Introduction to Macroeconomics

• Macroeconomics is the study of economics focusing on aggregate demand, aggregate supply, domestic and international trade, and stabilization policies impacting the Gross National Product.
• Economic agents satisfy their needs and wants through transactions.
• Macroeconomics studies variables like interest rate, inflation rate, exchange rate, taxes, expenditures, savings, and investment.
• Three players in the economy, namely the buyer, seller, and the government, with the government steering the country.
• Macroeconomics studies the behavior of the economy as a whole, including national income and output, total employment, general price levels, and foreign trade.

Historical Context

• In the 1930s, John Maynard Keynes challenged classical economics.
• Keynes advocated for government intervention during economic downturns and proposed economic policies to reduce unemployment.

Macroeconomic Objectives

• Governments use macroeconomic policies to influence economic performance.
• Monetary policy involves changes in the money supply or its rate of change to achieve macroeconomic goals.
• Fiscal policy involves government expenditure and/or tax changes to achieve economic goals like low unemployment, stable prices, and economic growth.
• Four key macroeconomic objectives are stable prices, low unemployment rate, economic growth rate, and foreign balance.

Stable Prices

• Governments aim for reasonable prices in the market to reduce inflation and maintain competitive prices.
• Macroeconomic instability can cause price level fluctuations.
• The Bangko Sentral ng Pilipinas (BSP) implemented monetary policies during the pandemic, including relief measures for financial institutions.
• Inflation is the general increase in the price level.

Low Unemployment Rate

• Having a low unemployment rate and a high employment rate is a government objective.
• The government aims to provide jobs, and fiscal actions like the "Build, Build, Build" project are implemented to boost the economy.
• Government agencies like DOLE, TESDA, and OWWA work to generate jobs.
• Full employment refers to the full utilization of economic resources

Economic Growth Rate

• Governments target a specific economic growth rate.
• Gross Domestic Product (GDP) reflects a country's output.
• Nominal GDP is the value of final goods and services at current year prices.
• Real GDP is the value of final goods and services at base-year prices.
• The real GDP measures economic expansion, accounting for inflation.
• GDP per capita is a precise measure of economic performance over time, considering population changes.
• The COVID-19 pandemic caused an economic contraction in the Philippines.
• Gross Domestic Product is the total market value of all final goods and services produced annually within a country's borders.

Foreign Balance

• Foreign Balance relates to the Balance of Payments (BOP), representing a country's net transactions with other countries.
• Balance of Payments includes import and export, payments for services, investments, and remittances.
• Countries rely on international trade.
• Foreign exchange is earned through exports and imports.
• The financial and economic status of a country is revealed in the BOP.
• The Bangko Sentral ng Pilipinas (BSP) reported a balance of payments surplus due to factors like increased foreign borrowings and lower merchandise trade deficit.
• Information from BOP helps the government craft fiscal and trade policies to achieve macroeconomic goals.
• Balance of Payments is the record of a country's trade with other countries in goods, services, and assets.

Government's Role

• The government examines, monitors, and intervenes in the economy when necessary.
• The Philippines aims to achieve a better standard of living through “AmBisyon Natin 2040”.
• Appropriate stabilization policies are used to move macroeconomic variables toward achieving national goals.