INTRODUCTION TO MACROECONOMICS
Differentiate MicroEconomics and MacroEconomics?
MicroEconomics
The study of microeconomics is focused on buyer
and seller trends. Microeconomics studies the
interactions between supply and demand in
particular marketplaces for commodities and
services.
What are the Macroeconomics goals?
1 Economic Growth
2 Price Stability
3 Full Employment
Determine the different ways to measure Economic Income in the Macroeconomic approach.
What is GDP and its definition?
A country's gross domestic product (GDP) is the sum
of the market values of all the finished products and
services produced within its borders during a certain
time period. It serves as a thorough assessment of a
particular country's economic health as a wide
indicator of entire domestic production.
Describe the important sentence below
All final goods and services produced within a
country.
The current worth of all finished products and
services produced in a country in a year is known as
GDP. Final goods are what? At the end of the year,
they are products or services in the last stages of
production. When calculating GDP, statisticians must
avoid the error of double counting, which occurs
when an output is counted more than once as it
moves through the manufacturing phases.
How do you measure GDP? Describe the formula
Expenditure Approach
GDP = C + G + I + NX
C- Consumption is the term used to describe all
private consumer spending within an economy,
encompassing services, non-durable products (such as
food and clothing), and durable goods (things with a
lifespan greater than three years).
G- total government spending, which includes military
MacroEconomics
Macroeconomics is the study of how economies go
through numerous cycles, including business cycles
and short- and long-term debt cycles. In
macroeconomics, a country is often the focus. The
topic is how all markets interact to produce large
phenomena that economists refer to as aggregate
variables.
What is GNP and its definition?
The approximate total worth of all commodities and
services generated by a nation's citizens and enterprises
owned by citizens is what is meant by the term "gross
national product" (GNP). A country's whole domestic and
foreign-owned business and citizen output activity is
measured by its gross national product (GNP).
Describe the important sentence below
All final goods and services are produced by the citizen of a
country.
The entire monetary value of the goods and services a
nation's citizens create is measured by the GNP. As a result,
any production produced within the country's borders by
foreign residents must be disregarded when calculating the
GNP, whereas any output produced by citizens of the
country outside of those limits must be taken into account.
How do you measure GNP? Describe the formula.
GNP= C + I + G + X + Z
C – Consumption Expenditure
I – Investment
G – Government Expenditure
X – Net Exports (Value of imports minus value of exports)
Z – Net Income (Net income inflow from abroad minus net
income outflow to foreign countries)
 INTRODUCTION TO MACROECONOMICS
spending, public education funding, road building and
repair, and staff wages.
I- total of capital goods, inventory, and housing
investments made by a nation.
NX = net exports or a country’s total exports less total
imports.
Income Approach
GDP = Total National Income + Sales Taxes +
Depreciation + Net Foreign Factor Income
Alternatively, the Gross National Product can also be
calculated as follows:
GNP = GDP + Net Income Inflow from Overseas – Net
Income Outflow to Foreign Countries
Where:
GDP = Consumption + Investment + Government
Expenditure + Exports – Imports

Total National Income – the sum of all wages, rent,

interest, and profits.
Sales Taxes – consumer taxes imposed by the
government on the sales of goods and services.
Depreciation – cost allocated to a tangible asset over
its useful life.
Net Foreign Factor Income – the difference between
the total income that a country’s citizens and
companies generate in foreign countries, versus the
total income foreign citizens and companies generate
in the domestic country.

What other measurements in measuring national income aside from GDP and GNP?
 Net National Product (NNP)
 Personal income
 Disposable income

What is the business cycle? Describe each stage.

1. Expansion- Expansion is the first phase of the business cycle. Positive economic indicators including
employment, income, output, wages, profits, demand, and supply of products and services are on the rise
during this stage. Debtors often pay their obligations on time, money is being created quickly, and
investment is growing. As long as the economy is expanding favorably, this process continues.
2. Peak- The second stage of the economic cycle, also known as saturation or peak, occurs when the economy
reaches this point. Growth has reached its utmost potential. The economic indices plateau and reach their
peak levels. The cost is at its highest. The economic growth trend has reached its turning point at this time.
At this time, consumers typically reorganize their spending plans.
3. Recession- The period that comes after the peak phase is known as the recession. In this stage, the demand
for products and services starts to fall off quickly and consistently. A condition of surplus supply on the
market results from producers continuing to produce despite a drop in demand. Prices usually decrease. As
a result, all favorable economic indices such as income, output, wages, etc., begin to decline.
4. Depression- Unemployment has increased proportionately. A depression is the stage at which the
economy's growth is declining and is below the steady growth line.
5. Trough- The economy's growth rate turns negative during the depression period. Prior to the demand for
and supply of goods and services, as well as the prices of the factors, continuing decrease occurs. Inevitably,
the economy hits its low point. For an economy, it is the point of negative saturation. The national budget's
resources are being depleted severely.
6. Recovery- After the trough, the economy enters the recovery period. The economy begins to recover from
its negative growth rate during this stage. Because of the cheap costs, demand begins to grow, and supply
begins to increase. The populace develops a favorable attitude toward investment and employment, and
 INTRODUCTION TO MACROECONOMICS
output begins to rise.
Employment begins to grow, and lending begins to improve as a result of accumulating cash balances with
bankers. During this stage, depreciated capital is replaced, resulting in fresh investments in the
manufacturing process. The recovery will continue until the economy recovers to normal growth rates.
This brings the business cycle to a close. The peak and trough are the extreme points.

References: Use economics textbooks (Write the title of the book, author’s name, publisher and year)

Textbooks

Website/s:
 Economics. (2022, July 7). Corporate Finance Institute. Retrieved November 2, 2022, from
https://corporatefinanceinstitute.com/topic/economics/
 Barnier (Ed.). (2022, September 25). Gross National Product (GNP) Defined With Example. Retrieved November 2,
2022, from https://www.investopedia.com/terms/g/gnp.asp
 “What Is Gross Domestic Product? | Macroeconomics.” What Is Gross Domestic Product? | Macroeconomics,
courses.lumenlearning.com/wm-macroeconomics/chapter/what-is-gross-domestic-product. Accessed 2 Nov. 2022.
 Tamplin, True. “Gross National Product (GNP) | Definition | What It Tells You.” Finance Strategists, 12 Sept. 2022,
learn.financestrategists.com/finance-terms/gnp.
 Fernando, Jason. “Gross Domestic Product (GDP): Formula and How to Use It.” Investopedia, 29 Sept. 2022,
www.investopedia.com/terms/g/gdp.asp.