Macroeconomics

Daphne S. Magtibay
Everyday Economics

“ECONOMICS IS LIFE IN
GRAPHS”
Economics relates to your everyday lives.

Economics is the study of our choices.

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Why study and understand Economics?

FOUR (4) REASONS

1. Learn a Way of Thinking
- opportunity cost
- marginalism and sunk costs
- efficient markets

2. To understand the society

3. To understand global affairs

4. To be an informed citizen

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What is ECONOMICS?

ECONOMICS
is social science that studies how
individuals, governments, firms, and nations
make optimal choices on allocating scarce
resources to satisfy their unlimited wants1

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 Economic Way of Thinking
Limits, Alternatives, and Choices

SCARCITY
is the limitation of economic resources to
fulfill infinite human needs and wants. Why
is there scarcity? The main explanation lies
in the fact that man’s wants and needs are
unlimited, while the actual goods and
services that can satisfy those needs are
limited.
FIELDS OF ECONOMICS
Microeconomics and Macroeconomics (from Economics by Case and Fair, 9th Ed.)

TABLE 1.1 Examples of Microeconomic and Macroeconomic Concerns

Divisions
of Economics Production Prices Income Employment

Microeconomics Production/output in Price of individual Distribution of Employment by

individual industries and goods and services income and individual businesses
businesses wealth and industries

How much steel Price of medical care Wages in the auto Jobs in the steel
How much office Price of gasoline industry industry
space Food prices Minimum wage Number of employees
How many cars Apartment rents Executive salaries in a firm
Poverty Number of
accountants

Macroeconomics National Aggregate price level National income Employment and

production/output unemployment in
the economy

Total industrial output Consumer prices Total wages and Total number of jobs
Gross domestic Producer prices salaries Unemployment rate
product Rate of inflation Total corporate
Growth of output profits
MICROECONOMICS VS MACROECONOMICS
FIELDS OF ECONOMICS

MICROECONOMICS
Branch of economics concerned with
individual units of such as a person, a
household, a firm, or an industry.
 FIELDS OF ECONOMICS

MACROECONOMICS
Branch of economics that examines either
the economy as a whole or its basic
subdivisions or aggregates, such as
government, household, and business
sectors.
FIELDS OF ECONOMICS
 When we study the consumption
behavior or equilibrium of a consumer;
the production pattern & equilibrium of a
firm, the entire analysis is ‘micro’ in
nature……because
we study a UNIT and not the SYSTEM
in which it is operating.
WHY STUDY MACROECONOMICS?
 The economic well being of consumers
rich or poor is affected by movement in
interest rates, exchange rates, inflation
etc.
 Businesses stand to gain or lose
considerable amounts of money when
their economic environment changes,
regardless of how well they are managed.
ROOTS OF MACROECONOMICS?

The Great Depression was a period of

severe economic contraction and high
unemployment that began in 1929 and
continued throughout the 1930s.
Importance of Macro economics
 To understand the working of the economy:

Macroeconomic variables like Total Income,

Total Output, Employment and General
Price level help us in analyzing the
functioning of the economy.
MACROECONOMIC GOALS
 MACROECONOMIC GOALS
1. FULL EMPLOYMENT

The situation in which all available

resources in the economy are employed
to produce goods and services

Full employment does not mean 100

percent of the working labor force. There
are always some people who are
voluntarily unemployed as a result of
being dissatisfied with their current jobs
and resigning to find another job.
 MACROECONOMIC GOALS
2. PRICE STABILITY

The objective of the nation is to keep its

inflation rate as low as possible
maintaining price stability.

Inflation occurs when there is an

increase in the overall price level.
Inflation can reduce the purchasing
power of consumers.
MACROECONOMIC GOALS
3. ECONOMIC GROWTH

To achieve economic growth, the

economy must be operating at
maximum capacity.

Economic growth refer to an increase

in the full production output level of
a nation over time
MACROECONOMIC GOALS
4. EQUITABLE DISTRIBUTION OF INCOME

Most of the nation try to narrow the gap

between the higher income and the lower
income groups. This is to ensure that all people
are equal in terms of the standard of living.

One of the method of achieving an equitable

distribution of income is taxation. When taxes
are imposed, the higher income groups pay a
higher tax to the government.