MACROECONOMICS

SIMPLIFIED

Edilberto B. Viray, Jr. MAE

Lucky Raymundo M. Malveda, MAE
Ma. Jesusa Avila – Bato, MAE
 CHAPTER IV
MACROECONOMIC
FUNDAMENTALS

ANVIL PUBLISHING INC., 2016

 CHAPTER IV: Macroeconomic Fundamentals

 The Role of Government

 The Production Possibilities Frontier
 Production Possibilities Curve
 Reasons for Economic Growth
 The Circular Flow Model
 Simple and Complex
 Nominal versus Real Values
 Positive versus Normative
 CHAPTER IV: Macroeconomic Fundamentals

What is Macroeconomics?

Macroeconomics is the study of how we can best

increase our country’s wealth given the available
resources we have like our land, labor, and
capital and how these resources are transformed
by entrepreneurs into final goods and services
which we ultimately consume to satisfy our needs
and wants
 CHAPTER IV: Macroeconomic Fundamentals

5 GOALS OF MACROECONOMICS
 Sustained Economic Growth
 Price Stability
 Full Employment
 Trade Balance
 Redistribution of Income
 CHAPTER IV: Macroeconomic Fundamentals

The Role of Government

The Philippines is a mixed economy with a

substantial amount of government
involvement in the form of direct government
spending, taxation, regulation, and monetary
policies
 CHAPTER IV: Macroeconomic Fundamentals

What is the production possibilities frontier?

The production possibilities frontier

represents outcome or production
combination that can be produced with a
given amount of resources
CHAPTER IV: Macroeconomic Fundamentals
CHAPTER IV: Macroeconomic Fundamentals
The Circular Flow Model (SIMPLE)
CHAPTER IV: Macroeconomic Fundamentals
The Circular Flow Model (COMPLEX)
Important Concepts and Definitions

Nominal versus real values

When we refer to nominal values, such as nominal prices,
earnings, wages, or interest rates, we refer to the peso value of the
prices, earnings, wages, or the absolute value of the interest rates.
Real values, on the other hand, are always values in comparison,
or relative, to other related economic variables.

Positive versus normative

Positive economic statements are facts or relationships which can
be proven or disproven. A normative economic statement is
someone’s opinion or value judgment about an economic issue.
Such a statement can never be proven. A normative statement is
one which people commonly argue about. Not that a positive
statement does not have to be a true statement; the statement could
be disproven. It would be false positive statement.
CHAPTER IV: Macroeconomic Fundamentals

End of Chapter IV