adam
Smith
Economic Cost = explicit cost (real cost) + implicit cost
(opportunity cost)
I Basic concept in Economics
3 Economics
The study of the choices people make to attain their goals, given their
scare resources
Three fundamental questions in economic
- Produce what
- How produce
- Produce for whom
Normative economics vs positive economics
Normative economics is a part of economics that
expresses value or normative judgments about economic fairness, or what the
outcome of the economy or goals of public policy ought to be.
Positive economics is the branch of economics that concerns the description
and explanation of economic phenomena. It focuses on facts and cause-and-
effect behavioral relationships and includes the development and testing
of economics theories
Macroeconomics (from the Greek prefix makro- meaning "large" and
economics) is a branch of economics dealing with the performance,
structure, behavior, and decision-making of an economy as a whole, rather
than individual markets. This includes national, regional, and global
economies. With microeconomics, macroeconomics is one of the two most
general fields in economics.
Macroeconomists study aggregated indicators such as GDP, unemployment

rates, and price indices to understand how the whole economy functions.
Macroeconomists develop models that explain the relationship between
such factors as national income, output, consumption, unemployment,
inflation, savings, investment, international trade and international finance.
In contrast, microeconomics is primarily focused on the actions of
individual agents, such as firms and consumers, and how their behavior
determines prices and quantities in specific markets.
While macroeconomics is a broad field of study, there are
two areas of research that are emblematic of the
discipline: the attempt to understand the causes and
consequences of short-run fluctuations in national income
(the business cycle), and the attempt to understand the
determinants of long-run economic growth (increases in
national income). Macroeconomic models and their
forecasts are used by governments to assist in the
development and evaluation of economic policy.
What is the object of macro and micro
1 Should FPT invest in new technology
2 Effect of increase of petroleum price on transportation
3 Whether Increase in input cost leads to increase in CPI
4 How Productivity affects GDP
Objects
Macroeconomics focuses on 4 fundamental objects
- Total output (aggregate output), economic growth,
business cycle
- Price level, inflation
- Unemployment, social welfare
- International trade, balance of payment, foreign exchange
rate
Questions revolving 4 abovementioned objects are the issues
researched by macroeconomists
Methods of reasearch
Economists use economic models to explore the choices
people make and the consequences of those choices. A
model is any simplified representation of reality that is
used to better understand real-life situations
In economics, a model is theoretically constructed to
explain economic processes by a set of variables and a
set of logical and/or quantitative relationships between
them. The economic model often but not always using
mathematical techniques
Methods of reasearch
Models are important because their simplicity allows
economists to focus on the effects of only one change at a
time. That is, they allow us to hold everything else
constant and study how one change affects the overall
economic outcome. So an important assumption when
building economic models is the other things equal
assumption, which means that all other relevant factors
remain unchanged. Collecting
Building model data and
Observations Hypothesis
with check
assumptions accuracy of
the model
3 Macroeconomic system
Macroeconomic system has three components: input, marcoeconomic
activities recording system (black box), output
+ input: exogenous and endogenous variables
+ black box: AD – AS model under affect of variables will produce
macroeconomic outcome
+ output: total output, inflation, unemployment, foreign exchange rate,
interest rate
Inputs will go to black box, in which they interacts with market
principles and then outcomes of economy will be produced under
aggregate numbers
For example: draught occurs then price level increases and output of
the economy decreases, which resulted from interaction of AD and AS
macroeconomy
Objectives
Economic goals Content
Economic efficiency Making the most resources
Economic freedom Freedom from government intervention in the
production and distribution of goods and services
Economic security and Assurance that goods and services will be
predictability available, payments will be made on time, and a
safety net will protect individuals in times of
economic disaster
Economic equity Fair distribution of wealth
Economic growth and Innovation leads to economic growth, and
innovation economic growth lead to higher standard of living
Other goals Environmental protection, human right protection
macroeconomy
Policy
+ Fiscal policy: the use of government revenue collection (taxation)
and expenditure (spending) to influence the economy
+ Monetary policy: the process by which the monetary authority of a
country controls the supply of money, often targeting a rate
of interest for the purpose of promoting economic growth and stability
+ Income policy: economy-wide wage and price controls, most
commonly instituted by governments as a response to inflation, and
usually below market level
+ Trade policy (commercial policy): a set of rules and regulations that
are intended to change international trade flows, particularly to restrict
imports
Key concepts
- Scarcity
- Opportunity cost
- Economics
- Macroeconomics
- Economic model
- Normative economics, Positive economics
- Macroeconomic system
- Fiscal policy, Monetary policy, Income policy, Trade
policy

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PRINCIPLES OF

Macroeconomists study aggregated indicators such as GDP, unemployment

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