Chapter 7

Macroeconomics

Chapter 7

Macroeconomics

Macroeconomics
- is the study of the economy as a whole

Chapter 7

Macroeconomics

2 School of Thoughts in Macroeconomics

1.Monetarist
- states that market works best when
kept to themselves.
- Adam Smith (1700) believes in Laissez
Faire and suggested the invincible hand.
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Chapter 7

Macroeconomics

2 School of Thoughts in Macroeconomics

2. Keynesian (John M. Keynes)
- government intervention could
significantly improve the performance of the
market/economy.
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Chapter 7

Macroeconomics

2 School of Thoughts in Macroeconomics

2. Keynesian (John M. Keynes)
- that during recession (economic
contraction) the government must interfere
and use the pump-priming solution wherein
the government will infuse money in the
economy.

Chapter 7

Macroeconomics

Economic Goals - Macroeconomics

1.Economic Growth
2.Full Employment
3.Price Stability
4.Sufficiency on International Reserves
5.Equitable Income Distribution
6.Sustainable Development
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Chapter 7

Macroeconomics

Economic Goals - Macroeconomics

1.Economic Growth
- Increase in production of goods and services.
- measured though the increase in GDP, in terms
of % change of GDP per year.
- growth rate could be +, -, 0
- typical growth rate is less than 10%
- greater than 10% is considered high
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Chapter 7

Macroeconomics

Economic Goals - Macroeconomics

2. Full Employment
- All members off the labor force are employed.
- Labor force is more or less 30% - 40% of the
population.
- However, at any one time, it is not possible that
all in the labor force are employed. 100% is
near impossible.
- But instead maintain a less than 10%
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unemployment rate.

Chapter 7

Macroeconomics

Economic Goals - Macroeconomics

3. Price Stability
- Literally price do not change.
- However, prices always rise.
- Question is whether prices rise gradually or
abruptly.
- what is gradual? 10% per year; > 10% is
considered high.
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Chapter 7

Macroeconomics

Economic Goals - Macroeconomics

4. Sufficiency in International Reserves
- Collecting currency particularly strongest.
- such as US Dollar, Yen, Pound, and Euro.
- used mainly for trade and depends on
importation needs.

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Chapter 7

Macroeconomics

Economic Goals - Macroeconomics

5. Equitable Income Distribution
- gap between high income and low income
earners.
- can be measured using Lorenz Curve

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Chapter 7

Macroeconomics

Economic Goals - Macroeconomics

5. Equitable Income Distribution
- gap between high income and low income
earners.
- can be measured using Lorenz Curve

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Chapter 7

Macroeconomics

Economic Goals - Macroeconomics

6. Sustainable Development
- Environment conservation.

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Chapter 7

Macroeconomics

Circular Flow Model of the Economy

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Chapter 7

Macroeconomics

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If you cant explain it simply,

you dont understand it well
enough.
- Albert Einstein
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End
of
Presentation
japdp
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