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PB202 Macroeconomics

Sophian bin Sout Mazliza binti Roslan 2011

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Learning Outcome [LO] Course Learning Outcome [CLO] Contents Group Discussion

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PB202 Macroeconomics Introduction to Macroeconomic

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PB202 Macroeconomic

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write briefly in group the information on the tools of fiscal and monetary policy that impact to the economic system based on case study given.[ Learning Outcome [LO] ] Upon completion of this course. 4. apply precisely the knowledge of basic macroeconomic theory in the world of economy issue 2. calculate precisely the national income accounting and prepare the national income equilibrium determination in economic sector 3. determination effectively the impact of macroeconomic problems to the economic system in current economic trend. student should be able to: 1. Menu Page [ PB202 Macroeconomic ] .

[ Course Learning Outcome [CLO] ] 1. determination effectively the impact of macroeconomic problems to the economic system in current economic trend. apply accuracy the knowledge of basic macroeconomic theory in the world of economy issue 2. write briefly in group the information on the tools of fiscal and monetary policy that impact to the economic system based on case study given. Menu Page [ PB202 Macroeconomic ] . 4. calculate precisely the national income accounting and prepare the national income equilibrium determination in economic sector 3.

2 Fiscal Policy……………………………………………………….3. 18 Courses Goals 2/3…………………………………………………… 19 1. 1.1 Learn macroeconomic on general 1.3 Macroeconomic Goal…………………………………….3.16 1.3 Aggregate Demand and Aggregate Supply 1.. 1.4 Government Expenditure………………………………. 1.3 The Curve……………………………………………………….1.1.2 Evaluating the government policies and tools 15 1.2.1.1 Aggregate Demand………………………………………… 1. Courses Goals 1/3…………………………………………………… 6 8 10 14 1.1 Introduction to Macroeconomic……………………. Courses Goals 3/3…………………………………………………….2. 17 1..2 Macroeconomic versus Microeconomic………… 1.2 Aggregate Supply…………………………………………….3 Monetary Policy…………………………………………….2..2.3.1 Definition of government policies……………………….[ Contents ] Topic 1: INTRODUCTION TO MACROECONOMIC 1. Menu Page [ PB202 Macroeconomic ] 20 21 22 23 .

com/watch?v=MvVcdxtKif4&feature=related Menu Page Contents Page [ PB202 Macroeconomic ] .youtube.[ Introduction to Macroeconomic ] Source: http://www.

investorwords.com/2914/macroeconomics. national income.[ Introduction to Macroeconomic ] The field of economics that studies the behavior of the aggregate economy.investopedia. often with the aim of studying the effect of government policy on these factors. For example.com/terms/m/macroeconomics. as opposed to the level of a specific subgroups or individuals (which is called microeconomics). Macroeconomics examines economy-wide phenomena such as changes in unemployment. and industrial production. Factors studies include inflation. Source:http://www. gross domestic product. Source: http://www.html#ixzz1ZlVJu9xr Menu Page Contents Page [ PB202 Macroeconomic ] . a macroeconomist might consider the industrial sector. unemployment. rate of growth. inflation and price levels.asp#ixzz1XDurvlno The study of the behavior an economy at the aggregate level. the services sector or the farm sector. but he/she will not consider specific parts of any of these sectors.

[ Microeconomic versus Macroeconomic ] http://www.com/watch?v=MvVcdxtKif4 Source: Menu Page http://www.youtube.com/watch?v=DJG-liA19eY&feature=related Contents Page [ PB202 Macroeconomic ] .youtube.

[ Microeconomic versus Macroeconomic ] Microeconomics Studies individual income Analyzes demand for and supply of labour Deals with households’ and firms’ decision Studies individual prices Analyzes demand and supply of goods Macroeconomics Studies national income Analyzes total employment in the economy Deals with aggregate decision Studies overall price level Analyzes aggregate demand and aggregate supply Menu Page Contents Page [ PB202 Macroeconomic ] .

[ Macroeconomic Goals ] Full Employment Achieving full employment of all available factors of production i. Source: Principles of Economic (2nd Ed). the higher the output of goods and services. Oxford Menu Page Contents Page [ PB202 Macroeconomic ] . An aeconomy should use all its available resources more efficiently to attain maximum output. Therefore if more resources are employed.e of labour. capital and entepreneurs. land.

It can lead to income not rising as fast as price. The objective of the nation is to keep its inflation rate as low as possible. thereby penalizing certain group of people.[ Macroeconomic Goals ] Price Stability Maintaining price stability or controlling inflation is another macroeconomic goal. Inflation can also have several consequences. Oxford Menu Page Contents Page [ PB202 Macroeconomic ] . Source: Principles of Economic (2nd Ed). namely pensioners and fixed income earners.

Source: Principles of Economic (2nd Ed). Economic growth can only be realized over the years. Economic growth also measured by evaluating the full production output per capita. However. In other words. the economy must be operating at maximum capacity. the economic growth of a nation does not move constantly but will experience short-term ups and downs. Oxford Menu Page Contents Page [ PB202 Macroeconomic ] . economic growth refers to an increase in the full production output level of a nation over time.[ Macroeconomic Goals ] Economic Growth To achieve economic growth.

This is to ensure that all people are equal in terms of the standard of living. Source: Principles of Economic (2nd Ed).[ Macroeconomic Goals ] Equitable Distribution of Income Most of the nations try to narrow the gap between higher income and the lower income groups. Taxation is one method of achieving and equitable distribution of income. An expenditure policy narrows the gaps between the two income groups. Oxford Menu Page Contents Page [ PB202 Macroeconomic ] .

[ Courses Goals 1/3 ] CLO 1: apply accuracy the knowledge of basic macroeconomic theory in the world of economy issue Cognitive Domain C1 : Knowledge Cognitive Domain C2 : Comprehensive Learning Domain LD1: Knowledge Learning Domain LD2: Technical Skills Affective Domain A4: Organizing Values Menu Page Contents Page [ PB202 Macroeconomic ] .

and judicial decisions.wikipedia. and funding priorities concerning a given topic promulgated by a governmental entity or its representatives.[ Government Policies ] Definition: Public policy as government action is generally the principled guide to action taken by the administrative or executive branches of the state with regard to a class of issues in a manner consistent with law and institutional customs.org/wiki/Public_policy Menu Page Contents Page [ PB202 Macroeconomic ] . regulatory measures. Other scholars define it as a system of courses of action. Public policy is commonly embodied in constitutions. Further substrates include both judicial interpretations and regulations which are generally authorized by legislation. legislative acts. Source: http://en. the foundation is the pertinent national and sub national constitutional law and implementing legislation such as the US Federal code. In general. laws.

Changes in the level and composition of taxation and government spending can impact on the following variables in the economy: a. Source: http://en.[ Government Policies ] In economics.org/wiki/Fiscal_policy Fiscal Policy Menu Page Contents Page [ PB202 Macroeconomic ] .wikipedia. c. The pattern of resource allocation. b. The two main instruments of fiscal policy are government expenditure and taxation. Aggregate demand and the level of economic activity. Fiscal policy refers to the use of the government budget to influence the first of these: economic activity. fiscal policy is the use of government expenditure and revenue collection (taxation) to influence the economy. The distribution of income.

Expansionary policy is traditionally used to try to combat unemployment in a recession by lowering interest rates in the hope that easy credit will entice businesses into expanding. government spending. Source: http://en. Contractionary policy is intended to slow inflation in hopes of avoiding the resulting distortions and deterioration of asset values. The official goals usually include relatively stable prices and low unemployment. Monetary policy differs from fiscal policy. It is referred to as either being expansionary or contractionary.org/wiki/Monetary_policy Monetary Policy Menu Page Contents Page [ PB202 Macroeconomic ] . and associated borrowing. often targeting a rate of interest for the purpose of promoting economic growth and stability.[ Government Policies ] Monetary policy is the process by which the monetary authority of a country controls the supply of money. which refers to taxation.wikipedia. Monetary theory provides insight into how to craft optimal monetary policy.

Acquisition of goods and services is made through own production by the government (using the government's labour force. Government acquisition of goods and services intended to create future benefits. fixed assets and purchased goods and services for intermediate consumption) or through purchases of goods and services from market producers.wikipedia.org/wiki/Government_spending Menu Page Contents Page [ PB202 Macroeconomic ] .[ Government Expenditure ] Government acquisition of goods and services for current use to directly satisfy individual or collective needs of the members of the community is classed as government final consumption expenditure. such as infrastructure investment or research spending. Read more on http://en. which usually is the largest part of the government gross capital formation. is classed as government investment (gross fixed capital formation).

[ Courses Goals 2/3 ] CLO 1: apply accuracy the knowledge of basic macroeconomic theory in the world of economy issue Cognitive Domain C1 : Knowledge Cognitive Domain C2 : Comprehensive Cognitive Domain C3 : Application Learning Domain LD1: Knowledge Learning Domain LD2: Technical Skills Menu Page Contents Page [ PB202 Macroeconomic ] .

[ Aggregate Demand ] The total amount of goods and services demanded in the economy at a given overall price level and in a given time period. It is often called effective demand. though at other times this term is distinguished. aggregate demand (AD) is the total demand for final goods and services in the economy (Y) at a given time and price level. It is the amount of goods and services in the economy that will be purchased at all possible price levels. Normally there is a negative relationship between aggregate demand and the price level. Source: http://en. Also known as "total spending".org/wiki/Aggregate_demand Menu Page Contents Page [ PB202 Macroeconomic ] . It is represented by the aggregate-demand curve.com/terms/a/aggregatedemand.investopedia. This is the demand for the gross domestic product of a country when inventory levels are static.asp#ixzz1Zra4ekMA In macroeconomics. Source: http://www. which describes the relationship between price levels and the quantity of output that firms are willing to provide.wikipedia.

Normally. Rising prices are usually signals for businesses to expand production to meet a higher level of aggregate demand. which describes the relationship between price levels and the quantity of output that firms are willing to provide. It is represented by the aggregate-supply curve. Source: http://en.wikipedia. aggregate supply is the total supply of goods and services that firms in a national economy plan on selling during a specific time period. It is the total amount of goods and services that firms are willing to sell at a given price level in an economy.asp#ixzz1ZrwFoPLE In economics.org/wiki/Aggregate_demand Menu Page Contents Page [ PB202 Macroeconomic ] .com/terms/a/aggregatesupply.[ Aggregate Supply ] The total supply of goods and services produced within an economy at a given overall price level in a given time period.investopedia. Source: http://www. there is a positive relationship between aggregate supply and the price level.

[ The Curve ] Aggregate Supply AS Intersection between Aggregate Supply and Aggregate Demand Price P* Equilibrium Price Aggregate Demand AD 0 Y* Equilibrium Output Aggregate Output Menu Page Contents Page [ PB202 Macroeconomic ] .

[ Courses Goals 3/3 ] CLO 1: apply accuracy the knowledge of basic macroeconomic theory in the world of economy issue Cognitive Domain C1 : Knowledge Cognitive Domain C2 : Comprehensive Cognitive Domain C3 : Application Psychomotor Domain P4: Articulation Learning Domain LD1: Knowledge Learning Domain LD2: Technical Skills Menu Page Contents Page [ PB202 Macroeconomic ] .

Group 6 Explain when the government practices contractionary fiscal policy.[ Group 1 Group Discussion ] Explain the circular flow model in a two sector economy in detail and relate it with three approaches in calculating national income Differentiate between microeconomics and macroeconomic Group 2 Group 3 Explain briefly the macroeconomic goals Differentiate fiscal and monetary policy Group 4 Group 5 “ Government cut the tax rate and increase the expenditure.” Explain this statement with regard to government policies. Menu Page Contents Page [ PB202 Macroeconomic ] .