MACROECONOMICS An Introduction | | Second Editionay +8, 2S Mall 2017 £ i | | \ | he ott | ied in 2017 by C a -fabishing Ine | 199 EDSA, South Tangle Queron Cy hop.com 2017 by C& E Publishing, nen Caso be Masepa, ad Alvin PANE ‘recording, of otherwise—without Permission of the plaber, oo aeedaeaee ree a mentee SS stares x pteennloue 2017 publishing, Ine, 2017. ener leche Wloaphy and inde 1. Macrorsnonie. 1 Ang in. HT ie, Seaior Bor: Alejandro D, Pala Managing Edtor Anne Loraine V Ang. {Layout Artist: Pal Andrew L. Pegs ‘Cover Designer: Lynal§ Nagut TABLE OF CONTENTS PREFACE. CCAAPTER 1: Introduction and the Ten Prnsples of Reoomi Defnitlon of Beonomles ‘Untied Human Wants and the Beonoml Problem eonomies and Philosophy Basie Assimption of Boonomics eonomie Resources or Factors of Production ‘Alternative Deion of Eeonomic in the 2st Century ‘Ten Principles of Seanomles Point tobe Discussed ey Ponts to Remember seatwork L Sextwork 2 (CHAPTER 2: veryday Application of Boonorice Economie Models and Theos ‘Soope of Beonomies: Miteeconomics and Macroeconomics Methods of Eeonomic Anais Pont to be Discussed Key Pints to Remember Seatwori 3 Seatwore 2 (CHAPTER 3: Gains from Trade Absolute Advantage ‘Comparative Advantage and Opportunity Cost Intemational Trade ofthe Palipines Pot tobe Diacutted ey Points to Remember Seatwork 1 Seatwork 2 (CHAPTER 4: Demand and Supply Demand ‘rttng the Sipe ofthe Demand CureShite Demand and Its Determinants ‘supy ‘eting the Sloe of he Supply Curve Shin in Supply on ts Determinants Anatyaing Basie Changes Geting the Egil Computing for Equtrium Pont using Alsbrale Equations Surplus Shortage, and Gverinent interventions Print tobe Discund ey Point to Remember Seattle Seater CUPTER The aos ee “ee Cr And careers Neenng Beni rower Meuron on pe ‘Gross Domestic Product aa DP ug be Va Ried Apach oP wing apenas Roe Dineen Get OF nts GOP oni OD? veus Rew DP rn Mato dace Fer cont OD oon Cun of on OF Posts Deca oP Romane Seiwoaet Secon (CHAPTER 6 Ntonl income Analysia Aasrepste Expenditure uliper Etec Decreasing Consumption Point tobe Discussed Key Point o Remember Seatwere Seatwork 2 aa egeae a ase ” 8 16 7 7 388 or 103 103 105 m (CHAPTER 7: Measuring the Cost of Living ‘consumer Pic Indes ‘Computing for CPL ‘Wht x Contained inte Masket Basket? Correcting the Eft of nation ‘eal ad Nominal intrest ates ‘plication of tterent Rates and Infaton Pont wo be Discussed Key Points to Remember seater Sextwork2 ‘CHAPTER 6: Production and Growth Determinants of Producity Pe Pic's Contribution te Boao Growth Investment fom Abroad dscation Pola Stab Free Trade Poi tobe Disesed Key Points to Remember Sextworc Seatwore 2 {CHAPTER 9: Savings, Invertment andthe Finacial Stet Financial nstition in the Pisin Sevng edness ‘Supply and Demand for Laanabe Punds ‘Shite of the Supply ad Demand for Leanale Fonts Patt be Diseased Key Points to Remember Sextworc Searworc 2 ‘CHAPTER 10: Toole of Finance ‘Measuring the Tie Value of Money (9) Fisk Minimization Miimaing is using Sainte ww ir 5 - 1st 182 19. 4 186 17 8in to be Discunted ey Plasto Reciember Seaton Seater? CHAPTER 11 Inaton, Labor, and Unempyment ‘ater and Labor Probleme nempiyment Underenpleyment Info and Type af iition ‘Conse Pit dex yperntason| : Who Beets om ination? Paint be Dacuend ey Pints o Remember Seater ‘Searwrk 2 ‘CHAPTER 12: Money and Monetary Money ents tpertance G Mooey Supply and Demand for Money =~ Teale for Monetary Conta ‘tect of lnreasing Money in Creation ~ Print tobe Discused en basse Key Point to Remember Seater Seater 2 (CHAPTER 13: Money Grom eneySupey, Demand for Mane Bh ory py a NA Moneta ttn esa They tony ; seek Pes rng Hyperion sig Pore: Drop ater ‘Rito be Dacuneg aon? 168 169 169 m 7 178, 179 179 ie 5 165, 195 210 210 au 213 ae 21s 215 a7 2a ‘CHAPTER 14: Fiscal Policy Fiscal Potey ‘ets of nressing and Decressng Taxes ‘What Happens if the Goverment Decesses Taxes? Status of Government Spending Bets of inctessng snd Decreasing Government Expendes Dilleret Types of Fea! Paces Point to be Discussed Key Points to Remember Seatwore 1 Seatwork 2 ‘ouossary Dex 2 26 m8 2 25k CHAPTER 2 Everyday Application of Economics rae te ieee Eee peed auaonenorice nirobcon conowie Mopets aND THEORIES, vr romani, jst Ue 18 the natural sclences, theeray gy ee tetged satenents about certain related variates | ¢ Tecan explain «specie phenomenon. An example ye ‘ene Uco of Thooas Malthus. He observed that popsicy| Praner (nan od supplies, and recommended that poplatia ‘rot. Athol Mah’ theory was true during hi time, bef {ecient phenomenon in other counties ike in the US. wine ‘od peduci faster tan population growth. Ezounics wes a lot of models. These models are wed tuseee,éenonsrte, and representa theory or parts oft (sand | (Bibi, 20.2. They simpy an explanation or description ef ‘erin pesomesn, aes through graph, diagrams, or methemsil ‘omit. Blw are examples of model representations cuts Low MooeL Bee crear flow model lnyoh involves two participant, sane Kesschais and firma. Both are buyers and sellers In Figure 2,22 ‘iss ee eles of economic resources also known 1 fc Fotos Sine ten sores ae inputs or the firms he Seeds ts pein te nee os oes se natujr in the proces, After receiving payments tld are then seen as buyers of goods and si Jesu theists the same manner, te firma become 22 Fiewe21 crasirFow Mode ‘veya Appleton oscoomis 17 ‘san example, Mr Bayant, a pert ofthe household, has a parte of commercial apace for lease along EDSA near Monumesto in Caloocan {y. A well enown restaurant decided to reat the place. Since his lan {etme by a restaurant Busines, Mr. Bayani ie conedered a slr ‘Tae restaurent owner ita buyer because the land spar of he bul Fir np [After some time, Me: Bayani celebrated his SO birthday ln the said restaurant. In thie oression, ME. Bayanl became the buyer and the restaurant became the sll. “Teaoe-o7F ‘The concept of trade-off illustrated in economies by, the production possiblities frontier (PPF) [tsa graph which ahows te {retest sum of outputs given accenalbe Inputs or factors of production {pen economy, For example, a firm needs to produce two types of soda dri ‘ble 21 shows’ poesible production combinations Of drinks that ‘manufacturer can produce in given time. Using a Sxed amount af lnputs(esources) a manufactsrer een produce 40 unit of orange sods ‘snd no cola none hour, 30 units of orange sodas and 20 units colin ‘vo hours, and ao on, The trade-off i ustated by showing how mich ofthe col snot produced the manufacturer chooses to apead more ‘ine in producing orange sodas, Figure 22. Produtin Psi Front Table21_ Tadeo bowen Org sod ssc18 Meroeconnics Animation spectre in gre 2.2 tha INA, 40s se TE pepoticed. A pant By 0 Bown ea sie un ef orange sodas and 20 ns ofc Senet tiled 25 cls and 28 oto, Thy on hes Bs nga ut 40 cla wl be mane ng te raph, ving from pont Ao pow ea tever unt of orange sodas and more colas. Therefore ty | etuany cost of producing ola drinks isthe amount of erang wt thatthe manufcrrer hast gve up. To produce 20 units of eas Gna pun Ao poet 10 unt of range soda has tobe given up, Scope oF Economics IMicRorconouics AND MACROECONOMICS. esramics i divided into two main branches: microeconomics xt smucroeconomice. Microeconomics analyzes the market behavior he firms. focuses on the decision-making process ofa particular ust the ecamy such as consumers, producers, and specific marke ‘microeconomics terms ike consumer behavior, production theory cst and prof and market structures are often encountered, On te cantar, macroeconomics deals with the aggrgses ‘epee wider ast stds the entirety ofan economy, whether {cbtratinal, nd determines economic changes, I macoeco ‘etal scan begin with how growth and output ae messed jim Talipiers work, Labor, employment, and. inflation ‘sani wel x oneny, fcaland trade polices Mertens oF Economic Auaursis minal of azalysis ae used in economics: posite fortnat, Tete eonmicanayis simply describes what ex Ton Sek has a mare objective orentation that disiog comer {sconomic analysis which looks at the outa ae through judgments and prescriptions for e™% Te tut at the statement, “Taxes provide be th acai as a positive sateen Sy Semone. putt Smething. The content af the salen Ne cen nat eancered with HB © a ony tle what To transform the 68 et shen an cgenion spinon ora Pat re abl is *The government should 17 80 the people” ait tents, Vital tools for studying Ts formate SE UP With systematized co06!™ ‘Sfonomic policies and theories 461% oes x ‘eryday Appleton efEconomis 19 1) pomr ree Discusseo ‘Why can't the Malthusian population theory be used today? ‘Theories are well-substantieted statements about certain related ‘asiables that sientifically explain a specific phenomena, Models iustrate, demonstrate, and representa theory or part of Im the circular flow model, there are two participants, namely ‘hovscholds aad Sims, Both can be buyers and sellers. ‘The concept of trade-off is illustrated in economics by the production possiblities frontier. It ie graph that shows the fveatest sum of output given accessible inputs or factors of production in an economy, Microeconomics analyzes the market behavlor of the firms and small organizations, Macroeconomics deals with the aggregates. Positive economic analysis describes what exists and how things wor [Normative economic analysis looks at the outcome of economic Dchaviors through judgments and prescriptions fr courses of