Macro-Economic 2023

Introduction
 What is the Difference Between Micro-Economic ‫االقتصاد‬
‫ & الجزئي‬Macro-Economic ‫?االقتصاد الكلي‬

Micro-economics
 It concerns with the
behavior ‫ سلوك‬of individual
economic units ‫وحدة اقتصادية فردية‬
such the study of
1) Behavior of one consumer
2) Behavior of one producer
3) How the price of one
product can be determined
 True (OR) False 
1) Microeconomics is economics on a national and global scale.
Macro-economic
 It concerns with the behavior of
the economy as a whole the Aggregate
level of economy ‫المستوى اإلجمالي لالقتصاد‬
1) Total consumption
2) Total export
3) Total investment
4) Unemployment Level ‫مستوى البطالة‬
5) Recession ‫ركود اقتصادي‬
6) Price level & Inflation ‫مستوى األسعار والتضخم‬
7) National output (Gross Domestic
Product = GDP)

2) There is no difference between Micro & Macro Economics

3) Economic phenomena such as the rate of unemployment and inflation are

studied in microeconomics.

4) Micro-economics study the behavior of one consumer

5) Macro-economic study the behavior of large business firm

6) Microeconomics focuses on financial reporting by individuals, whereas

macroeconomics focuses on financial reporting by large firms

7) Microeconomics focuses on national markets, whereas macroeconomics

concentrates on international markets
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 Choose The Correct answer 

1- Which of the following in not a topic studied in macro-economic?
A) Gross domestic product B) Unemployment rate
C) Price of IBM computers D) inflation rate

2- Which of the following is a topic studied in macro-economic?

A) The functioning of individual industries B) Aggregate behavior of individuals industries
C) The behavior of individual's household D) The decision making behavior of individual's

3- The study of the choices made by individuals is part of the definition of

A) microeconomics. B) positive economics. C) Macroeconomics

4- A basic difference between microeconomics and macroeconomics is that:

A) Microeconomics focuses on the choices of individual consumers, whereas macroeconomics
considers the behavior of large businesses.
B) Microeconomics focuses on financial reporting by individuals, whereas macroeconomics
focuses on financial reporting by large firms.
C) Microeconomics examines the choices made by individual participants in an economy,
whereas macroeconomics considers the economy's overall performance.
D) Microeconomics focuses on national markets, whereas macroeconomics concentrates on
international markets.

Macro-Economic Concepts
1) National Product (output)
Total quantity of goods and services produced in an economy in a given period.
We classify National output in to GDP & GNP

Gross domestic product (GDP = Y) Gross national product (GNP)

‫إجمالي الناتج المحلي‬
It is the total market value of all final
goods & services produced inside the
country whether by national factor of
production (citizens) or foreign factors
of production (foreigners) within a given
period
‫إجمالي الناتج القومي‬
It is the total market value of all
final goods & services produced by
national factors of production
(citizens) whether inside the country
or outside it within a given period

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 Macro-Economic 2023

Which is better GDP (OR) GNP ??

In Measure Domestic Economic Activity GDP is Better
 In Measure Economic welfare Of Citizen GNP is Better

2) Actual GDP & Potential GDP

Actual GDP (Y)
It's the value of output that the
economy already produced in a
certain year (Actually produced)
Potential GDP (Y*)
It's the level of national output
that would be produced if the
economy is operating at the
normal rate of utilization (full
employment level of resources)

Y* > Y Y* = Y Y* < Y
- Economy is operating - Economy is operating at - Economy is operating
below its potential level its potential level above its potential level

- This gap is now as - No gap - This gap is now as

Recessionary gap - Full employment of Inflationary gap
resources
- This gap will lead to
unemployment in using
the resources (idle
resources)

 True (OR) False 

1) Actual GDP is the value of the maximum output the economy can produce in a
certain year

2) If the economy is operating above the full employment level so it has a

recessionary gap

3) GDP is better than GNP as a measure of economic welfare of the country’s

residents.

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 Macro-Economic 2023

3) Unemployment, Employment & labor force

A- Definitions
 Unemployed: a person 15 years old or older who is not working, has made a
specific efforts to find work (searching for work) during previous period

 Employed: a person 15 years old or older who is working as a paid employee

for someone else (Or) in his own business

 Labor force ((+15 – 65 year's old)) = Employed workers + unemployed

workers

 Not in the labor force: A person who is not looking for work because he
(Or) she doesn’t want a job (Or) has given up looking

 Population = labor force + not in the labor force

 Note
People who stop looking for work are classified as having dropped out of
the labor force
We should not expect to see zero percent unemployment

 True (OR) False 

1) Labor force might include the unemployment portion in the economy

2) When more people who aren’t working start looking for jobs, the labor force
participation increase

3) Any person 15 years of age or older who is not classified as employed is

classified as unemployment

4) During Recession the unemployment rate increase

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B) Unemployment rate & labor force participation rate

 Unemployment rate: is the ratio of unemployed workers to the labor force.

𝐔𝐧𝐞𝐦𝐩𝐥𝐨𝐲𝐞𝐝
Unemployment rate (U) = × 100
𝐋𝐚𝐛𝐨𝐫 𝐟𝐨𝐫𝐜𝐞

 Labor force participation rate: is the ratio of labor force to the total
population 15 years old or older

𝐋𝐚𝐛𝐨𝐫 𝐟𝐨𝐫𝐜𝐞
Labor force participation rate = × 100
𝐏𝐨𝐩𝐮𝐥𝐚𝐭𝐢𝐨𝐧

 Example (1): assuming the following information concerning USA:

- Employed workers = 139,119. - Unemployed & looking for work workers = 14,623.
- Population of 15 years old & older = 237,690.
Calculate: 1) labor force. 2) Unemployment rate. 3) Labor force participation rate.
Answer
1) Labor force = 139,119 + 14,623 = 153,742.

2) Unemployment rate = × 100 = 9.5%

3) Labor force participation rate = × 100 = 65%

 Example (2): If you are given the following information

 Population size = 140 million those in the age category (+15 – 65) = 100 million that
are willing to work
 Unemployment rate = 10%
*** Calculate: 1) Number of labor force. 2) Employed people 3) unemployed people
Answer
Number of labor force = 100 million
 Unemployment people = Labor force × unemployment rate = 100 × 10% = 10 million
 Labor force = employed + unemployed Employed = labor force – unemployed
Employed = 100 – 10 = 90 million
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 Example (3): If you are given the following information

 Population size = 80 million those in the age category (+15 – 65) = 65 million that
are willing to work
 Employment rate = 80%
*** Calculate: 1) Number of labor force. 2) Unemployed people
Answer
 Labor force = 65 million

 Employment rate = Employed = employment rate × LF

Employed = 80% × 65 = 52 million

Unemployed = LF – Employed Unemployed = 65 – 52 = 15 million

 Example (4): If you are given the following information

 If the unemployment is 25% & the labor force (LF) is 60 million, calculate the
number of employed & unemployed people

 Example (5): If you are given the following information

 Labor force participation rate 75%
 Total population 15 years old or older 200 million
 Unemployment rate 10%
*** Calculate: 1- Labor force 2- unemployed workers 3- employed workers

C) Types of unemployment:
I- Frictional Unemployment
Those who are between jobs (OR) students who just complete school & are
looking for his first job
Is the unemployment due to the Natural turnover in the labor market so
it can never be zero.
Frictional unemployment is a short-run problem

 Example: People who are searching for their first job that meet with their
tastes & skills, & people who leaves their jobs & search for better ones.

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II- Structural Unemployment

It results from result mismatching between the job requirement & workers
qualifications.
Is the unemployment due to the Natural turnover in the labor market so
it can never be zero.

 Example: people who lose their jobs because their skills become obsolete

III- Seasonal Unemployment

Those who are out of work & looking for a job during the off season
Is the unemployment due to the Natural turnover in the labor market so
it can never be zero.

 Important Notes:
 These two kinds of unemployment are known as “Natural rate of
unemployment” because they exist even if the economy is operating at “full
employment (Y = Y*)” (it’s usually between 4% to 6%)

 Natural rate of unemployment (U*) =

Frictional + Structural + Seasonal
 So we can say the economy is at full employment but full employment doesn’t
mean that there is no unemployment because there is natural rate of
unemployment (frictional & structural), so we can’t expect to see “zero
percent unemployment”

IV) Cyclical Unemployment

 Exist when people "Search for a job but didn't find any"
 It's type of unemployment above the Natural rate of unemployment
 It occurs during recession periods in the business cycles

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 True (OR) False 

1-At Full employment the only existing unemployment is frictional.
False: at Full employment the existing unemployment are Structural, frictional and
seasonal or Structural & frictional
2- Structural unemployment occurs when there is a mismatch between the Structure of
the supplies of labor and the Structure of demands for labor.
True: It happens even when the economy is at full employment
3- The unemployment rate is equal to the number of unemployed people expressed as a
fraction of the labor force.
True
4- A person who has given up looking for job is classified as in the labor force.
False: A person who has given up looking for job is classified as not in the labor force
5- The unemployment rate is the percentage of the population that does not have paid
employment, but is immediately available and actively looking for work.
False: It is not the percentage of the population, but the percentage of the labor force
who do not have paid jobs but are immediately available and actively looking for work.

8- When more people who are not working start looking for jobs, the labor -force
participation rate increases.
True: when people start searching for work people move from not in the labor force to
unemployment person so labor force participation rate increase

9- The natural rate of unemployment is the unemployment rate during a period of full
employment.
True: natural rate of unemployment is a normal rate of unemployment happens when no
economic problems

10- Anyone 16 years of age or older who is not classified as employed is classified as
unemployed.
False:  The term unemployment should in principle satisfy three criteria:
 Being without work.
 Being available for work.
 Searching for work and can't find job

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