Macroeconomics • It is the aspect of economics that is

- is the branch of economics that deals with the concerned with human welfare.
structure, performance, behavior, and decision- • It deals with ethics, personal value
making of the whole, or aggregate, economy. judgements and obligations analyzing
- deals with the functioning of the economy as a economic phenomena.
whole. • It answers the question "What should be".
-It seeks to explain how the economy’s total output • It is also referred to as policy economics
of goods and services and total employment of
resources are determined. Example of Normative Economic Statement
-It deals with the broad economic issues, such as  The Philippine government should
full employment or unemployment, capacity or initiate political reforms in order to
under capacity production, a low or high rate of regain investor confidence, and
growth, inflation or Deflation. consequently uplift the economy.
-It is the theory of national income, employment,  The government should raise taxes and
aggregate consumption, savings and lower government spending to reduce
investment ,general price level and economic the budget deficit.
growth. Employment and Unemployment
-Explain how we can optimally use our resources • Unemployment is of vital importance,
in-order to achieve the highest standard of possible particularly to the employed.
living. - Edward Heath
MAJOR ECONOMICS GOALS • Unemployment is harmful to society it
1. Promote Economic Growth represents unused resources.
2. Limit Unemployment UNEMPLOYED PERSON-“Someone who doesn’t
3. Keep Prices Stable (Inflation and Deflation) have a job” .Someone who does not have a job
now and is actively looking for a job.
Economic Growth EMPLOYED PERSON - Someone who currently has
1. Increase in a country's capital stock/goods. a job
2. Advances in technology OUT OF THE LABOR FORCE - Someone who doesn’t
have a job right now but is not actively looking for a
Positive Economics job.
1. is an economic analysis that considers UNEMPLOYED PERSON
economic conditions “ as they are” or  Are 16 years old or older
considers economics “as it is”.  Do not have a Job
2. It uses objective or scientific explanation in  Have actively looked for work in the
analyzing the different transactions in the previous four weeks
economy, it answers the question "What is"  Are currently available for work.

Example of Positive Economic Statement TYPES OF UNEMPLOYMENT

 When the value of the dollar falls, the 1.FRICTIONAL UNEMPLOYMENT
Philippine products imported into the - Occurs when people take time to find a
United States become more expensive. job; the short-term unemployment associated with
 The economy is now experiencing a the process of matching workers with job.
slowdown because of too much politicking Example:
and corruption in the government 1. Freshly Graduate students or
Normative Economics 2. People who quit their jobs to
• is economic analysis which judges economic Look for more equip jobs based on their skills.
conditions "as it should be".
 -Inflation can become a destructive force in an
economy if it is allowed to get out of hand and rise
2. CYCLICAL UNEMPLOYMENT dramatically.
- Rises during economic downturns and falls
when the economy improves; it is the extra Hyperinflation occurs when inflation rises rapidly
unemployment that occurs during recession. and the value of the currency of the country
Example: tumbles rapidly. Economists define hyperinflation
A truck driver lost his job when the economy went as taking place when prices rise by at least 50%
into recession due to lesser demand on delivery3. each month.
3.STRUCTURAL UNEMPLOYMENT Hyperinflation - Consequences of inflation is the
- Occurs because of a geographic or skill drop in purchasing power.
mismatch between workers and employers (This
PURCHASING POWER - Is the amount of stuff you
means workers must either learn a new job skills,
can purchase with a unit of currency, As prices go
or they move to a location where jobs that require
up, the purchasing power of money go down.
their skills are more plentiful).
Example: PRICE INDEXES - Measurements that show how the
An unemployed construction worker will train as average price of a standard group of goods changes
Computer technician over time.

EMPLOYED PERSON
 Workers who are working part-time
but would like to work full-time.
 Those working in jobs for which they
are overqualified.
OUT OF THE LABOR FORCE
• Someone who doesn’t have a job
right now but is not actively looking
for a job.
• Someone who has given up looking CAUSE OF INFLATION
for work (discouraged worker).
UNEMPLOYEMENT RATE 1. QUANTITY THEORY OF INFLATION
• The percentage of the nation’s labor - States that too much currency available can
force that is unemployed. cause prices to go up and purchasing power to go
• down.
•
• 2. INCREASE IN AGGREGATE DEMAND
•
- Total demand in all finished goods and services
•
in an economy, If more people can afford to buy
•
stuff, they will, and the result is an increase in
Formula:
prices across the board.
PRICE STABILITY (INFLATION AND DEFLATION)
3. PRODUCERS MUST SPEND MORE TO PRODUCE
- Inflation occurs when prices rise across the
economy, decreasing the purchasing power of your - When producers have to spend more money in-
money. order to produce.
- Inflation refers to the broad increase in prices
Stagflation - occurs when inflation remains high,
across a sector or an industry.
but a country’s economy is not growing, and its
unemployment is rising. Usually, when
unemployment increases, consumer demand 2. MONETARY ECONOMY
decreases as people watch their spending more Milton Friedman
closely. This decrease in demand lowers prices, - Nobel Memorial Prize in Economic Sciences
helping to recalibrate your purchasing power. - Advocate for monetarism
When stagflation happens, however, prices remain - The key priority of monetary policy is to control
high even as consumer spending decreases, making inflation. Too much money results in inflation and
it increasingly expensive to buy the same goods. too little money results in low inflation and perhaps
deflation. Monetarist believe that firms are
Deflation - When prices decline across a sector of
influenced by the interest rate when making
the economy or throughout the entire economy. If
investment decision.
left unchecked, deflation can diminish or freeze
- Monetarists believe that markets are inherently
economic growth, which in turn decimates wages
stable and that a small government and limited
and paralyses an economy.
government interference in markets is preferable.
 INFLATION vs. DEFLATION -Is the Central Bank’s use of changes in Interest
rates, the money supply and the exchange rate in-
order to influence the level of aggregate demand
within an economy.
CENTRAL BANK
- Is a public institution that manages the currency
of a country or group of countries and controls the
money supply – literally, the amount of money in
circulation. The main objective of many central
banks is price stability. In some countries, central
banks are also required by law to act in support of
full employment.

3. CLASSICAL ECONOMY
Adam Smith
- Father of Laissez faire economics
- “ Flexible Wages”
Three (3) Main Types of Macroeconomics
- Classical Economists believe that consumers and
1. Keynesian Economics firms make decisions in the free market economy
2. Monetarist Economics in order to maximize their own self-interest,
3. Classical Economics consumers will make decisions that maximize their
own utility and firms make decisions that maximize
1. Keynesian Economics their profits, these self – interest drive voluntary
John Maynard Keynes exchange in the pre=market economy setting price
- The General Theory of employment, interest, and levels and quantities of output at an equilibrium
money. where all participants can satisfy their incentive
- was a prominent economist of the 20th century, driven goals.
whose ideas and theories have had a profound
impact on modern economies. (GDP) Gross Domestic Product
- shapes economics during economic crisis, he GROSS: Total
argued that government intervention was DOMESTIC: Within a country’s borders
necessary to revive the economy and creates jobs, PRODUCT: The value of all goods/services
he believed that market forces alone can not solve Gross Domestic Product is the value of all final
crisis and the government had to step in to goods/services produced within a country’s
stimulate demand. borders in a given year.
FINAL GOODS
Final Goods (Finished Products)- are goods that will
not be sold again as part of some other goods.
Intermediate Goods- are the raw materials which
means these goods are not finished yet.
Capital Goods- are goods used to provide services
and counted as final goods.

GDP
- all the cost combined over a given year is the GDP
of a certain country.

FOUR (4) CATEGORIES OF FINAL GOODS/SERVICES

1. Consumer Goods and Services
2. Business Goods and Services
3. Government Goods and Services
4. Net Exports
Net exports = Total exports – Total Imports

GDP
- to solve for GDP add all stuff that consumers,
business, and the government buys and add up all
the incomes in the economy.

NOMINAL GDP
- Nominal GDP is measured in current prices.

REAL GDP
- Real GDP is measured in constant, or unchanging
prices. In other word real GDP is nominal GDP but
adjusted for inflation. Real GDP is more accurate
way to measure economic growth, since inflation
can distort the actual value of goods and services.

Note: GDP does not measure non-market activities

or goods and services that people make or do
themselves, like washing their own car

GDP per CAPITA

- One way to accurately measure of a
country’s economy.