Demand pull factors

Cost push factors

Import cost factors Causes

Expectations

Increase in money supply

Redistribution of income & wealth

Balance of payment effects Inflation

Ex:. In 2008, Vietnam joined the WTO 2007, making many people get overexcited of
Uncertainty of the value of money Effect
the economy’s prospective, increasing inflation
Price uncertainty

Cost of changing price (shoe -leather cost)

Government's action

Ex: The government uses contractionary money as well as sacrifices some GDP to
maintain inflation in the acceptable extent (around 2%)

Real wage unemployment

Frictional – “matching” periods

Overview
Seasonal – yearly pattern
Causes Subtopic
Structural – changed industry conditions

Technological – skills, redundancy

Cyclical – following the trade cycle

Ex: The Philippines recorded its lowest unemployment rate since April 2020 at 6.9
percent in July this year

Loss of output

Loss of human capital

Unemployment
Inequalities in income distribution Effect

Social costs Ex: The economy recovered from the Depression only with
Increase burden on welfare funds the advent of World War II which pushed demand for goods
and services to the limit of its capacity.
Spend money directly on jobs

Encourage private sectors growth

Encourage training Main objectives of Macro policy

Chapter 3: Budget surplus

Offer grant assistance Government's action Ex: A government with a budget deficit of $24 billion but paying $30 billion as interest
on outstanding debt can be said to have a primary budget surplus of $6 billion
Encourage labor mobility The macroeconomic environment Both fiscal and monetary policy can be divided into
contractionary and expansionary ones in a sense that Budget deficit
Restrict the union’s negotiating strengths
contractionary will slow down the economy (usually for it Ex:If a government takes in $10 billion in revenue in a particular year, and its
Abolish minimum wage requirements not to get in to overheat state) while the expansionary will expenditures for the same year are $12 billion, it is running a deficit of $2 billion
New investment bolster it (often after a depression, a stagnance, … Tax on interest earned
New treaty signed Rental earnings
Causes
Fiscal policy Progressive tax
Ex: The European Union and Vietnam signed a Trade Agreement and an Investment Estate tax
Protection Agreement on 30 June 2019
Investment income taxes rental earning and tax credits
Technological process
Proportional tax
Ex: Vietnam is touted as a low-cost manufacturer with several
Ex: If the rate is set at 20%, a taxpayer earning $10,000 pays $2,000 and a taxpayer
companies such as Samsung and Nokia setting up shop to earning $50,000 pays $10,000. Similarly, a person earning $1 million would pay
manufacture and then export electronics Economic growth
$200,000
Brings about better living standards, welfare, level of consumption in the future. Regressive tax
But also depletes natural resources & creates pollution. Effect Government policies for managing the economy Tax
Need higher level of investment so has to cut down on current consumption. Money supply
Government's action Ex: U.S. currency and balances held in checking accounts and savings accounts are
included in many measures of the money supply
Government allocates resources to attain potential economic growth (the rate at which
the economy would grow if all resources (ex. people and machinery) were utilized Money demand
Import and export of goods and services Money in circulation
Net change in ownership of foreign assets, such as loans between the government Bond
Causes
and other countries.
Monetary policy Central bank
Cashflows
Sustainable balance of Ex: The three key actions by the Fed to expand the economy include a decreased
Trade deficit: imports exceed exports->net out flow cash from the country -> difficult discount rate, buying government securities, and lowered reserve ratio
to raise further finance payments
Effect Interest rate
Trade surplus: exports exceed -> net inflow of money into the -> increase the wealth
of the country->leads to inflation. Ex: When interest rates are already high, the central bank focuses on lowering the
discount rate
Government's action
Required reserve rate
Thus, the government strives to get an BOP – Balance of payments