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C1-Overview.pptx
1. Lecturer: Le Phuong Thao Quynh
Foreign Trade University, Faculty of International
Economics
Email: quynhlpt@ftu.edu.vn
PRINCIPLES OF
MACROECONOMICS
2. Course content
Chapter 1 Introduction to macroeconomics
Chapter 2 Data of Macroeconomics
Chapter 3 Aggregate expenditure and Fiscal Policy
Chapter 4 Money and Monetary Policy
Chapter 5 Aggregate demand and Aggregate
supply
Chapter 6 Unemployment
Chapter 7 Inflation and Phillips curve
Chapter 8 Economic Growth
Chapter 9 Saving, Investment and Financial
System
Chapter 10 Macroeconomics in open economy
3. Objectives
Acquire basic background of macroeconomics
(GDP, CPI, AD-AS model, unemployment,
inflation, foreign exchange rate, fiscal policy,
monetary policy)
Use knowledge of the course to study other
specialized economics (e.g. development
economics, public economics, environmental
economics, econometrics)
Apply academic background to practices
(understand what financial and economic news
imply, explain what happens in the economy,
estimate or forecast economic policy)
4. Course implementation
Teaching and learning methods: In class contact
hours, there will be lectures, discussions and
assistance with student’s works, reading and using
books.
Assessment methods:
+ Class participation: 10%
+ Midterm exam: Multiple choice questions and
short essay/problems set (50’)
+ Final written exam: 60%
5. Reading Textbooks
1. N.Gregory Mankiw, Principle of Macroeconomic,
International Student Edition,Third edition,Worth
Pulisher,2003.
2. Frank and Bernanke, Principles of Macroeconomics
Third edition, 2007.
3. Glenn Hubbard and Tony O’Brien, Macroeconomics,
Second edition, 2008.
4. D.Begg,S Fisher,R.Dorchbusch,Economics,Third
edition,McGraw-Hill Book Company,1991
6. 1. The richest man in Babylon – Geogre Sclason
2. Naked Economics – Charles Wheelan
3. The Undercover Economist – Tim Harford
4. 80/20 Principle – Richard Kock
5. Currency War – Song Hongbing
6. The exlusive quest for growth – William Easterly
7. Blue Ocean Strategy – Wchankim, Renee Mauborgne
8. Good luck – Alex Rovira, Fernando Trias de Bes
9. How to stop worrying and start living – Dale Carnegie
10. If you want it done right, You don’t have to do it yourself
– Donna M.Genett
11. Who moved my cheese – Spencer Johnson
Other references
8. Le Phuong Thao Quynh
quynhlpt@ftu.edu.vn
Chapter 1: Introduction to
macroeconomics
9. Content
I Basic concepts in Economics
1 Scarcity
2 Opportunity cost
3 Three fundamental questions in economic
II Overview of macroeconomics
1 What is macroeconomics
2 Objects and methods of research
3 Macroeconomic system
4 Objectives and policy tools of government to
adjust macro-economy
10. I. Basic concepts in Economics
I. Overview of economics
2. Opportunity cost
- Definition: The value of the next-best alternative
that must be forgone in order to undertake the
activity.
1. Scarcity
- Definition: The situation in which unlimited wants exceed
the limited resources available to fulfill those wants
-The law of diminishing marginal returns/ product/
productivity: the cost advantage usually diminishes for each additional unit of
output produced.
11.
12. 3. Economics
The study of the choices people make to attain their
goals, given their scare resources
Three fundamental questions in economics
- What to produce?
- How to produce?
- Produce for whom?
I. Basic concept in Economics
15. TEN PRINCIPLES OF
ECONOMICS
2. The cost of something is what you give up to
get it:
- The opportunity cost of an item is what you
give up to obtain that item.
- Decisions require comparing costs and
benefits of alternatives.
3. Rational people think at the margin: Marginal
changes are small incremental adjustments to
an existing plan of action.
16. TEN PRINCIPLES OF
ECONOMICS
4. People respond to incentives.
5. Trade can make everyone better off
6. Markets are usually a good way to organise
economic activity:
– Firms decide who to hire and what to
produce.
– Households decide what to buy and who to
17. TEN PRINCIPLES OF ECONOMICS
7. Government can sometimes improve
market outcomes
8. A country standard of living depends on its
productivity
9. Prices rise when government prints too
much money
10. In short-run, society faces the trade off
between inflation and unemployment
18. Normative economics vs positive
economics
Normative economics is a part of economics that
expresses value or normative judgements about
economic fairness, or what the outcome of the
economy or goals of public policy ought to be.
Positive economics is the branch
of economics that concerns the description and
explanation of economic phenomena. It focuses on
facts and cause-and-effect behavioral relationships
and includes the development and testing
of economics theories
19. Positive or normative
economics?
1. The government should invest in infrastructure
for better economic growth.
2. Inflation reduces the real income.
3. The interest rate should be decreased to
stimulate aggregate demand.
4. Recession leads to higher unemployment rate.
20. Microeconomics and
macroeconomics
Microeconomics: is the study of how
individual households and firms make
decisions and how they interact with one
another in markets.
Interaction between individual buyers and
sellers
The factors that influence the choices made
by buyers and sellers in individual markets
(e.g. coffee industry).
21. Microeconomics and
macroeconomics
Macroeconomics:
Macroeconomics is the study of the
economy as a whole (the aggregate
economy).
Examine economy-wide phenomena:
unemployment, national income, rate of
growth, gross domestic product, inflation
and price levels.
Its goal is to explain the economic changes
that affect many households, firms, and
22. Microeconomics or
macroeconomics?
The economic growth rate in Vietnam is
expected to be 7.5% in 2022.
Iphone is gaining a higher market share in
Vietnam.
The government expenditure should be
increased to stimulate economic growth and
reduce unemployment as a whole.
The government should invest more in
23. II. Overview of macroeconomics
1. What is macroeconomics
While macroeconomics is a broad field of study, there
are two areas of research that are emblematic of
the discipline:
- the attempt to understand the causes and
consequences of short-run fluctuations in national
income (the business cycle)
- the attempt to understand the determinants of long-
run economic growth (increases in national
income).
Macroeconomic models and their forecasts are used
by governments to assist in the development and
evaluation of economic policy.
24. What is the object of macro and micro
1. Should FPT invest in new technology?
2. Effect of increase of petroleum price on
transportation?
3. Whether increase in input cost leads to increase
in CPI?
4. How Productivity affects GDP?
II. Overview of macroeconomics
25. 2. Objects and methods of research
Objects
Macroeconomics focuses on 4 fundamental objects
- Total output (aggregate output), economic growth,
business cycle
- Price level, inflation
- Unemployment, social welfare
- International trade, balance of payment, foreign
exchange rate
Questions revolving 4 abovementioned objects are
the issues researched by macroeconomists
II. Overview of macroeconomics
26. 2. Objects and methods of research
Methods of reasearch
Economists use economic models to explore the
choices people make and the consequences of
those choices. A model is any simplified
representation of reality that is used to better
understand real-life situations
In economics, a model is
theoretically constructed to explain
economic processes by a set of variables and a
set of logical and/or quantitative relationships
between them. The economic model often but not
always using mathematical techniques
II. Overview of macroeconomics
27. 2. Objects and methods of research
Methods of reasearch
Models are important because their simplicity allows
economists to focus on the effects of only one
change at a time. That is, they allow us to hold
everything else constant and study how one change
affects the overall economic outcome. Hence, an
important assumption when building economic
models is the other things equal assumption,
which means that all other relevant factors remain
unchanged.
II. Overview of macroeconomics
Observation
s
Hypothesi
s
Building
model with
assumptions
Collecting
data and
check
accuracy of
the model
28. 3. Macroeconomic system
Macroeconomic system has three components: input,
macroeconomic activities recording system (black box),
output
+ input: exogenous and endogenous variables
+ black box: AD – AS model under affect of variables will
produce macroeconomic outcome
+ output: total output, inflation, unemployment, foreign
exchange rate, interest rate
Inputs will go to black box, in which they interacts
with market principles and then outcomes of
economy will be produced under aggregate
II. Overview of macroeconomics
29. 4. Objectives and policy tools of government to
adjust macroeconomy
Objectives
II. Overview of macroeconomics
Economic goals Content
Economic efficiency Making the most resources
Economic freedom Freedom from government intervention in the
production and distribution of goods and services
Economic security and
predictability
Assurance that goods and services will be
available, payments will be made on time, and a
safety net will protect individuals in times of
economic disaster
Economic equity Fair distribution of wealth
Economic growth and
innovation
Innovation leads to economic growth, and
economic growth lead to higher standard of living
Other goals Environmental protection, human right protection
30. 4. Objectives and policy tools of government to adjust
macroeconomy
Policy
+ Fiscal policy: the use of government revenue collection
(taxation) and expenditure (spending) to influence the
economy
+ Monetary policy: the process by which the monetary
authority of a country controls the supply of money, often
targeting a rate of interest for the purpose of
promoting economic growth and stability
+ Income policy: economy-wide wage and price controls,
most commonly instituted by governments as a response
to inflation, and usually below market level
+ Trade policy (commercial policy): a set of rules and
regulations that are intended to change international trade
II. Overview of macroeconomics
For example, a worker may produce 100 units per hour for 40 hours. In the 41st hour, the output of the worker may drop to 90 units per hour.
A good example of diminishing returns includes the use of chemical fertilisers- a small quantity leads to a big increase in output. However, increasing its use further may lead to declining Marginal Product (MP) as the efficacy of the chemical declines.
A good example of diminishing returns includes the use of chemical fertilisers- a small quantity leads to a big increase in output. However, increasing its use further may lead to declining Marginal Product (MP) as the efficacy of the chemical declines.
Market failure, externality (pollution, invention, etc).
Giảm lạm phát => tăng thất nghiệp
ITS ABILITY TO PRODUCE GOODS AND SERVICES
Exogenous (independent variables): war, technology, weather
Endogenous (dependent variables in the model): Personal income to personal consumption, since a higher income typically leads to increases in consumer spending.
Exogenous (independent) variables: war, weather, technology
Endogenous (dependent variables in the model). Eg: in the model of output (economic growth)