Macroeconomics Module 4

MACROECONOMICS
Bukidnon State University

Malaybalay City, Bukidnon
Daryl Matutes De Asis
1
FOREWORD
In this time of pandemic caused by COVID-19, the Office of the Director for
Satellite Campuses has initiated creating modules for our learners to amplify them
despite these unprecedented times. With the current condition of blended flexible
teaching and learning where the students have the opportunity to learn from home
more, we urged the necessity to develop appropriate and proper module material
intended for our students of the University as a whole.
In order to deliver the mode of instruction and learning for MACROECO-
NOMICS course, the module provides learning activities that allow students to be
motivated to participate in the entire learning process. It also encourages the latter
to develop and apply the 21st century learning skills through active collaborating
activities.
The module is guided with the framework of 5 E’s which will be shown and
introduced after this page for the students to be directed of their learning outcomes.
It is made easier and simple as well as entertaining for them to be fully engaged in
this time of crisis.
And lastly, this module is purposely created to guide our students of the Uni-
versity in preparation considering the competencies of the students to be developed
as well as in consonance with their capabilities.
2
Welcome Statement:
Good day learners!
Welcome to the Module of BACC 19-Macroeconomics. In this module, you will be compre-
hending the different basic concepts, theories, terminologies, and tools and techniques used by sev-
eral economists effectively in understanding the Macroeconomics in general contextualizing the
Philippine economic setting.
This module has four lessons and specifically you will be guided with the Five E’s represented
by their respective icons:
Engage You will be allotted with time to answer

pre-task activities as an overview of the learning
topics.
You will be given an opportunity and

Explore chance to have your own predetermined insights
on the topics. Some are required additional read-
ings and exploration of a video presentation with
transcription.
Explain This section will let you discuss your in-

sights from the input given.
Elaborate This section will give you emphasis on the

topics based on the input given and your percep-
tions of the shared insights.
Evaluate Lastly, after this module has been deliv-

ered to you, you will be directed to answer assess-
ments related to the topics presented.
3
BukSU VMGOs, Quality Policy, and Core Values 5
Course Syllabus 6
Module 1: Basic Concepts of Macroeconomics 7
Lesson 1: Aggregate Market Equilibrium, Demand and Supply:
Understanding Economic Conditions 10
Lesson 2: The Shifting of Aggregate Supply and Aggregate Demand 12
Shifts in Aggregate Demand 13
Shifts in Aggregate Supply 14
Module 2: The Effects of Inflation and Unemployment in the Economy 23
Lesson 3: Inflation and Unemployment: Causes and Effects 26
Effects of Inflation 27
Effects of Unemployment 29
Module 3: The National Income Accounting, Fiscal and Monetary Policy,
International Trade/Exchange Rates, and Economic and Development Growth 41
Lesson 4: The National Income 44
Fiscal Policy and Monetary Policy 46
International Trade and Exchange Rates 47
Module 4: Creating and Designing Student Portfolio for Macroeconomics 58
What is Portfolio? 59
Creating a Portfolio 60
4
University Mandate
The University shall primarily provide advanced education, higher technological, professional instruction
and training in the fields of education, arts and sciences, public, administration, information technology, ac-
countancy, law and other relevant fields of study. It shall also promote research and extension service, and pro-
vide progressive leadership in its areas of specialization .
BukSU Vision
A premiere institution of innovative and ethical leaders for sustainable development.
BukSU Mission
To develop competitive professionals who are committed to build a sustainable life for all through quality in-
struction, research, extension and production.
Quality Policy
BukSU is committed to the development, implementation and improvement of the QMS of the Uni-
versity. The importance of understanding, meeting, and enhancing stakeholder requirements is also recog-
nized. This is demonstrated through the statement of Quality Policy. BukSU commits to provide excellent
instruction, responsive research, sustainable extension and quality production for the highest satisfaction of
its stakeholders through continual improvement and adherence to applicable requirements To achieve this,
we shall:
1. Demonstrate academic excellence;
2. Harmonize quality assurance efforts;
3. Support International and Multicultural Student Services;
4. Produce research leaders who are able to initiate innovations in consonance with the mandates of
the university;
5. Promote production and utilization of research-based innovations, inventions and instructional
materials showcasing innovativeness and creativity;
6. Develop innovative leaders in extension;
7. Enhance the quality of Student Leadership Development;
8. Promote Sustainable Infrastructure Development and Functional Connectivity;
9. Provide an environment for excellence and quality; and
10. Utilize customer feedbacks for the continual improvement of the Quality Management System.
Core Values
Excellence, Professionalism, Integrity, Commitment, and Culture-Sensitivity.
5
Recalibrated Syllabus on MACROECONOMICS
(in times of COVID-19 A.Y. 2020-2021)
Course Code: BACC 19

Course Title: Macroeconomics
Course Credit: 3
Nominal Duration: 54 Hours
Prerequisite: None
Course Description:
The course is designed to provide an understanding of the causes and effects of infla-
tion, unemployment, fiscal and monetary policies, modes of taxation, international trade, na-
tional income, Gross Domestic Policy, and consumer development index.
Course Outcomes:
At the end of the course, the students are expected to:
CO1: Demonstrate understanding of the economic conditions on
aggregate market equilibrium, demand and supply due to
economic forces;
CO2: Analyze the causes and effects of inflation, and unemploy-
ment in the economy;
CO3: Analyze case studies about the National Income Accounting,
Fiscal and Monetary Policy, International Trade and Exchange
Rates .
CO4: Design a portfolio on Filipinos’ response to the cause and ef-
fects of inflation, unemployment, fiscal and monetary poli-
cies, modes of taxation, international trade, Gross National
Policy, Gross Domestic Policy, Development and Growth.
6
Module : Basic Concepts of Macroeconomics
Introduction:
Welcome to Module 1 of Macroeconomics. In this module we will be understanding the
basic concepts of Macroeconomics, factors affecting the behavior and performance of the econ-
omy as well as how we determine the level of economic activity in a society as a whole.
Module Outcome:
Demonstrate understanding of the economic conditions on aggregate market equilibrium,
demand and supply due to economic forces.
Specific Learning Outcomes:
At the end of the module, you are expected to:
1.1 Discuss the economic conditions of aggregate market equilibrium, demand and
supply forces in the economy.
1.2 Illustrate the shifts of aggregate demand and supply in a paper.
7
Let’s ready
to
ENGAGE!
Pre-Activity!
Instruction: Search and encircle the Macroeconomics terms. There are Seven (7) terms in the
box, hence, you have to strategize on how to achieve the goals by encircling all these terms
within FIVE (5) minutes. Please use a stopwatch or timer and crash-out the terms you have
searched or encircled.
Enjoy searching!
-AGGREGATE -SUPPLY -ECONOMY -MACRO

-MARKET -DEMAND -EQUILIBRIUM
S E P Y O R C A M
P R U I B R L I U
A G D E M A D Q I
G G M S T C N Y R
R A G B R V D L B
A S A R Q L E Y I
T U H D E G F P L
E P I N P G O S I
M P S A J K A M U
R L M M T A P T Q
K Y T E K R A M E
A N M D P L P U S
E C O N O M Y N M
8
Let’s Macroeconomics looks at the overall, big-picture scenario of the
economy. Put simply, it focuses on the way the economy performs as a
EXPLORE! whole and then analyzes how different sectors of the economy relate to
one another to understand how the aggregate functions.
For more readings: https://courses.lumenlearning.com/boundless-

economics/chapter/the-aggregate-demand-supply-model/
The context of
macroeconomics co-
vers also the aggregate Instruction: Provide what is asked
Activity 1!
market equilibrium, on the following questions.
the economic forces of
supply and demand
affecting the economic
conditions as a whole. 1. What are the Laws of Supply?
Aggregate: A mass,
assemblage, or sum of
particulars; something
consisting of elements
but considered as a
whole.
2. What are the Laws of Demand?
Supply: The amount

of some product that
producers are willing
and able to sell at a
given price, all other
factors being held con-
stant.
3. What is the graph all about? Explain.
Demand: The desire to

purchase goods and
services.
Source: https://courses.lumenlearning.com/boundless-economics/
chapter/the-aggregate-demand-supply-model/
Equilibrium: The mac-

roeconomic equilibri-
um is the point at
which the aggregate
supply intersects the
aggregate demand.
9
Let’s Lesson 1:
EXPLAIN! Aggregate Market Equilibrium, Demand and
Supply: Understanding Economic Conditions
Aggregate Market Equilibrium
Sho rtag e: Occur s

Aggregate market equilibrium is, strictly speaking, equilibrium in the
when the quantity de-
aggregated "product" markets, meaning that there are no economy-
manded for a good
wide shortages or surpluses of real production. However, aggregate market
exceeds the quantity
equilibrium also involves the aggregate financial and resource markets. As
supplied at a specific
such, aggregate market equilibrium actually comes in two forms: (1) long-run
price.
equilibrium, in which all three aggregated markets (product, financial, and re-
source) are in equilibrium and (2) short-run equilibrium, in which the product
and financial markets are in equilibrium, but the resource markets are not. The
reason for the difference is short-run price inflexibility that prevents equilibri-
Surplus: Occurs when um in the resource markets. In general, aggregate market equilibrium is identi-
the quantity supplied fied as the intersection of the aggregate demand curve and the aggregate sup-
of a good exceeds the ply curve.
quantity demanded at
For more readings: https://www.amosweb.com/cgi-bin/awb_nav.pl?
a specific price.
s=wpd&c=dsp&k=equilibrium,+aggregate+market#:~:text=In%20general%2C%
20aggregate%20market%20equilibrium,and%20the%20aggregate%20supply%
Supply and Demand
Determining the supply and demand for a good or services provides a model of price determination in a
market. In a competitive market, the unit price for a good will vary until it settles at a point where the quantity
demanded equals the quantity supplied. The result is the economic equilibrium for that good or service. There
are four basic laws of supply and demand. The laws impact both supply and demand in the long-run.
1. If quantity demand increases and supply remains unchanged, a shortage occurs, leading to a higher price
until the quantity demanded is pushed back to equilibrium.
2. If quantity demand decreases and supply remains unchanged, a surplus occurs, leading to a lower price un-
til the quantity demanded is pushed back to equilibrium.
3. If quantity demand remains unchanged and supply increases, a surplus occurs, leading to a lower price un-
til the quantity supplied is pushed back to equilibrium.4.
4. If quantity demand remains unchanged and supply decreases, a shortage occurs, leading to a higher price
until the quantity supplied is pushed back to equilibrium.
For more readings: https://courses.lumenlearning.com/boundless-economics/chapter/the-aggregate-demand-supply-model/
10
TAKEAWAYS:
Let’s
 Equilibrium is the price -quantity pair where the quan-
ELABORATE! tity demanded is equal to the quantity supplied.
 In the long-run, increases in aggregate demand cause

the output and price of a good or service to increase.
 In the long-run, the aggregate supply is affected only by

capital, labor, and technology.
 The aggregate supply determines the extent to which

Activity 2! the aggregate demand increases the output and prices
of a good or service.
Instruction: Create a Concept Map of Aggregate Market Equilibrium based on the presentation and discuss.
11
Let’s
Lesson 2:
EXPLAIN! The Shifting of Aggregate Supply and Aggregate
Demand
Aggregate Supply and Aggregate Demand
Aggregate Demand: Is
Equilibrium is the price-quantity pair where the quantity demanded is
the total demand for equal to the quantity supplied. It is represented on the AS-AD model where
final goods and ser- the demand and supply curves intersect. In the long-run, increases in aggre-
vices in an economy at gate demand cause the price of a good or service to increase. When the de-
a given time and price mand increases the aggregate demand curve shifts to the right. In the long-run,
the aggregate supply is affected only by capital, labor, and technology. Exam-
level. It is the demand
ples of events that would increase aggregate supply include an increase in
for the gross domestic population, increased physical capital stock, and technological progress. The
product (GDP) of a aggregate supply determines the extent to which the aggregate demand in-
country. creases the output and prices of a good or service.
When the aggregate supply and aggregate demand shift, so does the
point of equilibrium. The aggregate demand curve shifts and the equilibrium
Aggregate Supply: Is point moves horizontally along the aggregate supply curve until it reaches the
new aggregate demand point.
the total supply of
goods and services
that firms in a national
economy plan on sell-
ing during a specific Shifts in the Aggregate Supply and Aggregate Demand Model
time period. It is the
total amount of goods
and services that firms The aggregate supply-aggregate demand model uses the theory of supply
are willing to sell at a and demand in order to find a macroeconomic equilibrium. The shape of the
specific price level in aggregate supply curve helps to determine the extent to which increases in ag-
gregate demand lead to increases in real output or increases in prices. An in-
an economy.
crease in any of the components of aggregate demand shifts the AD curve to the
right. When the AD curve shifts to the right it increases the level of production
and the average price level. When an economy gets close to potential output, the
price will increase more than the output as the AD rises.
AD-AS Model: Shows

how equilibrium is
determined by supply
and demand. It shows
how increases and
decreases in output
For more readings: https://
and prices impact the
economy in the short- courses.lumenlearning.com/
boundless-economics/chapter/the-
run and long-run.
aggregate-demand-supply-model/
12
Shifts in the Aggregate Demand
Demand shocks are events that shift the aggregate demand curve. We
defined the AD curve as showing the amount of total planned expenditure on
domestic goods and services at any aggregate price level. As mentioned pre-
viously, the components of aggregate demand are consumption spending (C),
investment spending (I), government spending (G), and spending on exports
Demand Shocks: Are (X) minus imports (M). A shift of the AD curve to the right means that at least
events that shift the ag- one of these components increased so that a greater amount of total spending
gregate demand curve. would occur at every price level. This is called a positive demand shock. A
shift of the AD curve to the left means that at least one of these components
decreased so that a lesser amount of total spending would occur at every
price level. This is called a negative demand shock.
Positive Demand When consumers feel more confident about the future of the economy,
Shock: A shift of the they tend to consume more. If business confidence is high, then firms tend to
AD curve to the right spend more on investment, believing that the future payoff from that invest-
means that at least one ment will be substantial. Conversely, if consumer or business confidence
drops, then consumption and investment spending decline.
of these components
increased so that a
For more readings: https://courses.lumenlearning.com/wm -
greater amount of total macroeconomics/chapter/shifts-in-aggregate-demand/
spending would occur
at every price level.
A.
(A.) This graph shows an
equilibrium, E0, at a price level
Negative Demand of P0 and an output of Y0.
Shock: A shift of the
What do you think will happen
AD curve to the left
to the AD curve when there is
means that at least one
an increase/decrease in con-
of these components
sumer confidence or business
decreased so that a
B. confidence?
lesser amount of total
spending would occur
at every price level.
(B.) An increase in con-
sumer confidence or business
confidence can shift AD to the
right, from AD0 to AD1.
Cust omer/ Bu siness
Confidence: Occurs
C.
when customers or
businesses have the (C.) A decrease in consum-
tendency to consume er confidence or business confi-
more because of as- dence can shift AD to the left,
sured future economy. from AD0 to AD1.
13
Shifts in the Aggregate Supply
In this section we introduce supply shocks. Supply shocks are events that shift the aggregate
supply curve. We defined the AS curve as showing the quantity of real GDP producers will supply at any ag-
gregate price level. When the aggregate supply curve shifts to the right, then at every price level, a greater
quantity of real GDP is produced. This is called a positive supply shock. When the AS curve shifts to the left,
then at every price level, a lower quantity of real GDP is produced. This is a negative supply shock.
In the long run, the most important factor shifting the AS curve is productivity
growth. Productivity means how much output can be produced with a given quantity of inputs. One measure
of this is output per worker or GDP per capita. Over time, productivity grows so that the same quantity of labor
can produce more output. Higher prices for inputs that are widely used across the entire economy, such as la-
bor or energy, can have a macroeconomic impact on aggregate supply. Increases in the price of such inputs rep-
resent a negative supply shock, shifting the SRAS curve to shift to the left. This means that at each given price
level for outputs, a higher price for inputs will discourage production because it will reduce the possibilities for
earning profits.
For more readings: https://courses.lumenlearning.com/wm-macroeconomics/chapter/shifts-in-aggregate-supply/
Supply Shock: an event A.

that shifts both short run
and long run aggregate (A.) The original equilibrium
supply curves . E0 is at the intersection of AD
and SRAS0.
Productivity Growth:
Means how much out- B.
put can be produced
with a given quantity of (B.) A rise in productivity will
inputs. cause the curve to shift to the
right, leading to an increase in
real GDP (Y) and a decrease in
the aggregate price level (P).
Positive Supply Shock:
A rightward shift in the
SRAS and LRAS curves.
C.
Negative Supply Shock: (C.) A higher price for inputs

A leftward shift in the means that at any given price
SRAS and LRAS curves. level for outputs, a lower quan-
tity will be produced so aggre-
gate supply will shift to the left
from SRAS0 to SRAS1.
14
TAKEAWAYS:
Let’s
 In the long-run, increases in aggregate demand cause the
ELABORATE! output and price of a good or service to increase.
 In the long-run, the aggregate supply is affected only by

capital, labor, and technology.
 The aggregate supply determines the extent to which the

aggregate demand increases the output and prices of a
Activity 3! good or service.
Instruction: Draw and label the Graph that corresponds to the following questions.
1.) Suppose that there is a positive aggregate de- 2.) Suppose that there is a negative aggregate de-
mand shock. What graph most accurately show mand shock. What graph most accurately show
how this would affect the aggregate demand - ag- how this would affect aggregate demand - aggre-
gregate supply model? gate supply model?
3.) Suppose that there is a positive aggregate sup- 4.) Suppose that there is a negative aggregate sup-
ply shock. What graph most accurately show how ply shock. What graph most accurately show how
this would affect the aggregate demand - aggregate this would affect the aggregate demand - aggregate
supply model? supply model?
15
Great job! You are
Let’s now done with Module 1 of
EVALUATE! Macroeconomics!
Now, let’s assess

your learning with the fol-
lowing questions by an-
swering them respectively.
Kindly follow each of the instructions below.
Activity 4!
I- Identification:
:. Kindly write your answer legibly on the space provided before each number.
1. A mass, assemblage, or sum of particulars; something consisting of elements but considered

as a whole.
2. Occurs when the quantity demanded for a good exceeds the quantity supplied at a specific
price.
3. Is the total demand for final goods and services in an economy at a given time and price
level. It is the demand for the gross domestic product (GDP) of a country.
4. Are events that shift the aggregate demand curve.
5. An event that shifts both short run and long run aggregate supply curves.
6. A leftward shift in the SRAS and LRAS curves.
7. Occurs when customers or businesses have the tendency to consume more because of as-
sured future economy.
8. Shows how equilibrium is determined by supply and demand. It shows how increases and
decreases in output and prices impact the economy in the short-run and long-run.
9. Occurs when the quantity supplied of a good exceeds the quantity demanded at a specific
price.
10. The macroeconomic equilibrium is the point at which the aggregate supply intersects the
aggregate demand.
11. A rightward shift in the SRAS and LRAS curves.
12. A shift of the AD curve to the left means that at least one of these components decreased so
that a lesser amount of total spending would occur at every price level.
13. Is the total supply of goods and services that firms in a national economy plan on selling
during a specific time period. It is the total amount of goods and services that firms are
willing to sell at a specific price level in an economy.
14. The desire to purchase goods and services.
15. The amount of some product that producers are willing and able to sell at a given price, all
other factors being held constant.
16
Activity 5!
True or False:
:. Write True if the state is correct and False if otherwise on the space provided for.
1. In economics, the macroeconomic equilibrium is a state where aggregate supply
equals aggregate demand.
2. The aggregate supply determines the extent to which the aggregate demand increases
the output and prices of a good or service.
3. Determining the supply and demand for a good or services provides a model of price
determination in a market.
4. In a competitive market, the unit price for a good will vary until it settles at a point
where the quantity demanded equals the quantity supplied.
5. If quantity demand increases and supply remains unchanged, a shortage occurs, lead-
ing to a higher price until the quantity demanded is pushed back to equilibrium.
6. If quantity demand decreases and supply remains unchanged, a surplus occurs, lead -
ing to a lower price until the quantity demanded is pushed back to equilibrium.
7. If quantity demand remains unchanged and supply increases, a surplus occurs, lead-
ing to a lower price until the quantity supplied is pushed back to equilibrium.
8. If quantity demand remains unchanged and supply decreases, a shortage occurs, lead-
ing to a higher price until the quantity supplied is pushed back to equilibrium.
9. A short-run shift in aggregate demand can change the equilibrium price and output
level.
10. If the monetary supply decreases, the demand curve will shift to the left.
11. A shift in the SRAS curve to the right will result in a greater real GDP and downward
pressure on the price level, if aggregate demand remains unchanged.
12. Along with wages and energy prices, another source of supply shocks is the cost of
imported goods that are used as inputs for domestically-produced products.
13. In the long run, the most important factor shifting the AS curve is productivity
growth.
14. The shape of the aggregate supply curve helps to determine the extent to which in
creases in aggregate demand lead to increases in real output or increases in prices.
15. An increase in consumer confidence or business confidence can shift AD to the right,
from AD0 to AD1.
17
Activity 6!
Instruction: Graph and label the

shifts of Aggregate Demand and Ag-
gregate Supply using the illustration
from the right. Explain your answer in
2 to 3 sentences only.
1. An increase in consumer confidence or 2. A higher price for inputs means that at

business confidence can shift AD to the any given price level for outputs, a lower
right, from AD0 to AD1. What do you quantity will be produced so aggregate
think this will do to the equilibrium supply will shift to the left from SRAS0 to
point? SRAS1. What do you think this will do to
the equilibrium point?
18
Activity 7!
Instruction: Share us your insights

on what you have learned from this
module. Limit your answer to two (2)
paragraphs only.
19
RUBRICS
Short Answer
Criteria Outstanding Needs Improvement Unsatisfactory
5 Points 3 Points 1 Point
Content and develop- - Major points are stated - Major points are addressed - Major points are not
ment clearly - Responses are inadequate or clear.
- Responses are excel- do not address topic.
lent, timely and address
topic.
- Content is clear
Organization & Struc- -Structure of the paper - Structure of the paper is not - Organization and struc-
ture is clear and easy to fol- easy to follow. ture detract from the
low. - Transitions need improve- message.
- Transitions are logical ment. - Writing is disjointed
and maintain the flow and lacks transition of
of thought throughout thoughts.
the paper.
Grammar, Punctuation - Rules of grammar, - Paper contains few gram- - Paper contains numer-
& Spelling usage, and punctuation matical, punctuation and ous grammatical, punc-
are followed; spelling is spelling errors. tuation, and spelling er-
correct. rors.
Concept Mapping

Concepts -All significant concepts -Acceptable number of con- -insufficient concepts
(Knowledge) selected are and they cepts selected, with some re- selected relating to topic.
are clearly relate to the lationship to topic. -arrangement of con-
topic. -Arrangement of concepts cepts demonstrate a little
-Arrangement of the demonstrates some under- understanding of rela-
concepts demonstrates standing of relationship be- tionship between the.
complete and insightful tween them.
understanding of rela-
tionship between them.
Hierarchical Structure -All concepts connected -Some concepts connected in -Only a few concepts
(Communication) in a hierarchical struc- a hierarchical structure mov- connected in a hierar-
ture leading from more ing from one major ideas to chical structure.
complex to less com- minor ideas.
plex, and on to specific
concepts.
Linkages -All relationships indi- -Some relationships indicated -A few relationships in-
(Thinking) cated by connecting by connecting lines. dicated by connecting
lines -Some errors in the linking lines.
-All linking words are words. -Many errors in the link-
accurate and varied. ing words.
20
RUBRICS
Graphing and Labelling

Outstanding Needs Improvement Unsatisfactory
Criteria 5 Points 3 Points 1 Point
-Has correct labels and -Has correct labels for graph -Does not label axes of
Labels units of measure for axes, but does not have units graph or labels are incor-
graph axes. of measure. rect, unclear.
-All points are plotted -Axes are numbered evenly -Neither the X-axis or Y-
correctly and match up and in order, but are either axis points match the
Plotting of Points
with the data. number too high or too low. data.
-Points are connected -Points are connected from -Points are connected in
correctly from left to left to right, but 1-2 points are random manner. They
right with no mistakes. incorrect. Lines are crooked, are not plotted from left
Line
Lines are straight from curved. to right, but instead in
point to point. the order they were plot-
ted.
Module Insights

Content and develop- - Content is comprehen- Content is not comprehensive - Content is incomplete.
ment sive and accurate - Major points are addressed - Major points are not
- Major points are stated - Responses are inadequate or clear.
clearly do not address topic.
- Responses are excel-
topic.
- Content is clear
the paper.
correct. rors.
21
Great job!
You have finished Module 1: Basic Concepts of

Macroeconomics. I bet you are very excited for the next
Module. Please take time to review and read the refer-
ences, additional readings, and videos for Module 1. This
will greatly help you in understanding more the context
of Macroeconomics.
The next lesson would be on the effects of inflation

and unemployment in our economy.
Keep the track!
Module 1 References and Additional Readings:
 EQUILIBRIUM, AGGREGATE MARKET, AmosWEB Encyclonomic

WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2020. [Accessed:
August 5, 2020].
 https://courses.lumenlearning.com/wm-macroeconomics/chapter/shifts-in-aggregate-
supply/
 https://courses.lumenlearning.com/boundless-economics/chapter/the-aggregate-
demand-supply-model/
 https://www.amosweb.com/cgi-bin/awb_nav.pl?
s=wpd&c=dsp&k=equilibrium,+aggregate+market#:~:text=In%20general%2C%
20aggregate%20market%20equilibrium,and%20the%20aggregate%20supply%
20curve.&text=Aggregate%20expenditures%20exactly%20match%20real,the%
20quantity%20of%20resources%20supplied.
 Clifford, J. 2015. MACROeconomics 15 minute review, Macro Unit 1 (Video).
 https://youtu.be/UwAQRnpVMzI
 https://youtu.be/l6Udc6uDX8o
 https://www.youtube.com/watch?v=myeLTXMEhC4&t=65s
 https://www.youtube.com/watch?v=JBHbwtzHfDg&t=202s
22
: The Effects of Inflation and Unemployment
Module
in the Economy
Introduction:
Welcome to Module 2 of Macroeconomics. This module discusses and analyzes the caus-
es and effects of inflation and unemployment to the economy. This will also articulate the rela-
tionship of these factors and how they affect the economy as a whole.
Module Outcome:
Analyze the causes and effects of inflation, and unemployment in the economy;
2.1 Examine the causes and effects of inflation and unemployment.

2.2 Present an analytical paper regarding the effects of inflation and unemployment
to the economy.
23
Let’s ready
to
ENGAGE!
Pre-Activity!
Instructions:
Cut and collect pictures or any graphics portraying economic inflation and unemployment. Create
a collage and make your own title of this activity. Place your output in the box provided below.
24
Let’s It has often been the case that progress against inflation comes at
the expense of greater unemployment, and that reduced unemployment
EXPLORE! comes at the expense of greater inflation. This section looks at the record
and traces the emergence of the view that a simple trade-off between
these macroeconomic “bad guys” exists.
For more readings: https://2012books.lardbucket.org/books/

macroeconomics-principles-v2.0/s19-inflation-and-unemployment.html
Inflation :
Instruction: Provide what is asked
Is an increase in Activity 8!
for the following questions.
average price levels.
1. What causes inflation?

Unemployment:
Also referred to
as joblessness, occurs
when people are with-
out work and actively
seeking employment.
2. What causes unemployment?
3. What are the relationship between inflation and unemployment?
25
Let’s Lesson 3:
EXPLAIN! Inflation and Unemployment:
Causes and Effects
Inflation
Rate of Inflation : The

Inflation is a persistent increase in the general price level of goods and ser-
percent increase of vices in an economy over a period of time. Specifically, the rate of inflation is the
prices from the start to percent increase of prices from the start to the end of the given time period
the end of the given (usually measured annually). When the general price level rises, each unit of cur-
time period (usually rency buys fewer goods and services. Consequently, inflation reflects a reduction
in the purchasing power per unit of money – a loss of real value in the medium of
measured annually).
exchange and unit of account within the economy.
The decrease in purchasing power means that inflation is good for debtors
and bad for creditors. Since debtors usually pay back loans in a nominal amount,
Purchasing Power: they want to give up the least purchasing power possible. For example, if you
borrowed money and have to pay back P50,000.00 next year, you’d like that
The amount of
P50,000.00 to be worth as little as possible. Conversely, creditors don’t like infla-
goods and services tion because the money they are getting paid is can purchase less than if there
that can be bought were no inflation.
with a unit of currency
or by consumers.
Causes of Inflation
Money Supply: The

total amount of money When looking at individual goods, price changes may result from changes
(bills, coins, loans, in consumer preferences, changes in the price of inputs, changes in the price of
credit, and other liquid substitute or complement goods, or many other factors. When looking at the
instruments) in a par- inflation rate for an entire economy, however, these microeconomic factors are
ticular economy. relatively unimportant.
Instead, most economists agree that in the long run, inflation depends on
the money supply. Specifically, the money supply has a direct, proportional re-
lationship with the price level, so if, for example, the currency in circulation in-
Quantity Theory of
creased, there would be a proportional increase in the price of goods. To under-
Money: Sta te s
stand this, imagine that tomorrow, every single person’s bank account and sala-
that the general price
ry doubled. Initially we might feel twice as rich as we were before, but prices
level of goods and ser-
would quickly rise to catch up to the new status quo. Before long, inflation
vices is directly pro-
would cause the real value of our money to return to its previous levels. Thus,
portional to the
increasing the supply of money increases the price levels. This idea is known as
amount of money in
the quantity theory of money.
circulation, or money
supply. For more readings: https://courses.lumenlearning.com/boundless-economics/
chapter/defining-measuring-and-assessing-inflation/
26
Effects of Inflation
Unexpectedly high inflation tends to transfer wealth from creditors to

debtors and from the rich to the poor. Whether one regards inflation as a “good”
Nominal Amount: Is thing or a “bad” thing depends very much on one’s economic situation. Assum-
the face value, which is ing that loans must be paid back according to a nominal amount (i.e. the bor-
the amount repaid to rower must pay back P50,000.00 in one year), inflation is good for borrowers and
the bondholder at ma- bad for lenders. When there is inflation, the value of the money borrowers pay
turity. back is less.
In general, this means that those with savings in the form of currency or
Real Interest Rate: Is bonds lose money from inflation. The lower purchasing power of money erodes
the rate of interest an the value of currency, and inflation reduces the real interest rate earned on
investor, saver or lend- bonds. Those with negative savings (debt) or savings in the form of stocks, how-
er receives after allow- ever, are better off with higher inflation. Debtors find themselves paying a lower
ing for inflation. real interest rate than expected, and stocks tend to rise in value to reflect the in-
flation level. In demographic terms, this often manifests as a transfer from older
individuals, who are wealthier and tend to hold their savings in more conserva-
Deflation: Is a decrease tive assets such as cash and bonds, to younger individuals, who have more debt
in the general price lev- and tend to hold their savings in more aggressive assets such as stocks.
els of goods and ser-
vices.
IS/LM Model: Stands Deflation

for "investment-
savings" (IS) and
"liquidity preference-
Deflation is a decrease in the general price levels of goods and services. It
money supply" (LM) occurs when the inflation rate falls below 0%. When this happens, the nominal
that shows how the
prices of goods are falling on average and the purchasing power of money is
market for economic
increasing. Deflation is good for lenders and bad for borrowers: when loans are
goods (IS) interacts paid back, the cash is worth more. Thus, deflation discourages borrowing, and
with the loanable
by extension, consumption and investment today.
funds market (LM) or
money market. There are several theories about the causes of deflation. In the IS/LM
model, deflation is caused by a shift in the supply and demand curve for goods
and services. If there is a fall in how much the whole economy is willing to buy,
Deflationary Spiral: A for example, then the general demand curve shifts to the left and overall prices
situation where de- fall. Because the price of goods is falling, consumers have an incentive to delay
creases in price lead to purchases and consumption until prices fall further, which in turn reduces over-
lower production, all economic activity. Unemployment rises and investment falls, which in turn
which in turn leads to leads to further reductions in aggregate demand. This cycle of continuing infla-
lower wages and de- tion is called a deflationary spiral. Some economists believe that deflation is
mand, which leads to caused by a fall in the general level of demand, while others attribute it to a fall
further decreases in in the money supply.
price.
27
Let’s TAKEAWAYS:
 Inflation refers to the average changes in price econo-

ELABORATE!
my-wide, not the change in price in a particular in-
dustry. Further, inflation refers to the rate of change
in prices, not the level of prices at any one time.
 Most economists agree that in the long run, inflation

depends on the money supply.
 Unexpected inflation redistributes wealth from credi-

Activity 9!
tors to debtors.
 When deflation occurs, the general price level is fall-

ing and the purchasing power of money is increasing.
 Deflation discourages borrowing and investment be-

Instruction: Provide at least 3 causes of cause the real value of the money to be repaid will be
inflation and their effects to the economy.
higher than the real value of the money borrowed.
Write your answer legibly on the diagram
provided below. For more readings: https://courses.lumenlearning.com/
boundless-economics/chapter/defining-measuring-and-assessing
-inflation/
28
Unemployment
Unemployment, also referred to as joblessness, occurs when people are with-

out work and are actively seeking employment. During periods of recession, an
Labor Force: The col-
economy usually experiences high unemployment rates. There are many proposed
lective group of people
causes, consequences, and solutions for unemployment. Unemployment occurs
who are available for
when people are without work and are actively seeking employment. In an econo-
employment, i.e. in-
my, the labor force is the actual number of people available for work. Economists
cluding both the em-
use the labor force participation rate to determine the unemployment rate. Unem-
ployed and the unem-
ployment is measured in order to determine the unemployment rate. The rate is a
ployed.
percentage that is calculated by dividing the number of unemployed individuals
by the number of individuals currently employed in the labor force.
Unemployment Rate:
Is the percent of the
labor force that is job- Causes of Unemployment
less.
There are three reasons for unemployment which are categorizes as fric-
Frictional Unemploy- tional, structural, and cyclical unemployment. Frictional unemployment is the
ment: When people time period between jobs when a worker is searching for or transitioning from
being temporarily be- one job to another. It is sometimes called search unemployment and can be
tween jobs, searching voluntary based on the circumstances of the unemployed individual. Friction-
for new ones. al unemployment exists because both jobs and workers are heterogeneous,
and a mismatch can result between the characteristics of supply and demand.
Such a mismatch can be related to skills, payment, work-time, location, sea-
Structural Unemploy- sonal industries, attitude, taste, and a multitude of other factors. Structural
ment: A mismatch unemployment is a form of unemployment where, at a given wage, the quan-
between the require- tity of labor supplied exceeds the quantity of labor demanded, because there is
ments of the employers a fundamental mismatch between the number of people who want to work
and the properties of and the number of jobs that are available. The unemployed workers may lack
the unemployed. the skills needed for the jobs, or they may not live in the part of the country or
world where the jobs are available. It is generally considered to be one of the
“permanent” types of unemployment, where improvement if possible, will
only occur in the long run.
Cyclical Unemploy-
ment: A type of un- Of course, the economy may not be operating at its natural level of em-
empl oyment ex- ployment, so unemployment may be above or below its natural level. This is
plained by the de- often attributed to the business cycle: the expansion and contraction of the
mand for labor going economy around the long-term growth trend. During periods in the business
up and down with the cycle when the economy is producing below its long-run, optimum level,
business cycle. firms demand fewer workers and the result is cyclical unemployment. In this
case the long-run demand for labor is higher than the temporary demand, so
the rate of unemployment is higher than its natural rate.
29
Effects of Unemployment
Unemployment can have lasting impacts of individual people as well as the

economy as a whole.
Social: Within the economy, long-term unemployment increases the ine-

Poverty: The quality or
quality present in the economy and impedes long-run economic growth. Unem-
state of being poor or
ployment wastes resources and generates redistributive pressures and distortions
indigent; want or scar-
within the economy. When unemployment is high, the economy is not using all of
city of means of sub-
the available resources, specifically labor. Unemployment can also reduce the effi-
sistence; indigence;
ciency of the economy because unemployed workers are willing to accept em-
need.
ployment that is below their skill level.
Individual: For individual people, unemployment increases poverty, cre-

ates poor labor mobility, and impacts self-esteem. When individuals are unem-
Stagflation: Inflation ployed they are unable to meet their financial obligations. It is not uncommon for
accompanied by stag- social unrest and conflict that get worse during times of mass unemployment.
nant growth, unem-
ployment, or recession.
The Relationship Between Inflation and Unemployment
Disinflation: A de- The Phillips curve shows the inverse relationship between inflation and un-
crease in the inflation employment: as unemployment decreases, inflation increases. The Phillips curve
rate. relates the rate of inflation with the rate of unemployment. The Phillips curve ar-
gues that unemployment and inflation are inversely related: as levels of unemploy-
ment decrease, inflation increases. The relationship, however, is not linear. Graph-
ically, the short-run Phillips curve traces an L-shape when the unemployment rate
Philips Curve: A is on the x-axis and the inflation rate is on the y-axis.
graph that shows the
inverse relationship
between the rate of
Theoretical Phillips Curve:
unemployment and
The Phillips curve shows the in-
the rate of inflation in
verse trade-off between inflation
an economy.
and unemployment. As one in-
creases, the other must decrease. In
this image, an economy can either
experience 3% unemployment at
the cost of 6% of inflation, or in-
crease unemployment to 5% to
bring down the inflation levels to
2%.
30
Let’s TAKEAWAYS:
 Types of unemployment determine what the causes,

ELABORATE!
consequences, and solutions.
 Unemployment is calculated as a percentage by di-

viding the number of unemployed individuals by the
number of all the individuals currently employed in
the work force.
 Full employment represents a range of possible un-

Activity 10!
employment rates based on the country, time period,
and political biases.
 There are three types of unemployment: cyclical,

structural, and frictional.
Instruction: Provide at least 3 causes of  A.W. Phillips published his observations about the
unemployment and their effects to the
inverse correlation between wage changes and unem-
economy. Write your answer legibly on
ployment in Great Britain in 1958.
the diagram provided below.
For more readings: https://courses.lumenlearning.com/
boundless-economics/chapter/introduction-to-unemployment/
31
Great job! You are
Now, let’s assess

Activity 11!
I- Identification:
1. A graph that shows the inverse relationship between the rate of unemployment and the rate
of inflation in an economy.
2. Is an increase in average price levels.
3. A decrease in the inflation rate.
4. Also referred to as joblessness, occurs when people are without work and actively seeking
employment.
5. Inflation accompanied by stagnant growth, unemployment, or recession.
6. The percent increase of prices from the start to the end of the given time period (usually meas
ured annually).
7. The quality or state of being poor or indigent; want or scarcity of means of subsistence; indi
gence; need.
8. The amount of goods and services that can be bought with a unit of currency or by consum
ers.
9. A type of unemployment explained by the demand for labor going up and down with the
business cycle.
10. The total amount of money (bills, coins, loans, credit, and other liquid instruments) in a par
ticular economy.
11. A mismatch between the requirements of the employers and the properties of the unem
ployed.
12. States that the general price level of goods and services is directly proportional to the
amount of money in circulation, or money supply.
13. When people being temporarily between jobs, searching for new ones.
14. Stands for "investment-savings" (IS) and "liquidity preference-money supply" (LM) that
shows how the market for economic goods (IS) interacts with the loanable funds market (LM)
or money market.
15. Is the percent of the labor force that is jobless.
32
Activity 12!
True or False:
1. The relationship between inflation rates and unemployment rates is inverse. Graph
ically, this means the short-run Phillips curve is L-shaped.
2. The natural rate of unemployment is the hypothetical level of unemployment the econ
omy would experience if aggregate production were in the long-run state.
3. Structural unemployment is caused by mismatches between the skills offered by po

tential employees and those sought by employers.
4. Cyclical unemployment occurs whenever the economy is not operating at its full, long-
term potential.
5. Frictional unemployment is caused by an inability for workers and employers to find

each other immediately.
6. Policies to combat unemployment differ depending on the type of unemployment.
7. Unemployment occurs when people are without work and are actively seeking em
ployment.
8. The rate of unemployment is a percentage that is calculated by dividing the number of

unemployed individuals by the number of individuals currently employed.
9. Inflation is good for borrowers and bad for lenders because it reduces the value of the
money paid back to the lenders.
10. The inflation rate is built in to the nominal interest rate, which is the sum of the real
interest rate and expected inflation.
11. In general, this means that those with savings in the form of currency or bonds lose
money from inflation.
12. When deflation occurs, the general price level is falling and the purchasing power of
money is increasing.
13. Unexpectedly high inflation tends to transfer wealth from creditors to debtors and
from the rich to the poor.
14. When the inflation rate rises or falls unexpectedly, wealth is redistributed between
creditors and debtors.
15. During low periods in the business cycle, firms demand fewer workers and the result
is an unemployment level above the natural rate.
33
Activity 13!
Instruction: Present an analytical paper on the effects of Inflation. Limit your answer in three paragraphs only. An
analytical paper is a type of academic paper which aims to analyze a specific topic. You student must introduce
both pros & cons on the given issue. And based from the arguments provide your own conclusion.
The Effects of Inflation
34
Activity 14!
Instruction: Present an analytical paper on the effects of Inflation. Limit your answer in three paragraphs only. An
analytical paper is a type of academic paper which aims to analyze a specific topic. You student must introduce
both pros & cons on the given issue. And based from the arguments provide your own conclusion.
The Effects of Unemployment
35
Activity 15!

paragraphs only.
36
RUBRICS
Collage-Making
Criteria
All of the graphics or Most of the graphics or ob- None of the graphics or
objects used in the col- jects used in the collage re- objects reflects student
lage reflect creativity in flect student creativity in creativity.
Creativity their display. Student their display. Student only
utilizes numerous mate- uses pictures to depict the
rials for texture. themes, symbols, &/or char-
acters.
Graphics are cut to an 1-2 graphics are lacking in Graphics are not an ap-
appropriate size, shape design or placement. There propriate size shape.
and are arranged neat- may be a few smudges or Glue marks evident.
ly. Care has been taken glue marks. No tape marks Most of the background
Design
to balance the pictures are obvious from the front. is showing. It appears
across the area. Items little attention was given
are glued neatly and to designing the collage.
securely.
Titles and text were Titles and text were written Titles and/or text are
written clearly and clearly and were easy to read hard to read, even when
were easy to read from close-up. Possible minor the reader is close.
Title and Text
a distance. NO spelling errors. Spelling/Grammar er-
SPELLING OR GRAM- rors are distracting from
MAR ERRORS! the project.
The student gives a rea- The student gives a reasona- The student's explana-
sonable explanation of ble explanation of how most tions are weak and illus-
Attention to Theme how every item in the items in the collage are relat- trate difficulty under-
collage is related to the ed to the book. standing how to relate
book. items to the book.
Short Answer

topic.
- Content is clear
the paper.
correct. rors.
37
RUBRICS
Cause and Effect

Criteria
-Extremely clear de- -Clear description of cause- -Minimal description of
scription of the cause- and-effect relationships cause-and-effect relation-
Clear Description
and-effect relationships ships
-No capitalization, -One to three capitalization, -More than six capitali-

spelling, or punctuation spelling, or punctuation er- zation, spelling, or punc-
Language Convention errors rors tuation errors
Analytical Paper

Criteria
Focus/Clarity -The paper is clearly -The paper addressed in a -The paper did not ad-
addressed in a highly sufficient manner. Clarity is dressed and unclear or
articulate manner sufficient. No more than one unfocused manner.
comment is not directly relat-
ed to the question(s).
Organization -Constructed in an orga- -Adequately organized alt- - Organization detract

nized, concise, logical hough paragraphs could from the message.
manner. Transition sen- have been better constructed - Writing is disjointed
tences between para- or developed. May exhibit
graphs are used. Essay one of the following prob-
consists of more than lems: problems with flow of
one paragraph. Para- sentences within paragraph,
graphs build on and use of transition sentences
support the thesis state- between paragraphs, para-
ment. graph breaks may not corre-
spond to shifts in topic.
Content -Answered with superi- -Depth of thought is ade- -Content lack depth of
or depth of reasoning quate although could have thought.
and thought. Response been further developed.
indicates that applicant Could have addressed phi-
is familiar with or en- losophy and/or core values
gaged in "leg work" to and attitudes of the OT pro-
become familiar to ad- fession as well as Belmont
dress philosophy and/ program in a more thorough
or core values and atti- manner.
tudes of the OT profes-
sion as well as Bel-
mont's program.
Grammar -Free from grammatical -More than two errors in -Significant Number of
and spelling errors. spelling or grammar. errors in spelling or
grammar.
38
RUBRICS
Module Insight

topic.
- Content is clear
the paper.
correct. rors.
39
Great job!
You have finished Module 2: The effects of infla-

tion and unemployment in the economy. You are now
closer to becoming a real analyst in the macroeconomics
world. Please take time to review and read the refer-
ences, additional readings, and videos for Module 2.
This will greatly help you in understanding more the
causes and affects of inflation and unemployment to the
economy.
The next lesson would be on the the National In-

come Accounting, Fiscal and Monetary Policy, Interna-
tional Trade/Exchange rates and Economic and Devel-
opment Growth.
 https://2012books.lardbucket.org/books/macroeconomics-principles-v2.0/s19-inflation-
and-unemployment.html
 https://courses.lumenlearning.com/boundless-economics/chapter/defining-measuring-
and-assessing-inflation/
 https://courses.lumenlearning.com/boundless-economics/chapter/introduction-to-
unemployment/
 https://courses.lumenlearning.com/boundless -economics/chapter/measuring-
unemployment/
 https://courses.lumenlearning.com/boundless-economics/chapter/understanding-
unemployment/
 https://courses.lumenlearning.com/boundless-economics/chapter/the-relationship-
between-inflation-and-unemployment/
40
: The National Income Accounting, Fiscal and
Module Monetary Policy, International Trade/
Exchange Rates, and Economic and Develop-
ment Growth
Introduction:
Welcome to Module 3 of Macroeconomics. This module focuses on the National Income
Accounting, Fiscal and Monetary Policy, International Trade/Exchange rates and Economic
and Development Growth. You will be analyzing case studies as well pertaining their impacts
to our economy.
Module Outcome:
Analyze case studies about the National Income Accounting, Fiscal and Monetary Policy,
International Trade and Exchange rates.

3.1 Analyze case studies on Fiscal and Monetary Policy, and international Trade and
Exchange Rates.
41
Let’s ready
to
ENGAGE!
Pre-Activity!
Instructions: Below is a list of top 10 currencies that Philippines are trading. Subsequently,
this currency rates table lets you compare an amount in Philippine Peso to all other currencies. Supply
the following peso to currency and vice versa conversion and explain its implication.
Philippine Peso Exchange Rates Table
Currency Peso to Currency Conversion Currency to Peso Conversion

US Dollar
Euro
British Pound
Indian Rupee
Australian Dollar
Canadian Dollar
Singapore Dollar
Swiss Franc
Malaysian Ringgit
Japanese Yen
Implication/s:
42
Let’s National income accounting represents the process of working out
measures of a country’s income and production such as gross domestic
EXPLORE! product (GDP), gross national product/income (GNP), net national
product (NNP), disposable personal income, etc. It can be argued that
lack of such numbers was what worsened the Great Depression.
For more reading: https://xplaind.com/246946/national-income-accounting
National Income Ac-

counting: Used to de-
termine the level of Instruction: Provide what is asked
economic activity of a Activity 16! for the following questions.
country.
Gross Domestic Prod-

uct: Is a measure of 1. What is the difference between GDP and GNP as to their scope ?
total production that
takes place inside the
border of a country.
Gross National
Product/Income: Is the
total income earned by
the residents of a coun-
try.
2. What is the difference between Import and Export?
Net National Product:

Which equals gross
national product (GDP)
minus depreciation D.
Depression: A long
and severe recession in
an economy or market.
3. Assuming that Philippines has the following data for the year 2019 in millions:
*Personal Consumption Expenditure (P35,000)
Personal Income: Is *Private Investment (P20,500) Answer:

the gross amount at-
*Government Spending (P50,000)
tributable to residents
of a country. It is the *Exports (P30,000)
sum of all incomes in *Imports (P10,500)
the hand of individu-
How much is the National Income for 2019?
als.
43
Let’s
Lesson 4:
EXPLAIN!
The National Income
National Income
No serious analysis of an economy can be conducted if we do not have num-

bers about total production, employment, inflation, etc. Reliable, relevant and recent
National Income Ac- numbers are critical in formulating fiscal and monetary policies that would encour-
counting Identity: Is age growth while preserving stability. It can be argued that lack of such numbers
an equation that was what worsened the Great Depression. It is no coincidence that elaborate system
shows relationship of national income accounting was developed during the Great Recession and
between an economy’s World War 2.
total income/expense
and its different cate-
gories.
National Income Accounting Identity
National income accounting identity is an equation that shows relationship

between an economy’s total income/expense and its different categories i.e. per-
National income Ac-
sonal consumption expenditure (C), private investment (I), government spending
counting Equation:
(G) and net exports i.e. exports (X) minus imports (M).
Y =C+ I +G + (X- M)
The relationship can be written as follows:
Personal consumption
Y =C+ I +G + (X- M)
expenditure (C), pri-
vate investment (I), It is to national income accounting what assets (A) = liabilities (L) + equity
government spending (E) is to business accounting.
(G) and net exports i.e.
exports (X) minus im-
ports (M). Gross National Product
The most important number produced by the national income accounting is

Nominal GDP: Which the gross domestic product (GDP), which is the market value of all final goods and
is value of production services produced within geographical boundaries of a country. GDP is a measure
based on current prices. of total production that takes place inside the border of a country. It also a measure
of total expenses incurred on final goods and services and also a measure of total
income. This is due to the circular flow of income i.e. total income in an economy
equals total expense.
Real GDP: Is the infla-
There are two variants of GDP: nominal GDP which is value of production
tion-adjusted measure
based on current prices and real GDP is the inflation-adjusted measure of GDP.
of GDP.
All other indicators of national income are derived from GDP.
44
GDP Per Capita
GDP per capita means the average income earned by a person in a country. It
is calculated by dividing total GDP by the country’s population. Total gross domes-
tic product is not comparable across economies because their size differ depending
on the resources available to them such as land, population, etc. but the GDP per
capita is a standardized measure which enables comparison of standard of life across
GDP Per Capita: countries possible.
Means the average
income earned by a
person in a country. It Gross National Product
is calculated by divid-
ing total GDP by the
Gross national product (also called gross national income) is the total income
country’s population.
earned by the residents of a country. It equals gross domestic product (GDP) plus
income earned by a country’s residents abroad (R) minus income earned by foreign-
ers in a country (P):
Gross National Prod- GNP =GDP+R -P
uct: It equals gross
domestic product While GDP measures the income earned within geographical boundaries of a
(GDP) plus income country, GNP calculates the income earned by a country’s residents/nationals.
earned by a country’s
residents abroad (R)
minus income earned Net National Product
by foreigners in a
country (P):
Income generated by a country is achieved on the back of significant invest-
GNP =GDP+R -P ment in infrastructure i.e. roads, bridges, etc. which must be maintained. If we are
interested in finding out the income generated net of such charge for periodic
maintenance of such infrastructure, we calculate net national product (NNP) which
equals gross national product (GDP) minus depreciation D.
Net National Product:
which equals gross NNP=GNP-D
national product (GDP) National income (NI) is most comprehensive measure of total income earned
minus depreciation D. by residents of a country. It is approximately equal to net national product (NNP)
NNP=GNP-D except for an adjustment for statistical discrepancy.
Personal Income
Personal Income:
PI=NI-IDT-CP- Personal income (PI) equals national income minus indirect taxes (IDT) such
NETI+IA+TP-SS as sales tax, VAT minus corporate profits (CP) minus net interest (NETI) plus in-
come from assets (such as dividends, interest payments, etc. (IA) plus transfer pay-
ments i.e. amount paid by government to people with low incomes (TP) minus so-
cial security contribution made by people (SS).
PI=NI-IDT-CP-NETI+IA+TP-SS
45
Fiscal Policy
Fiscal policy is a form of economic policy that involves changing govern-

ment spending and taxes in order to achieve growth while keeping inflation in
check. It is also termed as discretionary fiscal policy.
Together with monetary policy, fiscal policy tools are used to keep the
Fiscal Policy: Is a form economy steady and save it, as much as possible, from ups and downs. While
of economic policy monetary policy is implemented by the central bank, fiscal policy is implemented
that involves changing by the government. Since fiscal policy is based on legislation, it typically takes lot
government spending more time in affecting the economy as compared to monetary policy.
and taxes in order to
When the economy is in facing recessionary pressures, the government
achieve growth while
provides stimulus to the economy by either decreasing taxes or increasing its ex-
keeping inflation in
penditures or taking both the steps simultaneously. On the other hand, if the
check.
economy is facing inflationary pressures, the government attempts to reduce in-
flation by either increasing taxes or decreasing its expenditures or doing both.
For more readings: https://xplaind.com/729741/fiscal-policy
Monetary Policy: Is a
form of economic poli- Monetary Policy
cy that involves
changing money sup-
ply in order to change
cost of borrowing Monetary policy is a form of economic policy that involves changing
which in turn changes money supply in order to change cost of borrowing which in turn changes infla-
inflation rate, growth tion rate, growth rate and unemployment rate. Together with fiscal policy, mon-
rate and unemploy- etary policy is used to save the economy from severe ups and downs.
ment rate.
Monetary policy is implemented by the central banks (in Philippines, The
Bangko Sental ng Pilipinas). It is relatively more responsive than the fiscal poli-
cy because central banks can react to economic changes more quickly than the
government and the legislature.
When the economy is under recessionary pressures, the central bank in-
Bangko Sentral ng Pil- creases the money supply which in turn decreases the cost of borrowing. Low
ipinas (BSP): Is the cost of borrowing stimulates consumption and investment which increases
central bank of the Re- GDP. Higher investment by businesses reduces unemployment rate and all this
public of the Philip- helps the economy move out of recession. On the other hand, when the econo-
pines. my is under inflationary pressures, the central bank decreases money supply
which increases cost of borrowing. Higher cost of borrowing dampens con-
sumption and investment which reduces inflation.
For more readings: https://xplaind.com/374183/monetary-policy
46
International Trade
International trade allows countries to expand their markets for both

goods and services that otherwise may not have been available domestically.
As a result of international trade, the market is more competitive which re-
sults in more competitive pricing which brings a cheaper product home to the
International Trade: consumer.
Is the exchange The fundamental truth is that international trade was key to the rise of
of goods and services the global economy where supply and demand, and therefore prices, both af-
between countries. fect and are affected by global events. Political change in Asia, for example,
could result in an increase in the cost of labor, thereby increasing the manufac-
turing costs for an American sneaker company based in Malaysia, which
would then result in an increase in the price charged at your local mall. A de-
crease in the cost of labor, on the other hand, would likely result in you having
to pay less for your new shoes. A product that is sold to the global market is
called an export, and a product that is bought from the global market is
Export: Are goods and
an import. Imports and exports are accounted for in a country's current ac-
services that are pro-
count in the balance of payments.
duced in one country
and sold to buyers in Global trade allows wealthy countries to use their resources—whether
another. labor, technology or capital—more efficiently. Since countries are endowed
with different assets and natural resources (land, labor, capital, and technolo-
gy), some countries may produce the same good more efficiently and there-
fore sell it more cheaply than other countries. If a country cannot efficiently
produce an item, it can obtain the it by trading with another country that can.
This is known as specialization in international trade.
Import: Refers to a
For more readings: https://www.investopedia.com/insights/what-is-international-
product or service pro-
trade/
duced in abroad that is
purchased in your
home country.
Exchange Rates
An exchange rate is the value of one nation's currency versus the currency of
Exchange Rates: Is the another nation or economic zone.
value of a nation's cur-
Most exchange rates are free-floating and will rise or fall based on supply and
rency in terms of the
demand in the market.
currency of another
nation or economic Some currencies are not free-floating and have restrictions.
zone.
For more readings: https://www.investopedia.com/terms/e/exchangerate.asp
47
Let’s TAKEAWAYS:
 Fiscal policy is a form of economic policy that in-

ELABORATE!
volves changing government spending and taxes in
order to achieve growth while keeping inflation in
check. It is also termed as discretionary fiscal policy.
 Monetary policy is a form of economic policy that

involves changing money supply in order to change
cost of borrowing which in turn changes inflation
Activity 17! rate, growth rate and unemployment rate. Together
with fiscal policy, monetary policy is used to save the
economy from severe ups and downs.
 Trading globally gives consumers and countries the

opportunity to be exposed to goods and services not
Instruction: Based on the discussion of
available in their own countries, or which would be
this module, provide us your understand-
more expensive domestically.
ing by answering the following questions.
Limit your answer in one paragraph with  Most exchange rates are free-floating and will rise or
3-4 sentences only. fall based on supply and demand in the market.
1. What is the difference between Fiscal and Monetary Policy?
1. How does Exchange Rates affect the country’s economy?
48
Great job! You are
Now, let’s assess

Activity 18!
I- Identification:
1. Is a measure of total production that takes place inside the border of a country.
2. Used to determine the level of economic activity of a country.
3. Which equals gross national product (GDP) minus depreciation D.
4. Is the total income earned by the residents of a country.
5. Is the gross amount attributable to residents of a country. It is the sum of all incomes in the
hand of individuals.
6. Is the inflation-adjusted measure of GDP.
7. Personal consumption expenditure (C), private investment (I), government spending (G) and
net exports i.e. exports (X) minus imports (M).
8. Which is value of production based on current prices.
9. Means the average income earned by a person in a country. It is calculated by dividing total
GDP by the country’s population.
10. A long and severe recession in an economy or market.
11. It equals gross domestic product (GDP) plus income earned by a country’s residents abroad
(R) minus income earned by foreigners in a country (P):
12. which equals gross national product (GDP) minus depreciation D.
13. Is an equation that shows relationship between an economy’s total income/expense and its
different categories.
14. Is a form of economic policy that involves changing government spending and taxes in order
to achieve growth while keeping inflation in check.
15. Is a form of economic policy that involves changing money supply in order to change cost of
borrowing which in turn changes inflation rate, growth rate and unemployment rate.
49
Activity 19!
True or False:
1. An accurate measurement of the economy’s performance is also important to private
businesses because failure to do that can lead to wrong decision making.
2. The level of economic activity that is taking place in an economy is vitally important.
3. The more of these goods and services that the economy produces, the more we will
have available for consumption and the better off we will be.
4. National income accounts provide information on the pattern of economic activity.
5. There is a continuous flow of goods and payments between the producers of goods
and services, which we call businesses, and individuals.
6. Both monetary and fiscal policy are macroeconomic tools used to manage or stimulate
the economy.
7. Monetary policy addresses interest rates and the supply of money in circulation, and it
is generally managed by a central bank.
8. Fiscal policy addresses taxation and government spending, and it is generally deter
mined by government legislation.
9. Monetary policy and fiscal policy together have great influence over a nation's econo
my, its businesses, and its consumers.
10. Central banks typically have used monetary policy to either stimulate an economy or
to check its growth.
11. Aside from factors such as interest rates and inflation, the currency exchange rate is
one of the most important determinants of a country's relative level of economic
health.
12. A higher-valued currency makes a country's imports less expensive and its exports
more expensive in foreign markets.
13. Exchange rates are relative and are expressed as a comparison of the currencies of
two countries.
14. When the economy is in facing recessionary pressures, the government provides
stimulus to the economy.
15. Monetary policy is implemented by the central banks (in Philippines, The Bangko
Sental ng Pilipinas).
50
CASE STUDY ANALYSIS
Activity 20!
Instruction: Read the following case and supply the following questions.
The Global Financial Crisis in 2008-2009

The Global Financial Crisis of 2008-2009 refers to the massive financial crisis the world faced from 2008
to 2009. The financial crisis took its toll on individuals and institutions around the globe, with millions of
American being deeply impacted. Financial institutions started to sink, many were absorbed by larger enti-
ties, and the US Government was forced to offer bailouts to keep many institutions afloat. The crisis, often
referred to as “The Great Recession,” didn’t happen overnight. There were many factors present leading up to
the crisis, and their effects linger to this day. Let’s take a look at a brief outline of the Global Financial Crisis of
2009-2009.
The Housing Market Bubble

The foundation of the global financial crisis was built on the back of the housing market bubble that
began to form in 2007. Banks and lending institutions offered low interest rates on mortgages and encouraged
many homeowners to take out loans that they couldn’t afford. With all the mortgages flooding in, lenders cre-
ated new financial instruments called mortgage-backed securities (MBS), which were essentially mortgages
bundled together that could then be sold as securities with minimal risk load due to the fact that they were
backed by credit default swaps (CDS). Lenders could then easily pass along the mortgages – and all the risk.
Outdated regulations that weren’t rigorously enforced allowed lenders to get sloppy with underwriting,
meaning the actual value of the securities couldn’t be established or guaranteed.
The Bubble Bursts

Banks began to lend recklessly to families and individuals without true means to follow through on the
mortgages they’d been granted. Such high-risk (subprime) loans were then inevitably bundled together and
passed down the line. As the subprime mortgage bundles grew in number to an overwhelming degree, with a
large percentage moving into default, lending institutions began to face financial difficulties. It led to the dis-
mal financial conditions around the world during the 2008-2009 period and continued for years to come.
The Aftermath of the Global Financial Crisis of 2008-2009

Many who took out subprime mortgages eventually defaulted. When they could not pay, financial in-
stitutions took major hits. The government, however, stepped in to bail out banks. The housing market was
deeply impacted by the crisis. Evictions and foreclosures began within months. The stock market, in response,
began to plummet and major businesses worldwide began to fail, losing millions. This, of course, resulted in
widespread layoffs and extended periods of unemployment worldwide. Declining credit availability and fail-
ing confidence in financial stability led to fewer and more cautious investments, and international trade
slowed to a crawl. Eventually, the United States responded to the crisis by passing the American Recovery
and Reinvestment Act of 2009, which used an expansionary monetary policy, facilitated bank bailouts and
mergers, and worked towards stimulating economic growth.
51
1. What is the case all about? Provide substantial facts of the case.
2. What is the problem of the case? How did it occur?
3. What where the role/s of Monetary Policy in this case? The Fiscal Policy?
52
4. How were international trading and exchange rates affected during the 2008-2009 global financial crisis?
5. Provide at least three (3) alternative courses of action.
6. Based on the alternative courses of action, what is your best recommendation for the case?
53
Activity 21!

paragraphs only.
54
RUBRICS
Short Answer

topic.
- Content is clear
the paper.
correct. rors.
Case Analysis

Criteria
Answer is appropriate Answer is appropriate to the Content unrelated to
to the question. Content question. Content may have question.
Content is factually correct. one or two factual errors.
Clear sense of order. May lack a proposition sen- Lacks clear organization-
Begins with a topic sen- tence, but points are present- al plan. Reader is con-
tence. Supporting ed in a logical progression. fused.
Organization points are presented in
a logical progression.
Develops each point Each point supported with Statements are unsup-
with may specific de- some details and evidence. ported by any detail or
Development tails. Answers question All important points includ- explanation. Repetitious,
completely. ed. incoherent, illogical
development.
Uses technical or scien- Accurate word choice. No Limited vocabulary; er-
tific terminology appro- more than 2 major errors rors impair communica-
Use of Language priately and correctly. and a few minor errors. tion.
No major grammatical
or spelling errors.
55
RUBRICS
Module Insight

topic.
- Content is clear
the paper.
correct. rors.
56
Great job!
You have finished Module 3: The National Income

Accounting, Fiscal and Monetary Policy, International
Trade/Exchange rates and Economic and Development
Growth.
I hope you have enjoyed this module as you have

actively participated on the different activities. And
now, you are now down to your next and last module
for this course!
Prepare yourself as you will be making a portfolio

of insights and learnings covering all the modules you
had. Enjoy the last module!
 https://www.x-rates.com/table/?from=PHP&amount=1
 https://xplaind.com/729741/fiscal-policy
 https://xplaind.com/374183/monetary-policy
 https://www.investopedia.com/insights/what-is-international-trade/
 https://www.investopedia.com/terms/e/exchangerate.asp
 https://corporatefinanceinstitute.com/resources/knowledge/finance/2008-2009-global-
financial-crisis/#:~:text=Summary%3A,that%20bundled%20high%2Drisk%20loans.
57
: Creating and Designing Student Portfolio for
Module
Macroeconomics
Introduction:
Welcome to Module 4 of Macroeconomics. This module will let you create and design
your portfolio as reflection of the effects of the topics discussed more particularly on cause and
effects of inflation, unemployment, fiscal and monetary policies, modes of taxation, interna-
tional trade, Gross National Policy, Gross Domestic Policy, Development and Growth.
Module Outcome:
Design a portfolio on Filipinos’ responses to the cause and effects of inflation, unemploy-
ment, fiscal and monetary policies, modes of taxation, international trade, Gross National Poli-
cy, Gross Domestic Policy, Development and Growth.
4.1 Make a reflection papers on the topics discussed.

4.2 Organized the evaluated and revised documents regarding the different topics
discussed.
58
What is a Portfolio?
Portfolios come in many forms, from notebooks filled with documents, notes, and graphics
to online digital archives and student-created websites, and they may be used at the elementary,
middle, and high school levels. Portfolios can be a physical collection of student work that in-
cludes materials such as written assignments, journal entries, completed tests, artwork, lab re-
ports, physical projects (such as dioramas or models), and other material evidence of learning
progress and academic accomplishment, including awards, honors, certifications, recommenda-
tions, written evaluations by teachers or peers, and self-reflections written by students. Portfolios
may also be digital archives, presentations, blogs, or websites that feature the same materials as
physical portfolios, but that may also include content such as student-created videos, multimedia
presentations, spreadsheets, websites, photographs, or other digital artifacts of learning.
A student portfolio is a compilation of academic work and other forms of educational evi-
dence assembled for the purpose of (1) evaluating coursework quality, learning progress, and
academic achievement; (2) determining whether students have met learning standards or other
academic requirements for courses, grade-level promotion, and graduation; (3) helping students
reflect on their academic goals and progress as learners; and (4) creating a lasting archive of aca-
demic work products, accomplishments, and other documentation.
The following are the benefits for both educators and students when creating a portfolio:
 Student portfolios are most effective when they are used to evaluate student learning
progress and achievement. When portfolios are used to document and evaluate the
knowledge, skills, and work habits students acquire in school, teachers can use them to
adapt instructional strategies when evidence shows that students either are or are not
learning what they were taught.
 Portfolios can help teachers monitor and evaluate learning progress over time. Tests and
quizzes give teachers information about what students know at a particular point in time,
but portfolios can document how students have grown, matured, and improved as learn-
ers over the course of a project, school year, or multiple years.
 Portfolios help teachers determine whether students can apply what they have learned
to new problems and different subject areas. A test can help teachers determine, for ex-
ample, whether students have learned a specific mathematical skill.
 Portfolios can improve communication between teachers and parents. Portfolios can also
help parents become more informed about the education and learning progress of their
children, what is being taught in a particular course, and what students are doing and
learning in the classroom.
59
Creating a Portfolio?
A student portfolio is a collection of a student's work, both in and out of the classroom, and
it enables educators to monitor students' progress and achievement over time. For this module,
you are required to create and design your own portfolio following the guidelines below:
1. You may opt to create and design your portfolio either paper or digital compilation
2. Your portfolio should observe good cover page and Title.
3. Provide Table of Contents.
4. Provide a preface, acknowledgements, and introduction.
5. The content of the portfolio shall be the reflection papers for the following topics:
a.) economic conditions on aggregate market equilibrium.
b.) demand and supply due to economic forces.
c.) causes and effects of inflation in the economy.
d.) causes and effects of unemployment in the economy.
e.) National Income Accounting.
f.) Fiscal and Monetary Policy.
g.) Trade and Exchange Rates.
h.) Learning insights every module.
i.) Complete graded activities/assessments.
5. Lastly, be creative in designing your portfolio.
Note: Please submit the Portfolio on/before the set deadline.
60
RUBRICS
Portfolio

Reflections shows reflections show

Reflection reveals
Some insights Little insights
Strong insights
Reflections about what to improve and about what areas to im-
about what to improve
indicates reasonable goals or prove and lack goals or
and future goals
future the future
Student has a Student has

Student compiled
complete incomplete
Completeness of the some
compilation of output, compilation of output,
Portfolio Of output, assignment, quiz-
assignment, quiz- assignment, quizzes, oth-
zes, other related work
zes, other related work er related work
Content and mechanics

Content and mechanics
Content and mechanics show show a
show Strong control
a little need Of improvement significant need
Content and Mechanics (neatness, creativity) of
in the final prod- Of improvement for
the final prod-
uct (portfolio) the final product
uct (portfolio)
(portfolio)
The final output shows The final output shows little The final output shows
Creativity technicalities in its form technicalities in its form and less technicalities in its
and design. design. form and design.
61
Great job!
You have finished the last Module for this course! I

am looking forward that you will be able to apply what
you have learned in this course as you will go on to your
next journey of this academic.
We had made it! Thank you for your participation

and incomparable efforts in pursuing this course. You
are now a few steps closer to your goal.
Continue to be passionate and dedicated!
 https://www.edglossary.org/portfolio/
 https://www.youtube.com/watch?v=E79aDmWd-NY
 https://www.scribd.com/document/412826867/rubrics-on-portfolio-xls
 https://www.thoughtco.com/steps-building-a-student-portfolio-4172775
62

Macroeconomics Module 4

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MACROECONOMICS

Bukidnon State University

Daryl Matutes De Asis

Engage You will be allotted with time to answer

You will be given an opportunity and

Explain This section will let you discuss your in-

Elaborate This section will give you emphasis on the

Evaluate Lastly, after this module has been deliv-

Module 1: Basic Concepts of Macroeconomics 7

Lesson 1: Aggregate Market Equilibrium, Demand and Supply:

Understanding Economic Conditions 10

Lesson 2: The Shifting of Aggregate Supply and Aggregate Demand 12

Shifts in Aggregate Demand 13

Shifts in Aggregate Supply 14

Module 2: The Effects of Inflation and Unemployment in the Economy 23

Lesson 3: Inflation and Unemployment: Causes and Effects 26

Module 3: The National Income Accounting, Fiscal and Monetary Policy,

International Trade/Exchange Rates, and Economic and Development Growth 41

Lesson 4: The National Income 44

Fiscal Policy and Monetary Policy 46

International Trade and Exchange Rates 47

Module 4: Creating and Designing Student Portfolio for Macroeconomics 58

A premiere institution of innovative and ethical leaders for sustainable development.

Excellence, Professionalism, Integrity, Commitment, and Culture-Sensitivity.

Course Code: BACC 19

Specific Learning Outcomes:

At the end of the module, you are expected to:

-AGGREGATE -SUPPLY -ECONOMY -MACRO

For more readings: https://courses.lumenlearning.com/boundless-

Supply: The amount

Demand: The desire to

Equilibrium: The mac-

Aggregate Market Equilibrium

Sho rtag e: Occur s

Supply and Demand

For more readings: https://courses.lumenlearning.com/boundless-economics/chapter/the-aggregate-demand-supply-model/

 In the long-run, increases in aggregate demand cause

 In the long-run, the aggregate supply is affected only by

 The aggregate supply determines the extent to which

Aggregate Supply and Aggregate Demand

AD-AS Model: Shows

For more readings: https://courses.lumenlearning.com/wm-macroeconomics/chapter/shifts-in-aggregate-supply/

Supply Shock: an event A.

Negative Supply Shock: (C.) A higher price for inputs

 In the long-run, the aggregate supply is affected only by

 The aggregate supply determines the extent to which the

Now, let’s assess

1. A mass, assemblage, or sum of particulars; something consisting of elements but considered

4. Are events that shift the aggregate demand curve.

6. A leftward shift in the SRAS and LRAS curves.

11. A rightward shift in the SRAS and LRAS curves.

14. The desire to purchase goods and services.

Instruction: Graph and label the

1. An increase in consumer confidence or 2. A higher price for inputs means that at

Instruction: Share us your insights

Criteria Outstanding Needs Improvement Unsatisfactory

Graphing and Labelling

Criteria Outstanding Needs Improvement Unsatisfactory

You have finished Module 1: Basic Concepts of

The next lesson would be on the effects of inflation

Keep the track!

Module 1 References and Additional Readings:

 EQUILIBRIUM, AGGREGATE MARKET, AmosWEB Encyclonomic