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Chapter 4

The chapter discusses key macroeconomic concepts including: 1) The roles of government in the economy through spending, taxation, regulation, and monetary policy. 2) The production possibilities frontier and how it represents the maximum production combination of goods an economy can produce with limited resources. 3) Models of the circular flow of income and expenditures between households, businesses, and the government. 4) The difference between nominal and real economic values and positive versus normative economic statements.

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764 views12 pages

Chapter 4

The chapter discusses key macroeconomic concepts including: 1) The roles of government in the economy through spending, taxation, regulation, and monetary policy. 2) The production possibilities frontier and how it represents the maximum production combination of goods an economy can produce with limited resources. 3) Models of the circular flow of income and expenditures between households, businesses, and the government. 4) The difference between nominal and real economic values and positive versus normative economic statements.

Uploaded by

norleen.sarmiento
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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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

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