Unit III

Makroekonomiks

Presented during the Training of G9 AP Teachers of

the K-12 Enhanced Basic Education Program
APRIL 26, 2016

Lecture in Macroeconomis
 Yunit III – Pagsusuri ng
Ekonomiya: Makroekonomiks

Lecture in Macroeconomis Prof. Ariel M. Plantilla

Lecture in Macroeconomis Prof. Ariel M. Plantilla
Lecture in Macroeconomis Prof. Ariel M. Plantilla
 Aralin 1 – Paikot na Daloy
ng Ekonomia

Lecture in Macroeconomis Prof. Ariel M. Plantilla

Lecture in Macroeconomis Prof. Ariel M. Plantilla
Lecture in Macroeconomis Prof. Ariel M. Plantilla
 Aralin 2 – Pambansang Kita

Lecture in Macroeconomis Prof. Ariel M. Plantilla

Lecture in Macroeconomis Prof. Ariel M. Plantilla
Lecture in Macroeconomis Prof. Ariel M. Plantilla
Lecture in Macroeconomis Prof. Ariel M. Plantilla
 Aralin 3 – Ugnayan ng Pangkalahatang
Kita, Pag-iimpok at Pagkonsumo.

Lecture in Macroeconomis Prof. Ariel M. Plantilla

Lecture in Macroeconomis Prof. Ariel M. Plantilla
 Situational analysis
▪ Kita >Pagkonsumo = _______?
▪ Kita < Pagkonsumo = _______ ?

Lecture in Macroeconomis Prof. Ariel M. Plantilla

 Aralin 4 - Inflation

INFLATION
(Measuring Consumer’s
Buying Power)
■ Presented during the Training of G9 AP
Teachers of the K-12 Enhanced Basic
Education Program
■ APRIL 26, 2016

Lecture in Macroeconomis Prof. Ariel M. Plantilla

 Inflation
■ Increase in prices of goods and
services.

Lecture in Macroeconomis Prof. Ariel M. Plantilla

 •Decline in the purchasing power of
money

P
R
I
V C
A E
L
U
E

Lecture in Macroeconomis Prof. Ariel M. Plantilla

 Types of Inflation

■ Demand Pull Inflation

Increase in Aggregate Demand greater
than what the economy can produce

■Cost push inflation

Increase in the cost of production
that pushes prices to increase
Lecture in Macroeconomis Prof. Ariel M. Plantilla
 Causes of Demand Pull
Inflation
■ Excessive supply of money

■ High Investment spending

■ High government spending

■ Increase in Foreign Exchange

rate

Lecture in Macroeconomis Prof. Ariel M. Plantilla

 Cause of Cost push Inflation

■ Increase in the price of raw

materials

Lecture in Macroeconomis Prof. Ariel M. Plantilla

 Price Index
Price Index is used to measure overall price levels.

■ Consumer Price Index (CPI)

Measures the average cost of a market

basket purchased typically by
consumer
Reflects the changes in the cost of
living of the consumers.
Lecture in Macroeconomis Prof. Ariel M. Plantilla
 How Inflation is measured?
Inflation is measured using Price Index

Price Index is used to measure overall price levels.

■ Consumer Price Index (CPI)

Measures the average cost of a market

basket purchased typically by
consumer
Reflects the changes in the cost of
living of the consumers.
Lecture in Macroeconomis Prof. Ariel M. Plantilla
 Consumer Price Index (CPI)

Market basket refers to a sample of goods and

services used to represent all goods and services
bought by a particular group of consumers in a
particular area.

Lecture in Macroeconomis Prof. Ariel M. Plantilla

 Consumer Price Index (CPI)
Aggregated weights for the six item major groups are shown
below:
Commodity Philippi Areas Outside Metro Metro
nes Manila Manila
Group

All Items 100.0 24.42 75.58

0
Food, Beverage 58.47 11.84 46.63
and Tobacco
Clothing 4.35 0.87 3.49
Housing and 13.30 5.40 7.90
Repairs
Fuel, Light and 5.36 1.45 3.91
Water
Services 10.90 3.32 7.58
Miscellaneous 7.59 1.53 6.06

Lecture in Macroeconomis Prof. Ariel M. Plantilla

 How Consumer Price Index is calculated

Fix the basket

Find the prices

Compute the basket

cost

Choose a base year

and Compute the Index

Lecture in Macroeconomis
 Formula in getting Consumer Price Index

∑P1 Q1
CPI = ______
X 100
∑P0 Q0
where
∑P1 Q1 price and quantity during the
current year
∑P0 Q0 price and quantity during the
base year
∑= summation

Lecture in Macroeconomis Prof. Ariel M. Plantilla

 Example
Assuming that a consumer spend his
income on three categories of goods
and services in a month.

Year Year
2005 2006
Price Quantity Price Quantity

Food & 100 30 120 30

Beverages
Clothing 500 2 600 2

Housing 3,000 1 3,000 1

Lecture in Macroeconomis Prof. Ariel M. Plantilla
 Compute the cost of the basket of goods and
services each year.
Year
2005 Multiply

P Q

Food & P100 X 30 3,000

Beverages

Clothing P500 X 2 1000

Housing P3,000 x 1 3,000

Summation of P x Q ( ∑P0 ) =7,000

Lecture in Macroeconomis Prof. Ariel M. Plantilla

Q0
 Year Multiply
2006
P Q

Food & 120 X 30 3,600

Beverages

Clothing 600 X 2 1,200

Housing 3,000 x 1 3,000

Summation of P x Q ( ∑P1 Q1) = 7,800

Lecture in Macroeconomis Prof. Ariel M. Plantilla
 ∑P1 Q1
CPI = ________
X 100
∑P0 Q0
CPI = 7,800
X 100
7,000

= 1.114x 100
= 111.4

CPI of current year 2006 is 111

Lecture in Macroeconomis Prof. Ariel M. Plantilla

 Assuming that year 2005 is the base
year, the base year index is always equal
to 100

How to compute Inflation Rate?

CPI in current year – CPI in Base year

Inflation rate = X 100
CPI in base year

Lecture in Macroeconomis Prof. Ariel M. Plantilla

 111 - 100
Inflation rate of 2006 = X 100
100
= .11 x 100

Inflation rate of 2006 is 11%

It means that prices of commodities in

2006 rose by 11% using 2005 base index

Lecture in Macroeconomis Prof. Ariel M. Plantilla

 Effects of Inflation (Cost of Inflation)

❑ People who have fixed income are

badly affected by inflation, because
their income spent on consumption
will not be sufficient for daily needs.

❑ Creditors or lenders loose money

when there is inflation because the
value of money they lend becomes
less.

Lecture in Macroeconomis Prof. Ariel M. Plantilla

 If Mrs. Sally Saver deposits P1,000 in
a bank account that pays annual
interest rate of 10 percent. After a
year, Sally had P100 interest income.
Sally has a total money of P1,100.
It means Sally has a purchasing power
of P1,100.
How much is the value of 1,100 if
the Inflation rate is 11%?
Answer: value of 1,100 is only P979
because the value of money
depreciate by 11 percent due to
inflation.
Lecture in Macroeconomis Prof. Ariel M. Plantilla
 NOMINAL INTEREST RATE
REAL INTEREST RATE
Nominal Interest rate
The interest rate as usually
reported without a correction for
the effects of inflation.
The interest rate charge by the bank
and other financial institutions
Real Interest rate
The interest rate corrected for the
Lecture in Macroeconomis
effects of inflation.
Prof. Ariel M. Plantilla
 Aralin 5 – Patakarang Piscal

Lecture in Macroeconomis Prof. Ariel M. Plantilla

Lecture in Macroeconomis Prof. Ariel M. Plantilla
Lecture in Macroeconomis Prof. Ariel M. Plantilla
 Aralin 6 – Patakarang Pananalapi

BSP

Lecture in Macroeconomis Prof. Ariel M. Plantilla

 ■ Mga Institusyon sa Pananalapi
📫Bangko
Commercial Banks
Thrift banks
Rural Banks
Specialized banks

Lecture in Macroeconomis Prof. Ariel M. Plantilla