Finding Fun in the FUNdamentals of Macroeconomics

     Another school year in our lives as students. A brand new semester, but still with the same Economics subject. Just seeing the subject code YMACRO in our registration forms makes us bored. Well I guess that's it. Macroeconomics is by itself boring to students. Yes, to us students. But a lot of professionals, especially in the field of business find this discipline very much interesting and fun. So our group decided to find some ways for us to understand and eventually learn to love Macroeconomics. 

     Supply, Demand, Prices, Products, Inflation, Recession, Unemployment, Input, Output and Income are just some of the words often associated with Macroeconomics. But what do they really mean? Definitely associated but HOW?

FROM

to

ECONOMICS is evident.

From schools

to streets 

to households 

to business firms

ECONOMICS is present.

But what is macroeconomics?

Why do we need to know what it is?

Is it important in our daily lives?

     YES, macroeconomics is a vital part of our everyday lives. We encounter it everyday, we see someone looking for a job, someone who buys and sells goods, someone who renders services to earn some profit and someone who produces products. But these are just parts of a larger economy known as MACROECONOMICS, which is the study of the economy as a whole. It considers the larger picture or the sum of all these events.

     For us to understand why changes in interest rates cause changes in real Gross Domestic Product, we need to know how lower interest rates influence decisions, such as the decision of how much to save. Once we understand how an individual will change their behavior we will then understand the large scale relationships in an economy.

     As we study macroeconomics we'll try to analyze the goals of macroeconomics which is to increase output, decrease the number of unemployed and to decrease inflation. 

     Aggregate output is greatly assosiated with GDP (Gross Domestic Product) and GNP (Gross National Product). Both GDP and GNP are concerned with the total market value of all final goods and services within a given period by factors of production. The difference lies in the inclusion of the products and services being produced. If the product is produced within the country this product is included in computing the GDP and if this product or the business is owned by a country's citizen it is included in the GNP, regardless of where this output is produced. But computing these data is not enough. We need to compare the GNP to our base year to know if there is really an increase in our output.

     

    Many people look for jobs but only the lucky ones get hired. Some of these people are employed in jobs that don't match their skills and professions. This is what we call underemployment or mismatching of jobs. And still, some fail to find suitable jobs for them, thus becoming unemployed. From this scenario then, unemployment arises.

    Increase in the price of NFA rice from P18/kilo to P30/kilo, of pork from P100/kilo to P160/kilo, of sugar from P30/kilo to P55/kilo, of gasoline from P35/L to P42/L and of the minimum fare from P7 to P8. 

   These are just some of the goods and services that have been continuously increasing with regards to their prices. This phenomenon is known as inflation which is the increase in the overall price level of output. 



     Is the Economic Circular Flow the same as the circular flow in our body? They are somehow similar but the difference is that blood is flowing in our veins while income and expenditures are flowing in our economy. Individuals who work for businesses, rent their property, manage and own their busineses are activities that generate income known as flows of payments from businesses to households. Then households spend their income on consuming goods, paying taxes to the government and on acquiring assets like stock certificates and bank CDs that flow through the financial sector and are then used to buy investments. All of these are expenditures. The flow of all income and expenditures are equal. Someone's expenditures on products become  someone else's income and someone's income turns either into spending or savings which may be invested to generate dividends - another form of income. With all these happenings, the flow continues and is never ending.

 Aggregate Supply and Aggregate Demand  tell about the total supply and total  demand in the whole economy. Aggregate Demand is the demand for all products and Aggregate Supply is the supply of all products.      

We need to study these so that we would know how much product to supply to avoid severe shortage or surplus in the goods and services available in the market. In an economy, there should be a consumer and a producer because not all products can be provided by an individual. There should be interdependence. As they say, "no man is an island".

     And that concludes our simple explanation of the fundamentals of macroeconomics. Well we guess the subject isn’t boring at all. Even with all these confusing topics, it can still be interesting. We have made the discussion creative through pictures so as not to bore future readers. 

MACROECONOMICS is FUN!