Podcast
Questions and Answers
What does the unemployment rate represent?
What does the unemployment rate represent?
- The number of jobs available in the market
- The percentage of wage workers in private establishments
- The total number of employed individuals
- The percentage of the labor force looking for work (correct)
How is price stability typically defined?
How is price stability typically defined?
- A balanced government budget
- A high rate of economic growth
- A low and declining unemployment rate
- A low and stable inflation rate (correct)
What does the Consumer Price Index (CPI) measure?
What does the Consumer Price Index (CPI) measure?
- The trend in the average price of goods and services bought by consumers (correct)
- The percentage of consumers who are unemployed
- The average income of consumers over time
- The total expenditure of the national government
Which of the following is a tool of fiscal policy?
Which of the following is a tool of fiscal policy?
What is the effect of raising interest rates according to macroeconomic principles?
What is the effect of raising interest rates according to macroeconomic principles?
Which type of government spending is included in GDP calculations?
Which type of government spending is included in GDP calculations?
What is considered an omitted activity in GDP calculations?
What is considered an omitted activity in GDP calculations?
Which of the following formulas correctly represents GDP?
Which of the following formulas correctly represents GDP?
Which of the following is NOT deducted from National Income to derive Personal Income?
Which of the following is NOT deducted from National Income to derive Personal Income?
What does GDP fail to account for in economic activities?
What does GDP fail to account for in economic activities?
What happens when the Bangko Sentral ng Pilipinas (BSP) sells securities?
What happens when the Bangko Sentral ng Pilipinas (BSP) sells securities?
How do reserve requirements affect a bank's ability to lend money?
How do reserve requirements affect a bank's ability to lend money?
What effect do taxes have on people's spending and saving habits?
What effect do taxes have on people's spending and saving habits?
What is the main focus of monetary policy as described?
What is the main focus of monetary policy as described?
What role does globalization play in policy-making in small, open economies?
What role does globalization play in policy-making in small, open economies?
What is the relationship defined by the consumption function?
What is the relationship defined by the consumption function?
What does the equation $C + I + G + X = GDP$ represent?
What does the equation $C + I + G + X = GDP$ represent?
How is the marginal propensity to save (MPS) calculated?
How is the marginal propensity to save (MPS) calculated?
What does the identity $S = I$ signify in an economy?
What does the identity $S = I$ signify in an economy?
Which of the following correctly describes the condition of macroeconomic equilibrium?
Which of the following correctly describes the condition of macroeconomic equilibrium?
Flashcards
Unemployment Rate
Unemployment Rate
The percentage of the labor force that is not working but actively seeking employment.
Underemployment Rate
Underemployment Rate
The percentage of employed individuals who are seeking additional work or hours, indicating underutilized labor resources.
Price Stability
Price Stability
A low and stable inflation rate, signifying a balanced economy with price stability.
Consumer Price Index (CPI)
Consumer Price Index (CPI)
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Inflation Rate
Inflation Rate
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Bangko Sentral ng Pilipinas (BSP)
Bangko Sentral ng Pilipinas (BSP)
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Monetary Policy
Monetary Policy
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Open Market Operations
Open Market Operations
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Reserve Requirements
Reserve Requirements
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Transfer Payments
Transfer Payments
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What is government expenditure (G) in GDP?
What is government expenditure (G) in GDP?
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What are transfer payments?
What are transfer payments?
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What is Net Domestic Product (NDP)?
What is Net Domestic Product (NDP)?
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What is National Income (NI)?
What is National Income (NI)?
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What is Personal Income?
What is Personal Income?
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Disposable Income (DI)
Disposable Income (DI)
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Consumption Function
Consumption Function
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Marginal Propensity to Consume (MPC)
Marginal Propensity to Consume (MPC)
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Marginal Propensity to Save (MPS)
Marginal Propensity to Save (MPS)
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Macroeconomic Equilibrium
Macroeconomic Equilibrium
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Study Notes
Macroeconomics Overview
- Macroeconomics studies the overall economy, focusing on factors affecting firms, consumers, and workers in aggregate.
- Two central themes are short-term fluctuations (business cycles) and long-term trends (economic growth).
- Key questions include: causes and solutions to unemployment, sources of inflation, and ways to increase economic growth.
Measuring Economic Success
- Macroeconomic policy aims for high and growing national output, high employment with low involuntary unemployment, and stable or gently rising price levels.
- Instruments include monetary policy (controlling money supply) and fiscal policy (government spending and taxation).
- Gross Domestic Product (GDP) measures the market value of all final goods and services produced in an economy.
Potential GDP and Employment
- Potential GDP is the maximum sustainable output level.
- Working-age population (WAP) is defined as individuals 15 years or older.
- Labor force consists of people employed or unemployed and actively seeking work.
- Key employment metrics include employment rate, unemployment rate, and underemployment rate.
Price Stability
- Price stability involves a low and stable inflation rate.
- Consumer Price Index (CPI) tracks the trend in average prices of goods and services.
- Inflation is a sustained increase in general price level.
- Types of inflation include hyperinflation and galloping inflation.
Headline Indicators
- Headline indicators track economic progress.
- Key indicators include GDP growth, rankings in global indexes (Innovation and Competitiveness), and unemployment rate.
Tools of Macroeconomic Policy
- Fiscal policy encompasses government spending and taxes to influence the economy.
- Monetary policy involves managing the nation's money supply and credit system.
Aggregate Supply and Demand
- Aggregate supply (AS) describes the total output businesses will produce at various price levels.
- Aggregate demand (AD) represents the overall spending in the economy at different price levels.
- Equilibrium occurs where AS intersects AD, determining the overall price level and output.
Gross Domestic Product (GDP): Two Approaches
- Flow-of-product approach: sums consumption, investment, government spending, and net exports to arrive at GDP.
- Earnings/income approach: adds up the earnings of all factors of production (labor, capital) in the economy.
Real GDP vs Nominal GDP
- Nominal GDP is calculated using current market prices.
- Real GDP uses constant prices to account for inflation, enabling comparison of output over time.
Gross vs Net Investment
- Gross investment measures the total investments made.
- Net investment is difference between gross investment and depreciation.
GDP to Disposable Income
- Gross domestic income (DI): is the total income earned within the country.
- Personal Income: the income received by households.
- National Income: the total income of a nation, less indirect taxes.
- Disposable income = personal income - personal taxes.
Other Important Macroeconomic Concepts
- Savings function and consumption function characterize relationships between disposable income and consumption + saving.
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