MACROECONOMICSMACROECONOMICS

Definitions of Macroeconomics

• Macroeconomics is the study of the economy as a whole.

• It is concerned with the behavior of the entire economy.

• It includes the following: 1) analysis of economic

aggregates such as national income and output

2) total employment 3) general price level 4) foreign trade

Some macroeconomic issues that need attention:

UnemploymentPovertyUnderdevelopmentInflationTrade deficit

Macroeconomic Equilibrium

A macroeconomy is said to be in equilibrium if total supply and total demand of goods and services are equal.

Total or Aggregate Supply is the amount of goods and services

produced in a given period of time.

Total or Aggregate Demand includes expenditure incurred by

various segments of the economy, the household, business,

government, and foreign sectors.

Macroeconomic Goals

Full employmentRapid Economic GrowthPrice StabilityExternal Balance

Macroeconomic

problems

Macroeconomic

problems

Types of Unemployment

Cyclical unemploymentStructural unemploymentSeasonal unemploymentFrictional unemployment

Effects of Unemployment

• Decrease in national output• Decline in aggregate demand• Loss of skills• High crime rate• Low morale• Poor nutrition

Price Instability

Inflation

• refers to a continuous increase in price

• refers to the rise in the level of prices, in general

Inflation rate -is the general rate in the rise

of prices

Hyperinflation -too high rate of inflation

Theories and Causes of Inflation

• Demand-pull inflation

• Cost-push inflation 1) wage-push theory

2) supply-shock theory

Effects of Inflation

Inflation reduces the purchasing power of money.People will be discouraged or unable to save.Inflation may lead to inflationary spiralEconomic collapseBenefits for businessmen

Deflation

Deflation

• refers to the fall in the average level of prices in the economy

• refers to some reduction in the level of economic activity

• used to lower inflation• refers to continuous decrease in

prices

Trade Imbalance

• Trade imbalance occurs if export earning are not enough to pay importations (trade deficit) or if export exceed import (trade surplus).

Savings&

Investment

Savings

• Very important feature in a money economy.

• the money put aside for future use

Investing

Using one’s saving (substantial saving) to earn profit.

Where to Invest

Bank AccountsTreasury Bills (T-Bills)Mutual FundsCommoditiesReal Estate

Measures of National Output and Income

THANK YOU!

Prepared by:

Joebert F. Padata Jr.Economics Student (S.Y. 2009-2010)