Introduction to Macroeconomics

Introduction to Macroeconomics

• Macroeconomics studies the entire economy, analyzing the overall level of economic activity.
• Quesnay emphasized nature's role in economic development.
• Economic equilibrium occurs when all income is spent on consumption.
• Different economic sectors play a role in achieving economic goals.

Economic Sectors and Their Roles

• Households own factors of production (land, labor, capital, entrepreneurship) and consume goods and services. Household spending includes necessities like food, clothing, and shelter.
• Businesses produce goods and services, utilizing resources from households.
• Government collects taxes from households and businesses, funding activities like infrastructure and governmental expenses.

Key Economic Indicators

• Gross National Product (GNP) measures the total value of all goods and services produced within a country.
• Gross Domestic Product (GDP) measures the total market value of all final goods and services produced within a country's borders.
• Economic Indicator is economic data to gauge the economy's overall health.
• NEDA is a key agency measuring Philippine economic performance.

National Income and Taxes

• Nominal GNI is higher than real GNI due to rising product prices.
• Indirect business taxes are applied to consumer goods.
• Net Factor Income from Abroad (NFIA) represents the difference in income earned by Filipinos abroad and foreigners in the Philippines.
• Statistical discrepancies arise from errors in measuring GNP/GNI.
• Net Exports balance a country's imports and exports.

Inflation and Its Impacts

• Inflation is a sustained rise in the general price level of goods and services.
• Hyperinflation is rapidly rising prices, often exceeding 50% monthly.
• Lenders with fixed-rate loans are most susceptible to unexpected inflation.
• Causes of Inflation: High foreign debt, causing currency depreciation and increased import prices, cartels restricting output for higher prices, and monopolies limiting output.
• Demand-Pull Inflation occurs when high consumer confidence, tax cuts, and growing economy boost demand beyond production capacity.
• Cost-Push Inflation occurs when global disruptions (like oil supply) increase production costs, forcing price increases.

Income, Savings, and Economic Well-Being

• Unemployment's impact on poor families is more severe due to limited resources.
• Families below the poverty line primarily allocate income for basic needs (food, shelter, healthcare, education).
• Real income is higher if income is sufficient for the cost of living.
• Technological advancements can increase or decrease income inequality.

Consumption, Savings, and Disposable Income

• Stock market booms increase consumption and decrease savings in the short term.
• Savings functions show the relationship between income and savings.
• Factors decreasing disposable income include higher payroll and personal income taxes.
• Disposable income is gross income after taxes and contributions.
• Personal income is the total income received by individuals and businesses.
• Consumption patterns and income changes are often directly correlated.
• One-time work bonuses increase consumption, but some portion is saved.