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Macroeconomics Review Psba
Macroeconomics Review Psba
TIAMBENG
MACROECONOMICS
MACROECONOMICS
MACROECONOMICS the branch of economics
that studies the behavior and performance of
an economy as a whole. It focuses on the
aggregate changes in the economy such as:
FOCUS:
ECONOMIC GROWTH vs. UNFAVORABLE ECONOMIC GROWTH
PRICE STABILITY vs. INFLATION
FULL EMPLOYMENT vs. UNEMPLOYMENT
BALANCE OF TRADE vs. ADVERSE BALANCE OF TRADE
FISCAL AND MONETARY POLICY vs. MONEY SUPPLY
ECONOMIC GROWTH
A country's economic growth is usually indicated
by an increase in the country's gross domestic
product, or GDP.
Generally speaking, GDP is an economic model
that reflects the value of a country's output.
In other words, a country's GDP is the total
monetary value of the goods and services
produced by the country over a specific period
of time.
ECONOMIC DEVELOPMENT
A country's economic development is usually
indicated by an increase in citizens' quality of
life.
'Quality of life' is measured using the Human
Development Index (HDI) -> an economic model
that determines factors not considered in
economic growth, such as:
1. literacy rates,
2. life expectancy, and
3. poverty rates.
NATIONAL INCOME ACCOUNTING
National Income Accounting -> a bookkeeping
system that a national government uses to
measure the level of the country's economic
activity in a given time period.
For example, NIC measures the revenues earned
in the nation's companies, wages paid, or tax
revenues.
NIC is a mathematical system. It does not
interpret, analyze or judge, and thus it is only
one step in the analytical process of measuring
a country's economic activity.
GDP versus GNP
Gross Domestic Product (GDP) is a measure of the total
market value of all final goods and services produced
within the boundaries of the Philippines whether by
domestic or foreign-owned sources, during a specified
period of time, usually one year.
Three Approaches:
1 2 3
GDP EXPENDITURE = GDP PRODUCT = GDP INCOME
1. EXPENDITURE APPROACH
It measures the total amount spent on the goods
produced by a country in a year.
GDP = C + I + G + (X-M)
• C = Private Consumption Expenditures
• I = Investment Expenditures
• G= Government Consumption Expenditures, and
Investments
• X = Value of Exports
• M= Value of Imports
MAIN POINTS:
• Expenditure on final goods and services
• Expenditure on imports needed to be deducted
from calculation
2. INCOME APPROACH
It measures the total incomes earned by households in a
nation in a year.
GDP = W + R + I + BP + IBT + SA + d + F
• W = Wages, Salaries, Benefits, Pensions, and SSS
Contributions
• R = Rental Income
• I = Interest Income
• BP = Business Profits (of business owners) – P, P, C
• IBT = Indirect Business Taxes (sales tax, business
property tax, license fees)
• D = Depreciation (this is the decrease in value of goods)
• F = Foreign Income(To calculate this, take the total
payments received by domestic citizens from foreign
entities and subtract the total payments sent to foreign
entities for domestic production.)
3. PRODUCTION APPROACH
T1 = Price for the first time period (or the starting number)
T2 = Price for second time period (or the ending number)
Consumer Price Index
A consumer price index (CPI) measures changes in
the price level of market basket of consumer
goods and services purchased by households.
OTHER TERMS:
Stagflation – persistent high inflation combined
with high unemployment and stagnant demand
in a country's economy.
• Disinflation is a decrease in the rate of inflation –
a slowdown in the rate of increase of the general
price level of goods and services in a nation's
gross domestic product over time.
• Reflation is the act of stimulating the economy
by increasing the money supply or by reducing
taxes, seeking to bring the economy (specifically
price level) back up to the long-term trend,
following a dip in the business cycle.
• Deflation is a decrease in the general price level
of goods and services. Deflation occurs when the
inflation rate falls below 0% (a negative inflation
rate).
UNEMPLOYMENT
Unemployment is a phenomenon that occurs
when a person who is actively searching for
employment is unable to find work.