Macroeconomics

Concepts
The most common macroeconomic concepts are
those that measure
the national income of the economy.
 National Income
Indicators Gross Domestic Product
(GDP )
Gross National Gross National Product
Income (GNI) ( GNP),
Gross domestic product(GDP)-
Defined as the total value of final goods and
services consumed during a given
period . This is typically expressed in
Philippine peso.

GDP growth or the rate of increase in GDP value from

one period to another, which is expressed as percentage.
Final – these goods and services are
the products bought or consumed by
end consumers

Intermediary goods are those

used for further processing or
production
Gross National Product( GNP)-
factors in outputs or products by
Filipinos or Filipino companies
abroad. The income equivalent
of GNP is the GNI

Gross National Income Equation

GNI= GDP + Net Primary
income ( income from nationals
working abroad)
National Income account Equation
Y= C+I+G+ (X - M) = GDP
Where
Y- = National income
C = Household consumption expenditure
I = Investment expenditure
G = Government expenditure
X = Exports of goods and services
M = Imports of goods and services
Nominal GDP is derived when the value of
goods and services is expressed in
current prices.

Real GDP is adjusted for inflation and is

expressed at constant or base year prices
Inflation – refers to the persistent rise
in price levels of goods and
services. It is measured through
the rise and fall of the purchasing
power of the domestic currency
Consumer Price Index ( CPI) measures the
purchasing power of the peso
through regular survey of the price level of
consumer goods and services
that are included in a virtual “ basket of goods.”
The virtual basket contains a
fixed sample of goods that best represents the
general price level in the economy.
Hyperinflation –is a case of extremely high and
accelerating inflation rate.
Interest Rate- is defined as the factor income for
capital. Specifically , interest rate is the cost of
borrowing or the return on investment.

Common Types of Interest Rate

Nominal interest rate – is the rate stated in bonds or
the rate typically quoted by banks and lending
institutions.
Common Factors that influence Interest Rate
1.The type of financial institution-
The interest rate charged by banks for loans
may be slightly lower than that charged by private
money lenders.
2. The purpose of a loan
This is due to different level of risks
associated with the loans.
3. Borrower’s credit standing
Lenders consider a borrower’s default risk.
Default risk measures the likelihood of a borrower’s to
default or not be able to pay back the loan. The higher
the default risk ,the higher the interest rate.
4.Term of the loan
Term refers to the length or period of the
loan.Short term loans typically have
30%
a lower
interest rate compared to long term ones.
5. Flexibility
An interest rate that is fixed for the
duration of a loan is different from
floating interest rate. A floating interest
rate has a more flexibilty because it can
be regularly adjusted to align with
prevailing market rate.
6. Collateral and guarantee attached to a
loan affect the interest rate.
Collateral and guarantees improve the
security of the loan being repaid so such
loans typically have a lower interest rates.