Macroeconomics Worktext

Jameson N. Estrada
Pangasinan State University
WO
R K T E X T
HOUSEHOLD FIRM
GOVERNMENTREST OF THE WORLD
MACROECONOMICS
PANGASINAN STATE UNIVERSITY
LINGAYEN CAMPUS
Lingayen, Pangasinan
Republic of the Philippines

Macroeconomics with the course code Econ 102 focuses on the structure, behavior, performance and
decision-makings in the economy as a whole. It provides a comprehensive understanding on how the
economy works and how different economic agents as a whole respond to changes in the economic
environment by analyzing macroeconomic concepts and variables such as national income, consump-
tion and investment, inflation, unemployment, aggregate demand and supply, monetary and fiscal
policy, economic growth, poverty, income inequality and international trade.
This worktext is intended for use by the students of BPA program taking up the subject Econ 102
with the objective of providing them with a comprehensive understanding about macroeconomics.
Likewise, it has been designed as an instrument for learning development and assessment, providing
students with a practical approach to applying the knowledge learned in the lectures. Each worktext
covers exercises that is built upon the lessons of all the chapters with the following course outcomes:
1. Comprehend the nature and scope of macroeconomic analysis.
2. Introduce fundamental concepts necessary to understand macroeconomics.
3. Apply various measurements and approaches in the determination of national income and
appreciate the important role of national income accounting to national economy.
4. Understand how inflation affects the economy as a whole.
5. Know the concept of unemployment and evaluate government policies to deal with the
different types of unemployment.
6. Analyze the various determinants of consumption spending and investment.
7. Analyze the model of aggregate expenditure function.
8. Understand how the aggregate demand and aggregate supply in the economy are
determined.
9. Analyze how macroeconomic equilibrium is determined using AD-AS model.
10. Examine the concept of money and determine how monetary policy affects prices, output,
and employment.
11. Appreciate fiscal policy as an economic tool to assess the effects of tax impositions and
government spending.
12. Understand the various economic growth theories and examine economic growth issues
being experienced by less-developed and developed economies.
13. Determine the causes and consequences of poverty and understand why and how income
inequality exists.
14. Develop an awareness on international economic theories, policies, trends, and issues
Bear in mind that it takes sustained effort – and some dedicated patience – to study and learn the
subject. But, it is assured that the effort is well worth it. It is hoped this modest work helps you. So, the
best of luck as you begin your journey in answering the worktext exercises!
PREFACE
ii

INTRODUCTION TO ECONOMICS
NATIONAL INCOME ACCOUNTING
MONEY AND FISCAL POLICY
MACROECONOMIC EQUILIBRIUM
AGGREGATE DEMAND AND SUPPLY
AGGREGATE EXPENDITURE MULTIPLIERS
CONSUMPTION FUNCTION AND INVESTMENT
UNEMPLOYMENT
INFLATION
FISCAL POLICY
ECONOMIC GROWTH AND DEVELOPMENT
POVERTY AND INCOME INEQUALITY
INTERNATIONAL TRADE
52
REFERENCES
FUNDAMENTAL ECONOMIC CONCEPTS 16
20
25
32
36
42
49
1
57
61
64
69
74
78
MACROECONOMICS (ECON 102) SYLLABUS
84
C
T
N
O
E
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iii

BACHELOR OF PUBLIC ADMINISTRATION
COURSE SYLLABUS
2ndSemester, S.Y 2016 – 2017
COURSE INFORMATION
COURSE CODE Econ 102
COURSE TITLE MACROECONOMICS
COURSE TYPE Lecture
CREDIT UNITS 3 units
TIME FRAME 3 hours / week (54 Hours)
PREREQUISITE Econ 101 – Microeconomics w/ TAR
VISION, MISSION, GOALS AND OUTCOMES
UNIVERSITY VISION To become an ASEAN Premier State University by 2020
UNIVERSITY MISSION The Pangasinan State University, through instruction, research, extension and production, commits to
develop highly principled, morally upright, innovative and globally competent individuals capable of meeting
the needs of industry, public service and civil society.
UNIVERSITY
STRATEGIC GOALS
1. Excellent student learning and career development
2. Strong research culture and technology transfer
3. Good governance
4. Sustainable social responsibilities
5. Quality human resources management and development
6. Efficient management of assets and finances
7. Responsive to Globalization and Diversity
8. Customer-focused
UNIVERSITY
OUTCOMES
The Pangasinan State University Institutional Learning Outcomes (PSU ILO) are the qualities that
PSUniansmust possess.
These outcomes are anchored on the following core values: Accountability and Transparency, Credibility
and Integrity, Competence and Commitment to Achieve, Excellence in Service Delivery, Social and
Environmental Responsiveness, and Spirituality – (ACCESS). Anchored on these core values, the PSU
graduates are able to:
1. Demonstrate through institutional mechanisms, systems, policies, and processes which are reflective of
transparency, equity, participatory decision making, and accountability;
2. Engage in relevant, comprehensive and sustainable development initiatives through multiple
perspectives in decisions and actions that build personal and professional credibility and integrity.
3. Set challenging goals and tasks with determination and sense of urgency which provide continuous
improvement and producing quality outputs leading to inclusive growth;
4. Exhibit life-long learning and global competency proficiency in communication skills, inter/interpersonal
skills, entrepreneurial skills, innovative mindset, research and production initiatives and capability in
meeting the industry requirements of local, ASEAN and international human capital market through
relevant and comprehensive programs;
PANGASINAN STATE UNIVERSITY
LINGAYEN CAMPUS
1

5. Display, socially and environmentally responsive organizational culture, which ensures higher
productivity among the university constituents and elevate the welfare of the multi-sectoral communities
and;
6. Practice spiritual values and morally upright behavior which promote and inspire greater harmony to
project a credible public image.
PSU
LINGAYENCAMPUS
OUTCOMES
PROGRAM
OUTCOMES
The BPA program is designed to produce graduates to
PROGRAM OUTCOMES PERFORMANCE INDICATORS
Integrate theories,
concepts, and principles of
public administration in the
practice of good
governance
 Prepare policy report
 Prepare resolutions, sample ordinances and case digests
 Prepare a position paper on administrative strategies and practices
 Formulate comprehensive organizational mandate
Display responsive,
adaptive and visionary
leadership
 Identify locally-determined development priorities
 Conceptualize leadership training/workshops for local and sectoral groups
and civic associations
 Propose a working plan that bridge the gap between national priorities and
local interests
 Conduct community outreach programs and advocacy campaigns
 Develop framework for code of conduct and ethical practices
 Prepare policy review on politico-economic integration
Show expertise,
transparency and
accountability in program,
project planning and
implementation
 Propose community-driven development decision tolls for development
programmes
 Prepare program and project concept plans
 Prepare MOA/MOU intended for program or project partnerships and other
linkages
 Prepare financial plan
 Participate in social responsibility mechanisms like public hearing and
budget scrutiny group
Apply effective and
efficient tools in
management functions
(planning, organizing,
leading and controlling)
 Conduct needs assessment survey
 Design efficient resource management plan
 Prepare incentive policies
 Design interoperability framework in e-government initiatives
 Conduct stallholders meeting
Value scholarly researches
in the field of public
administration and
governance
 Use statistical tools and scientific approaches in data management
 Conduct and/or defend researches
 Participate in research dissemination
Demonstrate capability in
good interpersonal and
communication skills
 Express ideas confidently in oral and written form
 Develop a structural flow of communication
 Participate in seminars on human relations, personality development and
holistic wellness
2

COURSE DESCRIPTION
The course focuses on macroeconomics which deals with the performance, structure, behavior, and decision-making of the economy as
a whole. It provides a comprehensive understanding on how the economy works and how different economic agents as a whole respond
to changes in the economic environment.by contemplating macroeconomic concepts and variables such as national income,
consumption and investment, inflation, unemployment, aggregate demand and supply, monetary and fiscal policy, economic growth,
poverty, income inequality and international trade.
COURSE OUTCOMES
The course demonstrates a comprehensive understanding of fundamental macroeconomic theory. Specifically, at the end of the course,
students are expected to:
1. Comprehend the nature and scope of macroeconomic analysis.
2. Introduce fundamental concepts necessary to understand macroeconomics.
3. Apply various measurements and approaches in the determination of national income and appreciate the important role of
national income accounting to national economy.
4. Understand how inflation affects the economy as a whole.
5. Know the concept of unemployment and evaluate government policies to deal with the different types of unemployment.
6. Analyze the various determinants of consumption spending and investment.
7. Analyze the model of aggregate expenditure function.
8. Understand how the aggregate demand and aggregate supply in the economy are determined.
9. Analyze how macroeconomic equilibrium is determined using AD-AS model.
10. Examine the concept of money and determine how monetary policy affects prices, output, and employment.
11. Appreciate fiscal policy as an economic tool to assess the effects of tax impositions and government spending.
12. Understand the various economic growth theories and examine economic growth issues being experienced by less-developed
and developed economies.
13. Determine the causes and consequences of poverty and understand why and how income inequality exists.
14. Develop an awareness on international economic theories, policies, trends, and issues.
COURSE LEARNING PLAN
Course
Outcome
Learning Outcomes Topics No. of
Hrs.
Teaching
and
Learning
Activities
Resource
Materials
Assess
ment
 State the vision, mission,
goals and core values of the
University
 Enumerate and explain the
objectives and learning
outcomes of the program
 Describe the course
information
 Explain the description of the
course
 Examine the outline /plan of
the course
 Comment on the
requirements and policies of
the course
 List the references and
supplemental readings to be
used in the course
COURSE ORIENTATION
1. Vision, Mission, Goals,
Guiding Philosophy and
Core Values of the
University
2. Program Outcomes
3. Course Information
4. Course Description
5. Course Outcomes
6. Course Outline
7. Course Requirements and
Course Polices
8. Course References and
Supplemental Readings
1 Lecture/Discu
ssion
 Syllabus
 Glass board,
marker and eraser
 Laptop and LED
Projector for
PowerPoint Slides
 Course Website at
www.psuecon.co
m
 E-learning (LMS)
site
 Quiz
3

CO1  Define macroeconomics and
explain economics as a
branch of economics
 Explain the relevance of
studying macroeconomics
 Distinguish between
microeconomics and
macroeconomics
 Explain that scarcity exists
because resources are finite
and wants are infinite
 Define opportunity cost and
analyze particular
circumstances to illustrate
the concept
 Examine the assumption of
rational economic decision
making
 Outline and explain the four
economic activities including
production, distribution,
exchange and consumption
 Distinguish between positive
and normative economics
 Define an economic model
and explain the process of
macroeconomic model
building in economics.
 Outline and differentiate the
different forms of economic
model
descriptive and analytical
model
 Explain the use of the ceteris
paribus assumption
 Describe a graph and explain
the use of graphs in
macroeconomic analysis
 Examine and interpret
rectangular coordinate
system (Cartesian plane) as
a way of representing
economic
relationship/variables
 Define variable and constant
dependent variable and
independent variable
 Distinguish between inverse
and direct relationship
 Define slope and calculate
the slope of a line
 Solve for x and y-intercept
 Express the general form of a
linear equation
 Find the equations of the line
using standard form, two-
point form, slope-intercept
form and intercept form
CHAPTER 1: NATURE AND
SCOPE OF
MACROECONOMICS
1. Macroeconomics Defined
2. Importance of Studying
Macroeconomics
3. Macroeconomics vs.
Microeconomics
4. Scarcity and Choice
5. Opportunity Cost
6. Economic Activities
7. Positive versus Normative
Economics
8. Circular Flow of Income
Model
9. Production Possibility
Frontier
10.Macroeconomic Model
Defined
11.Forms of Macroeconomic
Model
12.Descriptive and Analytical
Model
13.The Ceteris Paribus
Assumption
14.Graph: Its Meaning and
Uses
15.Rectangular Coordinate
System
16.Variable and Constant
17.Dependent Variable and
Independent Variabl
18.Inverse vs. Direct
Relationship
19.Slope of a Line
20.Linear Equation
3  Lecture/Dis
cussion
 Problem
Solving
 Web-based
Instruction
 E-Learning
(LMS)
 Books and E-
books
 Worktext
 Glass board,
marker and eraser
 Laptop and LED
Projector for
PowerPoint Slides
 Course Website
available at
www.psuecon.co
m
site at
www.psuecon.neo
lms.com
 Exercis
es
 Recitati
on
 Assign
ment
 Written
Quiz
4

CO2  Identify and explain the
different macroeconomic
goals including economic
growth, price stability, full
unemployment and
reasonable balance of trade
 Explain the roles of the four
sectors of the economic
including households, firms,
government and foreign
sector
 Describe and illustrate, using
a diagram, the circular flow of
funds in the macroeconomy
 Explain, using a business
cycle diagram, that
economies typically tend to
go through a cyclical pattern
characterized by the phases
of the business cycle
 Explain the long-term growth
trend in the business cycle
diagram as the potential
output of the economy
 Explain the phases of
business cycle including
recession, recovery, peak
and expansion
 Discuss the chronology of
main events and timeline of
history of macroeconomic
thought
 Outline the economic thinking
and explain the contributions
of John Maynard Keynes in
macroeconomic economic
thought
 Explain some significant
theories of Keynesian
economics.
CHAPTER 2 :
INTRODUCTION TO
MACROECONOMICS
1. Macroeconomic Goals
 Economic Growth
 Price stability
 Full unemployment
 Reasonable balance of
trade
2. Four Players/Actors of the
Economy
 Household
 Firms
 Government
 Foreign Sector
3. Circular Flow of Fund
Model in the
Macroeconomy
4. Production Possibility
Frontier
5. Business Cycle Defined
6. Phases of Business Cycle
 Peak
 Trough
 Recession
 Expansion
 Recovery
7. Business Cycle Indicators
 Leading Indicators
 Lagging
 Coincident Indicators
8. Three Sectors of the
Economy
 Agriculture
 Industry
 Services
4  Lecture/Dis
cussion
 Problem
Solving
 Web-based
Instruction
 E-Learning
(LMS)
 Books and E-
books
 Worktext
 Glass board,
marker and eraser
 Laptop and LED
Projector for
PowerPoint Slides
 Scientific
Calculator
 Course Website
available at
www.psuecon.co
m
site at
www.psuecon.neo
lms.com
 Exerci
ses
 Recitat
ion
 Assign
ment
 Written
Quiz
CO3  Define national income
accounting
 Explain the important role of
national income accounting
to national economy
 Define Gross Domestic
Product
 Outline the components of
GDP
 Describe consumption
spending, investment,
government expenditure
and net exports.
 Differentiate between GNP
and GDP
 Outline and explain the
things which are excluded in
the determination of
GDP/GNP
 Describe and calculate price
index
 Explain each of the three
approaches to national
income accounting including
industrial origin, expenditure
CHAPTER 3 : NATIONAL
INCOME ACCOUNTING
1. Definition of National
Income Accounting
2. Importance of National
Income Accounting
3. Definition of Gross
Domestic Product
4. Components of GDP
 Consumption
Spending
 Investment
 Government
Expenditure
 Net Exports
5. Gross Domestic Product
vs. Gross National Product
6. Measuring Economic
Growth
7. What are excluded in
GDP?
 Intermediate goods
 Used goods or
Second-hand Sales
6  Lecture/Dis
cussion
 Problem
Solving
 Web-based
Instruction
 E-Learning
(LMS)
 Case Study
 Debate
 Books and E-
books
 Worktext
 Glass board,
marker and eraser
 Laptop and LED
Projector for
PowerPoint Slides
 Scientific
Calculator
 Course Website
available at
www.psuecon.co
m
site at
www.psuecon.neo
lms.com
 Exerci
ses
 Recitat
ion
 Assign
ment
 Written
Quiz
5

approach and income
approach
 Identify and describe the
various components of
expenditure and income
approach
 Compare the sum-of-value-
added and value-of-final-
output methods of
calculating GDP.
 Compare nominal and real
GDP, and calculate and
interpret the GDP deflator
 Calculate hypothetical GDP
data using industrial origin,
expenditure approach and
income approach.
 Identify other
indicators/measures of
national accounting such as
per capita income, etc.
 Compare GDP, national
income, personal income,
and personal disposable
income
 Examine the GDP of the
Philippines throughout the
years
 Underground
economy and black
market
 Financial
transactions (stocks
and bonds)
 Household
production and
consumption
 Transfer payments
8. Nominal GDP versus Real
GDP
9. GDP Chain Price Index
10.Approaches to Calculating
GDP
 Expenditure
Approach
 Income Approach
 Industrial Origin
Approach
11. Component Variables of
Expenditure Approach and
Industrial Origin Approach
12. GDP Limitations and
Shortcomings
13. Other National Account
Measures
 National Income
 Personal Income
 Disposable Income
 GDP Per Capita
14. GDP and Economic
Growth of the Philippines:
An Analysis
CO4  Define inflation
 Calculate inflation rate
 Distinguish between and
deflation.
 Explain that inflation and
deflation are typically
measured by calculating a
consumer price index (CPI)
 Calculate the CPI and
inflation rate from a set of
data
 Describe the three strains
of inflation
 Explain, using a diagram,
the demand-pull inflation
 Explain, using a diagram,
the cost-push inflation
 Discuss the possible
economic effects and
consequences of inflation
 Determine the gainers and
the losers during inflation
 Describe the relationship
exists between inflation and
unemployment using the
Philips curve
CHAPTER 4 : INFLATION
1. Inflation Defined
2. Price vs. Price Level
3. Measuring Price Level
4. Consumer Price Index
5. Calculating the CPI
6. Calculating the Inflation
Rate
7. Deflation Defined
8. Three Strains of Inflation
 Moderate Inflation
 Galloping Inflation
 Hyperinflation
9. Economics Effects of
Inflation
 Purchasing Power
 Nominal and Real
Income
 Nominal and Real
Interest Rate
 Nominal Wage and
Real Wage
10.Causes of Inflation
11.Sources of Inflation
 Demand-pull Inflation
 Cost-push Inflation
12. Gainers and Losers of
Inflation
14. Inflation in the Philippines
4  Lecture/Dis
cussion
 Problem
Solving
 Web-based
Instruction
 E-Learning
(LMS)
 Case Study
 Books and E-
books
 Worktext
 Glass board,
marker and eraser
 Laptop and LED
Projector for
PowerPoint Slides
 Scientific
Calculator
 Course Website
available at
www.psuecon.co
m
site at
www.psuecon.neo
lms.com
 Exercis
es
 Recitati
on
 Assign
ment
 Written
Quiz
6

 Evaluate government
policies to deal with the
different types of inflation
 Examine how Philippine
economy experiences
inflation
CO5  Define the concept of
unemployment
 Explain how the
unemployment rate is
calculated
 Calculate the
unemployment rate from a
set of data
 Define labor force
 Examine the members and
non-members of the labor
force
 Describe and calculate the
labor force participation rate
 Identify who are
unemployed and employed
individuals
 Explain the reasons for
unemployment
 Describe the condition of
underemployment
 Explain the natural rate of
full employment
 Describe, using examples,
the meaning of types of
unemployment such as
frictional, structural,
seasonal and cyclical
unemployment
 Discuss possible economic
consequences of
unemployment
 Evaluate government
policies to deal with the
different types of
unemployment
 Analyze the demand and
supply of labor
 Explain how minimum wage
implements in the labor
market
 Analyze the labor and
unemployment problems in
the Philippines
CHAPTER 5 :
UNEMPLOYMENT
1. The Goal of Full
Employment
2. Definition of
Unemployment
3. Unemployment and
Employment Rates
Defined
4. Calculating the
Unemployment Rate
5. Labor Force
6. Composition of the Labor
Force
7. The Employed Individuals
8. People Excluded in the
Labor Force
9. Reasons for
Unemployment
 Job Loser
 Job Leaver
 Re-entrant
 New Entrant
10.Labor Force Participation
Rate
11.Underemployment
12.Natural Rate of
Unemployment
13.Types of Unemployment
 Frictional
unemployment
 Cyclical
Unemployment
 Structural
unemployment
 Seasonal
unemployment
 Technological
unemployment
14.Effects of Unemployment
15.Demand and Supply of
Labor
16.Minimum Wage
17.Philips Curve
18.Misery Index
19.Unemployment and Labor
Force in the Philippines
4  Lecture/Dis
cussion
 Problem
Solving
 Web-based
Instruction
 E-Learning
(LMS)
 Case Study
 Books and E-
books
 Worktext
 Glass board,
marker and eraser
 Laptop and LED
Projector for
PowerPoint Slides
 Course Website
available at
www.psuecon.co
m
site at
www.psuecon.neo
lms.com
 Exerci
ses
 Recitat
ion
 Assign
ment
 Written
Quiz
CO6  Describe the theory of
consumption
 Define consumption
function
consumption and
disposable income
CHAPTER 6 :
CONSUMPTION FUNCTION
AND INVESTMENT
1. Introducing Classical
Theory and the
Keynesian Revolution
5  Lecture/Dis
cussion
 Problem
Solving
 Web-based
Instruction
 Books and E-
books
 Worktext
 Glass board,
marker and eraser
 Exercis
es
 Recitati
on
 Assign
ment
7

 Calculate the disposable
income, consumption and
savings using hypothetical
data be able to derive the
consumption function
 Describe autonomous
 Describe marginal
propensity to consume
(MPC) as slope of the
 Explain and calculate the
savings function
 Describe marginal
propensity to save (MPS)
as slope of the savings
function
 Outline and analyze the
determinants of
consumption
 Determine the various
investment expenditure
 Describe and graph the
investment demand curve
 Determine the
determinants of
investment
 Calculate the aggregate
expenditure function
2. The Theory of
Consumption
3. Consumption Function
4. Consumption and
Disposable Income
5. Autonomous
Consumption
6. Marginal Propensities to
Consume
7. Calculating Consumption
Function
8. Graphical Representation
of the Consumption
Function
9. Savings Function
10. Marginal Propensities to
Save
11. Determinants of
Consumption
 Expectations
 Wealth
 Price Level
 Interest Rate
 Stock of Durable
Goods
12. Investment Expenditures
13. Investment Demand
Curve
14. Determinants of
Investment
15. Investment as
Autonomous Expenditure
 Expectations
 Technological Change
 Capacity Utilization
 Business Taxes
16. Aggregate Expenditure
Function
17. Calculating Aggregate
Expenditure Function
 E-Learning
(LMS)
 Case
Analysis
 Laptop and LED
Projector for
PowerPoint Slides
 Course Website
available at
www.psuecon.co
m
site at
www.psuecon.neo
lms.com
 Written
Quiz
CO7
 Explain the aggregate
expenditure model
 Describe government
spending and net exports
as components of
aggregate expenditure
model
 Make a tabular analysis of
Keynesian equilibrium
 Graph the aggregate
expenditure function
model
 Describe the spending
multiplier effect
 Calculate the spending
multiplier
 Describe and analyze the
recessionary gap
 Describe and analyze the
inflationary gap
CHAPTER 7: AGGREGATE
EXPENDITURE
MULTIPLIERS
1. The Aggregate
Expenditure Model
2. Adding Government and
International Trade to the
Keynesian Model
3. Government Spending
and Net Exports
4. Tabular Analysis of
Keynesian Equilibrium
5. Graphical Analysis of
Keynesian Equilibrium
6. The Spending Multiplier
Effect
7. Spending Multiplier
Defined
3  Lecture/Dis
cussion
 Problem
Solving
 Web-based
Instruction
 E-Learning
(LMS)
 Books and E-
books
 Worktext
 Glass board,
marker and eraser
 Laptop and LED
Projector for
PowerPoint Slides
 Scientific
Calculator
 Course Website
available at
psuecon.com
site at
www.psuecon.neo
lms.com
 Exercis
es
 Recitati
on
 Assign
ment
 Written
Quiz
8

8. Calculating the Spending
Multiplier
9. Recessionary Gap
10. Inflationary Gap
CO8  Explain the relevance of
AD-AS model
 Define aggregate demand
 Illustrate the aggregate
demand curve
 Explain the reasons of the
aggregate demand’s
shape as described by real
balances effect, interest-
rate effects and net-export
effects
 Determine and explain the
various determinants of
aggregate demand
including consumption,
investment, government
spending and net exports
 Illustrate graphically the
change in aggregate
demand curve
 Define aggregate supply
 Distinguish between short-
run and long-run
aggregate supply
 Discuss the three ranges
of aggregate supply curve
including Keynesian
range, intermediate range
and classical range
 Determine and explain the
various determinants of
aggregate demand
including resource prices,
taxes, technological
change, subsidies and
regulation
CHAPTER 8: AGGREGATE
DEMAND AND
AGGREGATE SUPPLY
1. Aggregate Demand
Defined
2. The Aggregate Demand
Curve
3. Reasons for The
Aggregate Demand
Curve’s Shape
 Real Balances
Effect
 Interest-rate
Effects
 Net Export Effects
4. Changes in Aggregate
Quantity Demanded:
Price-level Effects
5. Changes in Aggregate
Demand: Non-price
Determinants
 Consumption
function
 Investment
 Government
Spending
 Net Exports
6. Aggregate Supply
Defined
7. Short-Run versus Long-
run Aggregate Supply
8. Three Ranges of the
Aggregate Supply Curve
 Keynesian range
 Intermediate
range
 Classical range
9. Non-Price Determinants
of Aggregate Supply
 Resource Prices
 Taxes
 Technological
change
 Subsidies
 Regulation
4  Lecture/Dis
cussion
 Problem
Solving
 Web-based
Instruction
 E-Learning
(LMS)
10. Rea
l
Bal
anc
es
Effe
ct
11. Inte
rest
-
rate
Effe
cts
12. Net
Exp
ort
Effe
cts
 Books and E-
books
 Worktext
 Glass board,
marker and eraser
 Laptop and LED
Projector for
PowerPoint Slides
 Scientific
Calculator
 Course Website
available at
www.psuecon.co
m
site at
www.psuecon.neo
lms.com
 Exercis
es
 Recitati
on
 Assign
ment
 Written
Quiz
CO9  Explain the
macroeconomic trends
and fluctuations
 Describe short-run
macroeconomic
equilibrium
CHAPTER 9:
MACROECONOMIC
EQULIBRIUM
1. Explaining
Macroeconomic Trends
and Fluctuations
4  Lecture/Dis
cussion
 Problem
Solving
 Web-based
Instruction
 E-Learning
(LMS)
9

 Analyze how short-run
macroeconomic
equilibrium is achieved
 Define long-run
macroeconomic
equilibrium
 Analyze how long-run
macroeconomic
equilibrium is achieved
 Explain the business cycle
un AS-AD model
 Analyze the fluctuations in
aggregate demand and
aggregate supply
2. Short-Run
Macroeconomic
Equilibrium
3. Long-Run
Macroeconomic
Equilibrium
4. Economic Growth and
Inflation in the AS-AD
5. Model
6. The Business Cycle in
the AS-AD Model
7. Fluctuations in Aggregate
Demand
8. Fluctuations in Aggregate
Supply
CO10  Define money
 Understand the
development and
importance of money
 Describe functions of
money as medium of
exchange, unit of account
and store of value
 Enumerate the
characteristics of money
 Identify and explain each
type of money
 Describe theories of the
demand for and supply of
money
 Define money supply
 Distinguish between M1
and M2
 Explain the money creation
process
 Define monetary policy
 Explain the three theories
concerning the demand for
money
 Illustrate the demand for
money curve
 Analyze the equilibrium
interest rate
 Explain the effects of
changes in money supply
 Determine how monetary
policy affects prices, output
and employment
 Explain the concept of
equation of exchange
 Describe the velocity of
money
quantity theory of money
CHAPTER10: MONEY AND
MONETARY POLICY
1. Money Defined
2. Evolution of Money
3. Characteristics of Money
4. Functions of Money
 Medium of
Exchange
 Unit of Account
 Store of Value
5. Types of Money
 Commodity Money
 Fiat Money
 Paper Money
 Bank Money
 Electronic Money
6. Money Supply Definition
7. Measuring and
Determining the Money
Supply
8. M1 and M2
9. Money Creation
10. Monetary policy Defined
11. The Demand for Money
 Transactions
Demand for Money
 Precautionary
Demand for Money
 Speculative
Demand for Money
12. The Demand for Money
Curve
13. Equilibrium Interest Rate
14. The Effects of Changes in
Money Supply
15. How Monetary Policy
Affects Prices, Output,
and Employment
16. The Equation of
Exchange
17. Velocity of Money
18. Quantity Theory of Money
4  Lecture/Dis
cussion
 Problem
Solving
 Web-based
Instruction
 E-Learning
(LMS)
 Books and E-
books
 Worktext
 Glass board,
marker and eraser
 Laptop and LED
Projector for
PowerPoint Slides
 Scientific
Calculator
 Course Website
available
atpsuecon.com
site at
www.psuecon.neo
lms.com
 Exercis
es
 Recitati
on
 Assign
ment
 Written
Quiz
10

CO11  Define fiscal policy
 Describe taxes and
government spending
 Describe the roles and
objectives of fiscal policy
 Describe the tools of fiscal
policy, including their
advantages and
disadvantages.
 Describe the arguments for
and against being
concerned with the size of a
fiscal deficit relative to gross
domestic product (GDP).
 Explain the implementation
of fiscal policy and the
difficulties of
implementation.
 Determine whether a fiscal
policy is expansionary or
contractionary.
 Explain the interaction of
monetary policy and fiscal
policy.
CHAPTER 11: FISCAL
POLICIES
1. Fiscal Policy Defined
2. Fiscal Policy: The Basics
a. Taxes
b. Government
Spending
c. Transfers and
Borrowings
3. The Government Budget
and Total Spending
4. Supply-Side Effects of
Fiscal Policy
5. Expansionary and
Contractionary Fiscal
Policy
6. The Multiplier
7. Using the Multiplier to
Estimate the Influence of
Government Policy
8. Multiplier Effects of an
Increase in Government
Spending
9. Multiplier Effects of
Changes in Government
Transfers and Taxes
10. How Taxes Affect the
Multiplier
4  Lecture/Dis
cussion
 Problem
Solving
 Web-based
Instruction
 E-Learning
(LMS)
CO12  Define economic growth
 Calculate the economic
growth rate
 Describe and calculate GDP
per capita
 Explain the theories of
economic growth
economic growth and
economic development
 Outline and describe the
various factors that
determine economic growth
and development
 Compare and differentiate
less-developed with
developed countries
 Enumerate the
characteristics of both less-
developed and developed
countries
CHAPTER 12 : ECONOMIC
GROWTH AND ECONOMIC
DEVELOPMENT
1. Economic Growth
Defined
2. Calculating the Economic
Growth Rate
3. GDP per Capita
4. Economic Growth
Theories
 Harrod–Domar
model
 B. Solow–Swan
model
 C. Endogenous
growth theory
5. Economic Growth vs.
Economic Development
6. Key Categories and
Factors that Determine
Economic Growth and
Development
7. Comparing Less-
developed and
Developed Countries
8. Characteristics of Less-
Developed Countries
9. Characteristics of
Developed Countries
4  Lecture/Dis
cussion
 Problem
Solving
 Web-based
Instruction
 E-Learning
(LMS)
 Books and E-
books
 Worktext
 Glass board,
marker and eraser
 Laptop and LED
Projector for
PowerPoint Slides
 Scientific
Calculator
 Course Website
available
atpsuecon.com
site at
www.psuecon.neo
lms.com
 Exercis
es
 Recitati
on
 Assign
ment
 Written
Quiz
11

CO13  Define poverty
 Differentiate absolute
poverty from relative
poverty
 Describe and calculate GDP
per capita
 Explain how poverty line is
determined
 Explain the consequences
and effects of poverty
 Discuss the vicious circle of
poverty
 Describe some facts about
income distribution
 Define income inequality
 Enumerate the sources of
income of people
 Determine how to measure
income inequality using
Lorenz Curve and Gini
Coefficient
 Explain the graphical
representation of Lorenz
Curve and Gini Coefficient
 Outline and explain the
factors that contribute to
income inequality
CHAPTER 13 : POVERTY
AND INCOME INEQUALITY
1. Definition of Poverty
2. Absolute Poverty vs.
Relative Poverty
3. Poverty income
threshold or poverty
line,
4. Causes of Poverty
5. Consequences and
Effects of Poverty
6. The Vicious Circle of
Poverty
7. Income Distribution
8. Definition of Income
Inequality
9. Sources of Personal
Income
10. Measuring Income
Inequality
11. The Lorenz Curve
12. The Gini Coefficient
13. Graphical
Presentation of
Lorenz Curve and
Gini Coefficient
14. Factors Contributing
to Income Inequality
CO9  Define trade
 Differentiate domestic trade
from international trade
 Describe the benefits and
costs of international trade.
 Describe static gains and
dynamic gains from trade
 Comprehend the
importance of international
trade to an economy’s
growth
comparative advantage and
absolute advantage
 Explain the Ricardian and
Heckscher–Ohlin models of
trade and the source(s) of
comparative advantage in
each model.Analyze the
economic basis of
international trade
 Describe the different
barriers to trade
protectionism and discuss
the arguments in support
for protectionism
 Identify and understand
several economic issues
pertaining to international
trade that may affect the
nation
CHAPTER 14:
INTERNATIONAL TRADE
1. Trade defined
2. Definition of International
Trade
3. Domestic Trade vs.
International Trade
4. Difference between Static
Gains and Dynamic Gains
5. Economic Basis of Trade
6. Comparative Advantage
and Gains from Trade
7. International Trade
Theories
8. Balance of Trade
9. Exports and Imports
10. Barriers to Trade
 Tariff
 Import Quota
 Export Subsidy
 Embargo
11. Protectionism
12. Arguments in support for
Protectionism
13. Economic Issues of
International Trade
14. Capital Flows and the
Balance of Payments
15. Foreign Exchange
16. The Foreign Exchange
market
17. Exchange Rates Defined
4  Lecture/Dis
cussion
 Problem
Solving
 Web-based
Instruction
 E-Learning
(LMS)
 Books and E-
books
 Worktext
 Glass board,
marker and eraser
 Laptop and LED
Projector for
PowerPoint Slides
 Scientific
Calculator
 Course Website
available at
www.psuecon.co
m
site at
www.psuecon.neo
lms.com
 Exercis
es
 Recitati
on
 Assign
ment
 Written
Quiz
12

 Describe the balance of
payments accounts,
including their components
 Explain how decisions by
consumers, firms, and
governments affect the
balance of payments
 Describe functions and
objectives of the
international organizations
that facilitate trade,
including the World Bank,
the International Monetary
Fund, and the World Trade
Organization
globalization
18. The Fluctuations of
Exchange Rates
19. Peso vs. Dollar
20. International Trade
Organizations
21. Multinational Enterprises
22. Globalization
COURSE REQUIREMENTS
1. Pass final and midterm exams, quizzes and worksheet exercises.
2. At least 80% class attendance rate.
3. Submission of all homework assignments.
4. Submission of a research paper/term paper.
5. Registration and subscription in the course webpage at www.psuecon.com
6. Enrolment in the E-learning system at www.psuecon.neolms.com
A. LECTURES
Three-hour lecture will be spent each week. You are encouraged to actively ask questions at any time and answer questions during
class lectures. For each lecture, there will be provided powerpoint slides covering the main points, which will be published on the
course web page. Should there be queries you wish to raise in lectures, whether about the course organization or about materials
covered, you are welcome to come to see me during office hours or email me.
B. COURSE WEBSITE ACCESS
A course website is maintained which will be used round the year to communicate all the course resources to you including syllabus,
homework, class notes, worktext exercises, lecture slides, online tests and links to suggested reading materials. You are
encouraged to register or subscribe to gain full access to all the website materials. You should also frequently access the course
web site to find updated course information and materials. The site is available at www.psuecon.com.
C. E-LEARNING ENROLMENT
You are required to create an account and enroll the course in the E-learning system which can be accessed at
www.psuecon.neolms.com. This is the portal for the sending of your softcopy assignment and term papers. Here you can download
and access course resources, take online quiz and exam, read class announcement, post queries and comments, etc.
CLASS POLICIES
A. ABSENCES AND TARDINESS
Every student is required to attend his classes regularly and punctually. Absence or persistent tardiness for more than 20% of the
total number of class meetings during the entire course shall be sufficient reason for disqualifying a student from taking final
examination or for dropping the student without credit. A student who is late for class for at least 10 minutes will be marked as absent.
A student will incur an absence for every 3 times that he is tardy.
13

B. MAKE-UP EXAM
Every student is required to attend the final exam, midterm exam, and at least five quizzes. If he is absent on days when tests are
scheduled, he should notify me in advance and bring documentation of the excuse upon returning to class. Unexcused absences
from exams will result in a zero grade. Make–up exams will be arranged only under extraordinary circumstances. Acceptable or valid
reasons for missing an exam include religious observances, athletic trips, illness and urgent circumstances beyond your control.
Makeups must occur within one week of the regularly scheduled exam or quiz, otherwise a zero score will be given.
C. HOMEWORK POLICY
There will be 6 homework assignments (3 for midterm and 3 for final). Each assignment is worth 30 points. These assignments will
be posted on the course website and are mostly due on Mondays in the beginning of class. Any assignment can be late for up to 1
day without penalty. Late homework for two to three days loses 10 points. After 4 days, zero credit is given for late assignments.
D. ACADEMIC HONESTY
All students are expected to be academically honest. Cheating, plagiarisms, lying, theft and other forms of unethical behavior will
not be tolerated. Any student suspected or found guilty of academic dishonesty in this course will be handled according to the
procedures set out in the PSU Student Handbook.
GRADING SYSTEM
The grades for this course will be based on preliminary and semi-final, midterm and final exams, quizzes, worktext exercises,
recitation, homework and a term paper. The course grade will be determined as follows:
Midterm / Final Exam 25%
Preliminary/Semi-Final Exam 15%
Quizzes / Exercises 30%
Recitation 10%
Homework 10%
Term Paper /Project 10%
TOTAL 100%
COURSE REFERENCES AND SUPPLEMENTAL READINGS
A. BOOKS AND E-BOOKS
Arnold, Roger, ECONOMICS 11TH
EDITION, South-Western, Cengage Learning, Mason, USA, 2014
Baumol, William J. et. al. MACROECONOMICS: PRINCIPLES AND POLICY, 11th Edition, South-Western Cengage Learning,
USA, 2009
Brue, et,al, Economics: Principles, Problems and Policies, 18th
Edition, McGraw-Hill Irwin, USA, 2009
Brue, Mc Connell MACROECONOMICS Boston, McGraw-Hill Irwin, USA, 2005
Costalles, Achilles et. al. ECONOMICS: PRINCIPLES AND APPLICATIONS, JMC Press, Inc. Quezon City, 2000
Dornbusch, Rudger, et. al. MACROECONOMICS 10th Edition., McGraw-Hill Education., Philippines, 2008
Estrada, Jameson N., MACROECONOMICS WORKTEXT, Lingayen, Pangasinan, 2016
Hubbard, R. Glenn, et. al., MACROECONOMICS, Pearson Education, Inc., USA, 2012
Mankiw, N. Gregory, PRINCIPLES OF MACROECONOMICS, 6th Edition, Cengage Learning, USA, 2012
McConnell Campbell, et. al. ECONOMICS: PRINICIPLES, PROBLEMS AND POLICIES, McGraw-Hill, New York, USA, 2009
McEachern, William A. MACROECONOMICS Phil. Edition, Cengage Learning Asia Pte. Ltd., Pasig City Philippines. 2012
Parkin, Michael, MACROECONOMICS, 10th Edition, Addeson-Wesley, MA, USA, 2012.
Paul Krugman, ECONOMICS 3rd Edition, Worth Publisher, New York City, USA, 2013
Ray, Margaret and Anderson, David, KRUGMAN’S MACROECONOMICS FOR AP, Worth Publishers, New York, USA, 2010.
Romer, David ADVANCED MACROECONOMICS 2nd Edition. Singapore, McGraw-Hill Companies Inc., 2001. Schiller, Bradley R.
14

THE MACROECONOMY TODAY Boston McGraw-Hill Irwin, 2006
Salazar, Erna M. GENERAL ECONOMICS, TAXATION AND LAND REFORM, IPM Publishing, Bulacan, Philippines, 2013.
Tucker, Irvin B., MACROECONOMICS FOR TODAY, 7th Edition, Edition, Cengage Learning, USA, 2012
B. ONLINE SORCES
http://bookboon.com/en/advanced-macroeconomics-ebook
http://economistsview.typepad.com/
http://faculty.wcas.northwestern.edu/~mdo738/textbook/main.pdf http://gregmankiw.blogspot.com/
http://homepage.univie.ac.at/robert.kunst/macro1.pdf http://visualizingeconomics.com/
http://welkerswikinomics.com/blog/
http://www.columbia.edu/~mu2166/UIM/notes.pdf
http://www.johncdriscoll.net/Macro_Lecture_Notes.pdf
http://www.saylor.org/site/textbooks/Principles%20of%20Macroeconomics.pdf
http://yuhangdong.weebly.com/uploads/1/8/5/8/18583500/macro__advanced_macroecon omics_4_romer_2011.pdf
https://www.ipfw.edu/dotAsset/142429.pdf https://www.khanacademy.org/
2.
INSTRUCTOR’S CONTACT INFORMATION
NAME JAMESON N. ESTRADA
OFFICE AB Economics Department Office
MOBILE NUMBER 0949-9756-345
EMAIL jameson.n.estrada@gmail.com
WEBSITE www.psuecon.com / www.jamesonestrada.com
CONSULTATION HOURS 8:00 – 12:00 (T/Th)
PREPARED BY:
JAMESON N. ESTRADA
Instructor I
CHECKED BY:
ERNA M. SALAZAR, MBA
Chairperson, AB Economics Department
NOTED
LORNA G. URBIZTONDO, Ed.D
Dean, College of Arts and Sciences
ARMANDO D. JUNIO, Ph.D
Campus Executive Director, PSU Lingayen
15

1
WORKTEXT 1 : FUNDAMENTAL ECONOMIC CONCEPTS Econ 102 – Macroeconomics
www.psuecon.com
EXERCISE 1
True or False. Determine whether each of the following
statements is true or false. Write T if it is true and F it is false on
the blank after the number.
1. Economics studies how individuals and societies choose
to allocate and use scarce resources to satisfy unlimited
wants. _________
2. Macroeconomics deals with the aggregate economic
variables of an economy. _________
3. The economy is a system that coordinates choices about
production and consumption. _________
4. Even if a country sustains economic growth, there would
still be scarcity. _________
5. Normative economics describes how the economy works
while positive economics prescribes how the economy
should work. _________
6. A household is an organization that produces goods and
services for sale. _________
7. If an economist wants to analyze how an economy works,
he applies a microeconomic model. _________
8. A variable is a quantity that has only one value.
_________
9. Economists seldom use models to help understand the
effects of an economic change. _________
10. Wants are unlimited and resources are limited.
_________
11. Capital is an economic resource which is paid in profit.
_________
12. Two variables are directly related if one variable rises as
the other falls. _________
13. The slope of a vertical line is zero. _________
14. An inverse relationship occurs when two variables
change in the same directions. _________
15. The slope of an upward-sloping line is positive.
_________
EXERCISE 2
Multiple Choice. Encircle the one alternative that best completes
the statement or answers the question.
16. Economics is best defined as the study of
A. the best way of eliminating scarcity.
B. how individuals make choices to cope with scarcity.
C. the economic issues affecting economy.
D. how society manages its unlimited resources.
E. how to operate a business.
17. Which of these is a macroeconomic statement?
A. The price of hamburger patties declined by 3 percent last
year.
B. The demand for fried chicken chain rose last year.
C. The productivity of factory workers decreased by 2 percent
last year.
D. The profits of Jollibee Food Corporation increased by 4%
last year.
E. The gross profits of all Philippine businesses were 182 billion
last year
18. Enjoying the cosmetic treatments at a beauty salon is an
example of
A. production. B. distribution.
C. exchange. D. competition.
E. consumption.
19. After the eggplants were harvested, the farmer directly sold
the produce to the market and bought eventually by buyers. In
this case, what economic activity is involved?
A. Production B. Distribution
C. Consumption D. Exchange
E. Supply
20. Each of these is an example of capital, except
A. a farmland. B. a tractor.
C. a delivery truck. D. an irrigation system.
E. a farm-to-market road.
21. The two categories of markets illustrated by the simple
circular flow model are
A. capital good market and consumer good market.
B. household market and firm market.
C. good market and factor market.
D. free market and controlled market.
E. real flow market and money flow market.
Lingayen Campus
WORKTEXT 1 : FUNDAMENTAL ECONOMIC CONCEPTS
Econ 102 – Macroeconomics
NAME: _______________________________________ SCORE: ___________________________________
YEAR AND COURSE: ___________________________ DATE: ____________________________________
16

www.psuecon.com
10 20 30 400
10
20
30
40
Y
X
A
B
1 2 3 4
1
2
3
4
–4 –3 –2 –1
–4
–3
–2
–1
AB
C
D
E
X
y
22. Resource payments which include wages, rent, interest, and
profits flow from
A. business firms to the government.
B. the government to business firms.
C. households to business firms.
D. business firms to households.
E. households to the government.
23. In constructing or building economic models, an economist
A. describes a necessary information.
B. uses mathematical equations.
C. formulates an assumption.
D. makes use of graphs to express information.
E. does all of these.
24. In understanding the concept of consumption function using an
equation, an economist should most likely use
A. a descriptive model. B. a mathematical model.
C. an assumption. D. a graphical model.
E. a normative statement.
25. In which quadrant does the point, (8, −3) be plotted?
A. Quadrant I B. Quadrant II
C. Quadrant III D. Quadrant IV
E. Quadrant V
26. Graphs are a convenient and revealing way to represent
economic relationships. Which of the following is most likely the
best graph to present two variables?
A. Pie chart B. Cartesian plane
C. Line graph D. Bar graph
E. Linear equation
27. What is the coordinate (ordered pair) of point A as shown in
the cartesian plane?
A. (−2, − 2)
B. (4, −2)
C. (3, 2)
D. (−4, 3)
E. (2,2)
28. When the government increases its public spending, the Gross
Domestic Product, rises. In this statement you can predict that the
relationship between variables is
A. inverse. B. negative.
C. constant. D. direct.
E. not significant.
29. What is the slope of the line containing the points (4, 5) and
(−8, −7)?
A. 4 B. −0.5
C. 1 D. 12
E. −3
30. Given the following diagram, the slope of straight line AB is
A.
1
2
B. 2
C. −1
D. 1
E. 0.5
EXERCISE 3
Classification. Determine whether each of the following
economic questions pertains to microeconomics or
macroeconomics. Write MI for Microeconomics and MA for
Macroeconomics. Write the answer on the space provided for
after the question.
31. What is the nation’s rate of economic growth?
___________
32. Why price of rice has increased so rapidly in recent
years? ___________
33. What economic policies should be adopted to promote
price stability in the economy? ___________
34. How many people are employed and unemployed in the
economy this year? ___________
35. What determines the wages paid to workers in the
manufacturing industry? ___________
36. What are the factors affecting the increase in net exports
of a domestic economy? ___________
37. How does a consumer maximize his satisfaction on a
food product? ___________
38. What are the economic activities of an individual firm?
___________
39. What induces the high profitability of products of a
consumer electronics firm? ___________
40. How much is the government spending of the
Philippines last year? ___________
41. Why China’s economy grows faster than Japan in the
2000s? ___________
42. What are the forces of supply and demand in a particular
market? ___________
43. Why unemployment rate in the Philippines falls from
2014 to 2016? ___________
44. What causes the recession of an economy?
___________
45. Why the value of Philippine peso depreciates over U.S
dollars? ___________
EXERCISE 4
Classification. Identify what economic activity is described in
each of the following cases. Write P for production, D for
distribution, E for exchange and C for consumption on the space
provided for after the item. Write the answer on the space
provided for after the statement.
46. A worker eats three scoops of buko ice cream.
_________
47. A farmer buys fertilizers and new farming equipment for
his corn production. _________
17

www.psuecon.com
48. A software developer creates a new fitness app for Apple
smartwatch. _________
49. An exporter of coconut oils uses cargo ships to deliver
the products to Singapore. _________
50. A housewife goes to a public market to buy five kilos of
beef. _________
51. A real estate developer sells multi-family dwellings to 100
households. _________
52. An online shopper purchases 3 units of air coolers.
_________
53. An electronics company hires 360 laborers to assemble
smartphones. _________
54. A student downloads a new game application from
Google Play Store. _________
55. Ann eats Chowking’s Chicken Lauriat meal and Lee eats
Chowking Fish Lauriat meal. _________
56. A vegetable dealer uses delivery trucks to transport
vegetables from La Trinidad to Metro Manila. _________
57. An apparel company works with regional distributors to
market its products. _________
58. A teacher buys a newly released brand of perfume from
a department store. _________
59. A bakery bakes 800 loaves of bread every week.
_________
60. A moviegoer spends two hours to watch Mad Max: Fury
of Road. _________
EXERCISE 5
Classification. Identify what category of resources does each of
the following belong. Write LD for land, LR for labor, CL for capital
and EP for entrepreneurship. Write the answer on the space
provided for after the item.
61. Assembly tools ____________
62. Company’s CEO ____________
63. Industrial plant ____________
64. Roads and bridges ____________
65. Delivery trucks ____________
66. Lifestyle entrepreneur ____________
67. Communications networks ____________
68. Chemical substances ____________
69. Farmland ____________
70. Renewable resources ____________
71. Soil used for farming ____________
72. Software developers ____________
73. Mineral deposits ____________
74. Lawyers ____________
75. Marketing expert ____________
EXERCISE 6
Classification. To which category of traded goods does each of
the following belong? Write CO for consumer goods and CA for
capital goods. Write the answer on the space provided for after
the item.
76. Transport equipment ____________
77. Dairy products ____________
78. Semiconductors ____________
79. Chemicals ____________
80. Electrical machinery ____________
81. Mineral fuels ____________
82. Cereals ____________
83. Fashion accessories ____________
84. Rice ____________
85. Fertilizers ____________
86. Vegetable oils ____________
87. Beverages ____________
88. Industrial robot ____________
89. Smartphones ___________
90. Computer system ____________
EXERCISE 7
Classification. Choose the letter that most likely indicates the
type of economic model to be used in the following
macroeconomic variables. Write the answer on the space
provided for after the item.
A. Descriptive model
B. Assumption
C. Graphical model
D. Mathematical model
91. Consumption function
92. Circular flow of income model ___________
93. Ceteris paribus ___________
94. Graph of the Philips curve ___________
95. Meaning of inflation ___________
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96. Relationship between GDP and price level labelled on
Cartesian plane ___________
97. Concept of fiscal policy ___________
98. Definition of poverty___________
99. Graphical analysis of investment curve ___________
100.Positive statement of foreign exchange___________
101.Description of four macroeconomic goals ___________
102.Shifting of the aggregate supply curve caused by
increased costs of production ___________
103.Derivation of the aggregate expenditure function
___________
104.Diagram of a business cycle ___________
105.Difference between a nominal income and real income
___________
EXERCISE 8
Classification. Determine whether each of the following
macroeconomic statements is normative or positive. Write N for
Normative statement and P for positive statement. Write the
answer on the space provided for after the statement.
106.A nation will export a particular product if the world price
exceeds the domestic price. ___________
107.All taxes are bad to the economy while public services
are beneficial to the economy. ___________
108.Indirect taxes should be increased to distribute income
more equitably. ___________
109.Recession is the most serious economic problem.
___________
110.Spending on infrastructure involves an opportunity cost.
___________
111.An increase in household consumption leads to rise in the
level of GDP. ___________
112.The Philippines should cut its imports. ___________
113.Rapid increases in quantity of the money results to
inflation. ___________
114.The United States is the largest trading partner of the
Philippines. ___________
115.Unemployment is more dangerous than inflation.
___________
116.The government should spend more on public works.
___________
117.Macroeconomics is concerned with decision-making of
an economy as a whole. ___________
118.Increasing the minimum wage leads to rise in
unemployment rate. ___________
119.China is a richer country than India. ___________
120.Economic development cannot be achieved without
economic growth. ___________
EXERCISE 9
Problem Analysis. Determine whether the expected
macroeconomic relationships are direct or inverse. Write DR if it
is direct relationship and IR if it is inverse relationship. Draw also
graph and explain the relationships you would expect to find
between the variables.
121.Consumption spending and level of disposable income
___________
122.Money-supply growth and long-term price inflation
___________
123.Investment and level of economic growth ___________
124.Political stability and economic development
___________
125.Price level and aggregate demand ___________
126.Unemployment rate and inflation rate ___________
127.Level of Gross Domestic Product (GDP) and value of
imports ___________
128.Poverty and economic development ___________
129.Gross National Product (GNP) and government
expenditure ___________
130.Interest rate and business investment ___________
131.Net exports and foreign exchange rate ___________
132.Income inequality and economic growth ___________
133.Savings and real GDP ___________
134.Aggregate supply and business taxes ___________
135.Cost of living and inflation rate ___________
19

WORKTEXT 2 : INTRODUCTION TO MACROECONOMICS Econ 102 – Macroeconomics
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EXERCISE 1
statements is true or false. Write T if it is true and F it is false on
the blank after the item.
1. The circular flow model for a macroeconomy includes
domestic trade but not international trade. _________
2. In the five sector model of the economy, injections mean
introduction of income into the flow. _________
3. In order to achieve favorable balance of trade, the value
of imports should exceed the value of exports. ________
4. Combinations of goods that lie on the production
possibility curve illustrate an efficient allocation of scarce
resources. _________
5. Fall in the size of labor force, other factors remaining
constant, will cause an outward shift of a production
possibility curve. _________
6. Any point inside the production possibility frontier is
unattainable. _________
7. Business cycle is the downward and upward movement
of country’s price level. _________
8. Recession is a period of increasing real incomes and
declining unemployment. _________
9. The foreign sector is the implementer of economic
policies. _________
10. Economic growth is an expansion in national output
measured by the annual percentage increase in a
nation’s real GDP. _________
11. The phase of the business cycle in which real GDP
declines is called peak. _________
12. Coincident indicators are variables that change at the
same time that real GDP changes. _________
13. There will be expansion in the business cycle if the
production capacity is underutilized. _________
14. The primary sector of the economy is the industry.
_________
15. Production of household appliances and automobiles for
use or sale belongs to service sector. _________
EXERCISE 2
16. In the four-sector circular flow diagram, the economic agent
that collects taxes and spends on public goods and services is
A. government.
B. household.
C. foreign sector.
D. firm.
E. private organization.
17. The macroeconomic goal that is concerned with the absence
of inflation is
A. price stability.
B. economic efficiency.
C. full employment.
D. balance of trade.
E. economic growth.
18. Economic growth can be attained if
A. there is neither inflation nor deflation.
B. the vicious cycle of poverty is broken.
C. unemployment rate increases.
D. there is sustained increase in GDP growth rate.
E. the wage level of workers rises.
19. In drawing the production possibilities frontier, it is assumed
that
A. there is no inflation in the economy.
B. only one good is produced.
C. economic resources are unlimited.
D. unemployment exists.
E. technology is fixed.
20. Any point within the production possibilities frontier is
A. an efficient point.
B. an unattainable point.
C. an unfeasible point.
D. an inefficient point.
E. a maximum output combination.
21. In PPF, economic growth can be depicted as a
A. leftward shift of the production possibilities curve.
B. outward shift of the production possibilities curve
C. inward shift of the production possibilities curve.
D. movement of point within a production possibilities curve.
E. movement of point outside a production possibilities curve.
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22. Which of the following might shift a nation's production
possibilities curve to the left (inward)?
A. Improved workers’ productivity
B. Increased foreign investment
C. Increase in the size of the labor force
D. Technological progress
E. Devastation by natural disasters
23. Downward and upward movement of economic growth and
contraction, which can be measured by changes in real GDP is
called
A. business cycle.
B. economic bubble.
C. vicious cycle of poverty.
D. circular flow model.
E. production possibility frontier.
24. When real GDP reaches its maximum level during a recovery,
the phase of a business cycle is
A. recession.
B. depression.
C. recovery.
D. trough.
E. peak.
25. Which of the following is most likely to rise during the recession
phase of a business cycle?
A. Price level
B. Unemployment rate
C. Economic growth rate
D. Labor force
E. Next exports
26. Whenever the economy is in recovery or expansion phase, we
can expect
A. price level to rise.
B. unemployment to rise.
C. economic growth to fall.
D. investment to fall.
E. net exports to fall.
27. Which of these is a variable in business-cycle leading
indicators?
A. Money supply B. Unemployment rate
C. Industrial production D. Consumer Price Index
E. Manufacturing and trade sales
28. Which of the following is classified as a lagging indicator in
business cycle?
A. Stock prices B. Interest rates
C. Unemployment rate D. Consumer expectations
E. New building permit
29. The three economic sectors of the economy are
A. production, distribution and exchange.
B. agriculture, industry and services.
C. land, labor and manufacturing.
D. farming, manufacturing and transportation.
E. public sector, private sector and foreign sector.
30. The tertiary sector of the economy that involves the provision
of services to other businesses as well as final consumers is
A. agriculture B. industry.
C. service. D. public administration.
E. manufacturing.
EXERCISE 3
Graphical Analysis. Fill in the blanks with the appropriate word
or phrase that completes each statement. Refer to the following
four-sector circular flow diagram to answer the questions below.
GOVERNMENT
FINANCIAL
SYSTEM
REST OF THE
WORLD
HOUSEHOLD
FIRM
Spending
by Domestic
Households
on Imports
Taxes
Taxes
Payment of
Wages,
Interest and
Transfer
Payments
Spending
on Goods
and
Services
Spending
by Foreign
Households
on Exports
Spending
on Goods
and
Services
Saving
Borrowing
31. This ___________ shows the income received and
payments made by each sector of the economy.
32. Households ___________ the factors of production to
firms in exchange for income in the form of wages,
interest, profit, and rent.
33. The ___________ receives taxes from firms and
households.
34. Funds flow from ___________ to household in the form
of wages, profit, interest, and rent through the factor
markets.
35. ___________ to the rest of the world generate a flow of
funds into the economy.
36. Some of the incomes earned by ___________ that is not
spent on consumer goods are saved in financial system.
37. Firms and government borrow funds from the
___________ for investment and government spending.
38. Government buys goods and services from firms and
provides ___________ to households.
39. Spending by domestic households on ___________
leads to a flow of funds out of the economy.
40. Foreign households ____________ goods and services
generating a flow of funds into the economy.
21

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0
10
20
30
40
50
60
70
0 10 20 30 40 50 60 70
Televisions(thousandunits)
Microwave Ovens (thousand units)
EXERCISE 4
Classification. Categorize the following by economic sector.
Write H for household, F for firm, G for government and R for rest-
of-the-world. Write the answer on the space provided for after the
item.
41. The Juan Family __________
42. Province of Cebu __________
43. Trading partners of the Philippines like Japan and France
__________
44. San Miguel Corporation __________
45. Pineapple industry __________
46. Local government units (LGUs) __________
47. Soap manufacturers in the country __________
48. Jollibee Foods Corporation __________
49. Mercury Drugs consumers __________
50. Imported instant coffees from Indonesia __________
51. BPO employees __________
52. Government-owned and Controlled Corporation
__________
53. Foreign exchange between Italy and Peru __________
54. Department of Trade and Industry __________
55. Labor union members __________
EXERCISE 5
Classification. Determine what macroeconomic goal is
described. Write E for economic growth, P for price stability, F for
full employment and B for balance of trade. Write the answer on
the space provided for after the item.
56. An increase in productivity and advances in technology
__________
57. A decrease in the real value of money and other
monetary items over time. __________
58. Mismatch between the supply and demand of workers
with necessary skill sets. __________
59. Excessive growth of the money supply. __________
60. An absolutely 0% rate of unemployment. __________
61. The availability of adequate foreign exchange with which
to pay for import. __________
62. A sustained rise in GDP growth rate. __________
63. All persons willing and able to work at the prevailing
wages are able to do so. __________
64. Increase in taxes or restrictions on trade. __________
65. The value of exports exceed the value of imports.
__________
EXERCISE 6
Graphical and Problem Analysis. Answer what is asked in the
following problem.
A. Refer to the diagram below showing the production possibilities
curve between two goods (televisions and microwave ovens) to
fill in the correct answer of the following statements.
66. The Good Y in the PPF is ______________.
67. At point D of the PPF, the quantity produced are
______________.
68. At point E of the PPF, the quantity produced are
______________.
69. Points B and C represent ______________.
70. The efficient production points are ______________.
71. The attainable points with the resources and
technology currently available are ______________.
72. The inefficient points are ______________.
73. The full employment production points are
______________.
74. The opportunity cost of moving from point A to point C is
______________
75. The opportunity cost of moving from point B to point E is
______________
B. Determine the shift (inward or outward) of the economy's
production possibilities curve between televisions and microwave
ovens. Illustrate the shift of the graph of the PPF and explain how
each of these cases affects the location of a country’s PPF.
76. The quality of education in the country improves.
__________
77. The number of employed workers in the television and
microwave oven industry rises. __________
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78. A new technology improves the efficiency of producing
television and microwave ovens. __________
79. A devastating earthquake destroys numerous production
plants of television and microwave ovens.
80. The GDP growth rate falls. _________
81. The population growth rate increases. _________
82. Highly skilled labor force is hired in the economy.
_________
83. A favorable business climate encourages multinational
corporations to invest more in IT industry. _________
84. The government spends on highly developed
infrastructure. _________
85. Business profits of television and microwave oven fall.
_________
EXERCISE 7
Graphical Analysis. Refer to the following diagram depicting a
business cycle to answer the questions below.
86. Point A represents ___________________
87. Point B represents ___________________
88. Point C represents ___________________
89. Point D represents ___________________
90. Point E represents ___________________
91. Point F represents ___________________
92. The demarcation line represents ___________________
93. Draw the demarcation lines for the duration of the
recession.
94. Draw demarcation lines for the duration of recovery.
95. Draw the demarcation lines for the duration of expansion.
EXERCISE 8
Classification. Identify what phase of the business cycle is
described the following statements. Write P for peak, R for
recession, T for trough R for expansion. Write the answer on the
space provided for after the item.
96. Unemployment rate is rising_____________
97. Real output in the economy is increasing ____________
98. Unemployment rate is declining_____________
99. Interests rates are high _____________
100.Multiple bankruptcies of firms occur_____________
101.Real GDP is at its lowest point _____________
102.Stocks exchanges crash _____________
103.Interest rates are low. _____________
104.Stocks recover because of the fall in prices and
incomes. _____________
105.Firms throughout the economy experience falling
demand, causing them to lay off workers.
_____________
106.There are dramatic increases in productivity and
industrial production. _____________
107.The price level of goods and services sharply rises.
_____________
108.The purchasing power of consumers increases.
_____________
109.Investment spending falls. _____________
110.Business profits increase. _____________
EXERCISE 9
Classification. Determine what category of business-cycle
indicators is indicated in each of the following. Write LE for
leading, LA for lagging and CO for coincident. Write the answer
on the space provided for after the item.
111.Consumer Price Index _____________
112.Gross National Product _____________
113.Gross Domestic Product _____________
114.Interest rates _____________
115.Stock prices _____________
116.Money supply _____________
117.Unemployment rate _____________
118.Personal income _____________
119.Consumer Price Index _____________
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120.Industrial production _____________
121.New orders for plant and equipment _____________
122.Manufacturing and trade sales _____________
123.Commercial and industrial loans _____________
124.Labor cost per unit of output _____________
125.Consumer expectations _____________
EXERCISE 10
Classification. To which sector of the economy does each of the
following belong? Write P for primary sector, S for secondary
sector and T for tertiary sector.
126.Public administration _____________
127.Transportation _____________
128.Forestry _____________
129.Real estate _____________
130.Fishing _____________
131.Construction _____________
132.Agribusiness _____________
133.Financial intermediation _____________
134.Mining and quarrying _____________
135.Manufacturing _____________
EXERCISE 11
Classification. To which sector of the economy does each of the
following goods and services belong? Write A for agricultural
sector, I for industrial sector and S for service sector.
136.Transport equipment _____________
137.Garments and textiles _____________
138.Pharmaceuticals _____________
139.Beef _____________
140.Footwear _____________
141.Business process outsourcing _____________
142.Petroleum refining _____________
143.Health care _____________
144.Perishable goods _____________
145.Automotive _____________
EXERCISE 12
Problem Analysis. Answer what is asked in the following.
A. Below is a set of hypothetical production possibilities for a
country producing trucks and pineapple juice.
Choice Truck
(in thousand
units)
Pineapple juice
(in million
units)
Opportunity
Cost
A 0 100
B 20 90
C 40 80
D 60 60
E 80 30
F 100 0
146.Plot the production possibilities data. Put truck on the
vertical axis and pineapple juice on the horizontal axis.
147.Plot the output combination (40, 120) on the PPF and
label this as point G. Describe what does point G
represent.
148.Plot the output combination (60, 20) on the PPF and
label this as point H. Describe what does point H
represent.
149.Fill in the opportunity cost (truck forgone) of producing
the first through the sixth pineapple juice.
150.Determine the opportunity cost of moving from point B
to point E.
B. Below is a schedule showing the real GDP figures of a
hypothetical economy for 12 years.
Year Real GDP
( in billion pesos)
1 300
2 450
3 550
4 400
5 300
6 350
7 550
8 750
9 850
10 750
11 600
12 450
151.Draw a graph of the business cycle by plotting the data
points.
152.Identify the four phases of the business cycle and label
these on the graph.
153.Determine the year when the real GDP reaches its peak.
154.Determine the length of years of recession and recovery
and draw demarcation lines illustrating their duration.
155.Draw the growth trend line showing the fluctuations of
real GDP over time.
24

WORKTEXT 3 : NATIONAL INCOME ACCOUNTING Econ 102 – Macroeconomics
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EXERCISE 1
statements is true or false. Write the answer on the blank after the
number.
1. National income accounting is a framework that
summarizes and categorizes productive activity in an
economy over a period of time. _________
2. The most common measure of a nation’s output is GDP.
_________
3. Consumption as a percentage of GDP is higher than
government spending. _________
4. National income accountants can avoid multiple counting
by counting both intermediate and final goods.
_________
5. Net exports are exports plus imports. _________
6. Gross domestic product measures and reports output in
percentage terms. _________
7. GNP defines production based on the geographical
location of production. _________
8. Real GDP measures output after eliminating the effects
of price changes. _________
9. Nominal GDP is calculated using the prices current in the
year in which the output is produced. _________
10. Investment includes spending on durable goods,
nondurable goods, and services. _________
11. Disposable income is personal income minus personal
taxes. _________
12. GDP per capita is GDP divided by the size of the
population. _________
13. Foreign -produced goods and services are not included
in calculations of GDP. _________
14. The expenditure approach sums up the compensation
of employees, rents, profits, net interest, and non-
income expenses for depreciation and indirect business
taxes.
15. All expenditures on new construction are included as
consumption spending in calculating GDP. _________
EXERCISE 2
16. When comparing a country’s economic performance or
position with other countries, one should see its
A. money supply in circulation. B. net exports.
C. Gross Domestic Product. D. natural resources.
E. population.
17. A country's gross domestic product (GDP) is the total market
value of all final goods and services
A. produced by its citizens, regardless of where they are living.
B. produced within the borders of a country.
C. consumed by all the consumers in the economy.
D. planned to sell by firms selling during a specific time period.
E. demanded by the four sectors of the economy.
18. Which one of these goes into the investment component of
GDP?
A. The purchase of toiletries products.
B. The purchase of a new factory.
C. The purchase of 50 shares of a corporation’s stock.
D. The purchase of a 15-year-old office building.
E. The purchase of imported goods from China.
19. If GDP in one year is measured at Ᵽ225 billion (and a year
later it is measured at Ᵽ250 billion, then the rate of GDP growth
that year is
A. 11.11%. B. 1.7%.
C. 120.8%. D. 67.6%.
E. 34.1%.
20. The largest component of Gross Domestic Product GDP is
A. consumer spending B. investment spending
C. imports D. exports
E. government spending
21. Spending on intermediate goods in the economy is
A. not part of final goods.
B. is included in GDP but only after backing out the sales of final
goods.
C. included in the calculation of GDP.
D. not included in GDP so as to avoid double counting.
E. none of these
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22. A food processor buys Ᵽ200,000 worth of ingredients in the
production of ham. It sells 800 pieces of ham at Ᵽ400 each. The
value added in the production and selling of ham is
A. Ᵽ320,000 B. Ᵽ120,000
C. Ᵽ800,000 D. Ᵽ200,000
E. Ᵽ60,000
23. Which of the following is counted in GDP?
A. intermediate goods B. used goods
C. foreign-produced goods D. changes in inventories
D. financial assets (stocks and bonds)
24. If GDP rose from Ᵽ12 trillion to Ᵽ15 trillion and prices rose by
10 percent over this period,
A. real GDP fell by 25% percent.
B. real GDP fell by 15 percent.
C. real GDP rose by 15 percent.
D. real GDP rose by 25 percent.
E. real GDP stayed the same.
25. Mang Ambo grows vegetables in his backyard plots for
household consumption. This economic activity is
A. included in GDP because it reflects production
B. excluded from GDP in order to avoid multiple counting.
C. excluded from GDP because an intermediate good is
involved.
D. excluded from GDP because it is part of the underground
economy.
E. excluded from GDP because no market transaction occurs.
.
26. Using the table data below, the GDP is
A. 1,360.
B. 2,540.
C. 1,260.
D. 980.
E. 3,490.
27. In a simple economy, three goods are produced during the
year, in these quantities: 18 units of good A, 34 units of good B,
and 40 units of good C. The price of good A is Ᵽ55 each, the price
of good B is Ᵽ80 each and the price of good C is Ᵽ75 each. What
is the market value of these three goods for the economy?
A. Ᵽ6,710 B. Ᵽ9,710
C. Ᵽ5,710 D. Ᵽ16,710
E. Ᵽ12,710
28. GDP can be calculated by the expenditure approach as
A. 𝐶 + 𝐼 + 𝐺 − (𝑋 − 𝑀). B. 𝐶 (𝐼) + 𝐺 − (𝑋 − 𝑀).
C. 𝐶 − 𝐼 + 𝐺 + (𝑋 − 𝑀). D. 𝐶 + 𝐼 + 𝐺 + (𝑋 − 𝑀).
E. 𝐶 − 𝐼 − 𝐺 + (𝑋 − 𝑀).
29. Suppose the real GDP in a particular year is Ᵽ400 billion and
nominal GDP is Ᵽ600 billion, the GDP price index for that year is
A. 150. B. 200.
C. 300. D. 1.5.
E. 66.
30. Suppose the GPD of a country is Ᵽ854 billion and depreciation
is 12 billion. Based on this, the national income is
A. Ᵽ866 billion. B. Ᵽ842 billion.
C. Ᵽ71 billion. D. Ᵽ878 billion.
E. Ᵽ854 billion.
EXERCISE 3
Classification. Determine whether the following goods and
services are intermediate or final. Write I for intermediate good
and F for final good. Write the answer on the space provided
for after the item.
31. Diesel purchased for a delivery truck __________
32. Memory chip for a desktop computer __________
33. Pesticide purchased by a farm supplier __________
34. Sugar purchased by a mother in the supermarket
__________
35. Corn starch purchased by a bakery as ingredient for
a cake __________
36. Screen displays for smartphones purchased by an
electronic firm __________
37. Hospital services availed by the patients
__________
38. Microwave oven sold to a consumer __________
39. Transistors purchased by a TV manufacturer
__________
40. Textiles bought by a garment factory __________
41. Smartwatch purchased by a fitness trainer
__________
42. Shampoos purchased from a drugstore __________
43. Speedometer purchased in a new automobile
__________
44. Purchase of paint by a real estate developer for
condominium unit __________
45. Movie ticket purchased from a cinema __________
EXERCISE 4
Classification. Determine the following transactions as
consumption spending, investment spending, government
spending and net exports. Write C for consumption spending, I
for investment, G for government spending and N for net export
spending. Write the answer on the space provided for after the
item.
46. Construction of a new factory __________
47. Spending on military weapons __________
48. Purchase of additional coffee makers by a restaurant
__________
49. Purchase of a pizza by a private worker __________
Consumption 630
Investment 150
Government Spending 380
Exports 200
Imports 100
26

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50. Purchase of construction materials for a public highway
__________
51. Construction of a single-family dwelling by a government
employee __________
52. Acquisition of textbooks by the government __________
53. Building of an automobile assembly plant __________
54. Public expenditure of healthcare services __________
55. Buying of sports shoes by a professor __________
56. Purchase of imported chocolates from Canada
__________
57. Purchase of China-made glassware __________
58. Consumption of fast food meals __________
59. Use of salon spa services __________
60. Purchase of a new delivery truck __________
61. Export of pineapples to Australia __________
62. Renovation of a shopping mall __________
63. Technological upgrade of medical equipment by a
hospital __________
64. Purchase of smartphones made in South Korea
__________
65. Utilization of a 2-night lodging in a hotel __________
EXERCISE 5
Classification. Analyze whether the following will be accounted
for Gross Domestic Product or Gross National Product for the
Philippine economy. Write GDP if it is accounted for Gross
Domestic Product and GNP if it is accounted for Gross National
Product. Write the answer on the space provided for after the item.
66. A Filipino citizen owns a business in South Korea.
__________
67. Juan, an OFW, works in the United Kingdom.
__________
68. A Canadian BPO firm operates in the Philippines.
__________
69. A Filipino businessman purchases a new leather jacket
in Paris. __________
70. Unilab domestically produces pharmaceutical products
for export in Asia Pacific region. __________
71. The Philippine government purchases helicopters made
from Germany. __________
72. A domestic real estate developer sold 1,500
condominium units. __________
73. Unilever, a British-Dutch multinational company owned
a plant which produces major personal care products in
the Philippines. __________
74. Jollibee, a fast food chain, runs five branches in Dubai.
__________
75. New car models are made at a Toyota factory in the
Philippines. __________
76. Twelve thousand units of semiconductors produced
domestically are purchased by a Japanese citizen.
__________
77. San Miguel Corporation produces beers in Hong Kong.
__________
78. A local shoe firm purchases Ᵽ5 million worth of
construction materials to build a new factory
__________
79. SM Prime Holdings, a mall and retail operator in the
Philippines, constructs a new shopping mall in
Pangasinan. __________
80. A Filipino celebrity earned $1 million from endorsements
in the United States. __________
EXERCISE 6
Classification. The following are transactions or factors which
are omitted in the determination of Gross Domestic Product.
Determine the factor that is being described in each transaction.
Write the answer on the space provided for after the item.
81. An engineer purchases a new automobile manufactured
in Japan. __________
82. A drug addict pays Ᵽ5,000 to buy shabu. __________
83. A retired government employee receives a pension.
__________
84. The government purchases third-hand police cars to
from a private security agency. __________
85. Mr. Lee buys an existing share of SM Corporation’s
stock. __________
86. Panfilo just sells his 2005 Honda Civic to Lacson for
Ᵽ450, 000. __________
87. Mrs. Reyes cooked and cleaned for her family.
__________
88. A restaurant owner buys sugar and baking powder as
ingredient for making bread__________
89. A basketball player buys Adidas shoes made from
Germany. __________
90. Mr. Estrada purchases a PLDT corporate bond.
__________
91. Mang Ambo grows vegetables in backyard plots for
household consumption. __________
27

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92. SSS pays security benefits to retired members
amounting to Ᵽ5 billion. __________
93. A firm uses illegal labor where workers are paid less than
the minimum wage. __________
94. Aling Puring earns Ᵽ8,000 from her sari-sari store
business. __________
95. An entrepreneur wins Ᵽ6 million from illegal gambling.
__________
96. Jecelle purchases a used computer from a friend for
Ᵽ15,000. __________
97. Conte’s family sells its old apartment building Salazar’s
family for Ᵽ400,000. __________
98. Michael earns a revenue of Ᵽ100,000 for selling
Produced pirated CDs and DVDs. __________
99. A private employee uses Philhealth for hospitalization
services. __________
100.The costs of air and water pollution increase.
__________
EXERCISE 7
Classification. Determine whether the following variables are
accounted for expenditure approach, income approach or
industrial origin approach. Write EA for expenditure approach, IA
for income approach and IOA for industrial origin approach. Write
the answer on the space provided for after the item.
101.Exports __________
102.Service sector __________
103.Manufacturing industry __________
104.Imports __________
105.Rental income __________
106.Government income from property and entrepreneurship
__________
107.Gross domestic capital formation __________
108.Depreciation __________
109.Indirect business taxes __________
110.Personal consumption expenditures __________
111.Rental income __________
112.Corporate profits __________
113.Compensation of employees __________
114. Net interest__________
115.Government spending __________
116.Mining and quarrying industry __________
117.Agriculture, fisheries and forestry sector __________
118.Trade services __________
119.Proprietor’s income __________
120.Transfer payments __________
EXERCISE 8
Classification. Consider how each of the following events is
likely to affect Gross Domestic Product (GDP). Write IG if there is
increase in GDP, DG if there is decrease in GDP and NG if there
is no change in GDP. Write the answer on the space provided for
after the statement.
121.Developers build 250 new single-family dwelling units.
__________
122.Parents around the country reduce their workweeks to
spend more time with their children. __________
123.The government extensively promotes the research and
development of new technologies. __________
124.Mr. Tino Villa sells surplus televisions made from Japan
and South Korea. __________
125.A strong typhoon devastated the country that brought
billions of agricultural damages. __________
126.The government decides not to spend much on national
defense. __________
127.The discovery of a new agricultural machinery increases
farm harvests. __________
128.Jameson Estrada buys a bond issued by Universal
Robina Corporation. __________
129.Local firms increase their imports on raw materials used
in their domestic production. __________
130.The government provides Social Security benefits to
pensioners. __________
131.Some families do not hire people through the classified
section of the newspaper to cook and clean because the
family members perform the tasks. __________
132.Manufacturing firms experience dwindling demand for
their goods, causing them to lay off workers.
__________
133.Most college fresh graduates were able to find jobs
immediately after graduation. __________
134.Consumers become patriotic to buy more locally
produced products. __________
135.The activities in the black market like illegal currency
transactions become prevalent. __________
28

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EXERCISE 9
Problem Analysis. Analyze and answer what is required in the
following problems.
A. Suppose a hypothetical economy produces only three goods:
refrigerators, televisions, and washing machines. The table below
shows the prices and output of the three goods for the years 2013
to 2016.
Year
Refrigerator Television Washing machine
Price Qty Price Qty Price Qty
2013 10,000 600 15,000 1,000 7,000 400
2014 11,000 650 15,500 1,200 8,500 500
2015 12,000 700 16,000 1,400 10,000 600
2016 13,000 800 16,500 1,600 11,500 700
136.Calculate the percentage change in production of each of
the goods from 2013 to 2014, 2014 to 2015 and from
2015 to 2016.
137.Calculate the percentage change in prices of each of the
goods from 2013 to 2014, 2014 to 2015 and from 2015 to
2016.
138.Calculate nominal GDP for each of the four years.
Determine the percentage change in nominal GDP 2013
to 2014, 2014 to 2015 and from 2015 to 2016.
139.Calculate real GDP using 2013 prices for each of the four
years. Determine is the percent change in real GDP 2013
to 2014, 2014 to 2015 and from 2015 to 2016.
B. The table reflects a hypothetical example of value added in the
process of producing and selling potato chips.
Transaction
Sales Value of
Materials or
Product
Value-added
Farmer produces potatoes 3.50
Vegetable dealer delivers to
Suppliers
5.05
Suppliers sends to flour mill 6.10
Flour mill grinds potatoes
into flour
7.50
Potato flour ships to potato
chips manufacturer
8.25
Manufacturer uses potato
flour to produce potato chips
9.40
Potato chip are packaged 9.60
Potato chip is marketed 12.70
Potato chip delivers to
supermarket
15.95
Potato chip is sold by a
consumer
21.50
140.Fill in the blanks by calculating the value-added for each
transaction in the process of producing and selling potato
chips.
C. Refer to the data below to answer the following questions.
141.Calculate the annual growth rate of nominal GDP from
2013 – 2014.
2014 – 2015.
2015 – 2016.
D. Given the following hypothetical data in which quantity is fixed
and price is varied each year.
Year Quantity Price Price
Index
Nominal
GNP
Real
GDP
2009 400 50
2010 400 60
2011 400 70
2012 400 80
2013 400 90
2014 400 100
144.Calculate the price index for each year. (Use 2011 as
base year.)
145.Calculate the nominal GDP for each year.
146.Calculate the real GDP for each year.
E. The following table depicts a group of selected years with the
corresponding nominal GDP data.
Year Price
Nominal
GDP
Price Index
(𝟐𝟎𝟎𝟓 = 𝟏𝟖𝟎)
Real
GDP
1976 50 724
1986 100 1,576
1996 150 3,989
2006 200 7,139
2016 250 11,808
147.Calculate the price index for each selected year.
148.Calculate the real GDP.
149. Indicate in each calculation whether it is inflating or
deflating the nominal GDP data.
Year Nominal
GDP
GDP Growth
Rate
2013 370.32
2014 394.25
2015 410.18
2016 450.83
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F. Given the following hypothetical data reflecting the nominal
GDP (in billion pesos) and population (in millions) of five countries
150.Calculate the GDP per capita of the five countries.
151.Determine the country with the highest and lowest GDP
per capita.
G. The following table shows the transactions made by Juan in the
economy.
Activity/Transaction Amount
Juan constructs a vacation house at Pangasinan
valued at Ᵽ6 million
Juan buys ingredients to bake a cake that is worth
Ᵽ2,000
Juan’s restaurant, “Juan to Juan Resto” purchases
Ᵽ3 million worth of cooking equipment
Juan plants fruits and vegetables in his backyard
that is worth Ᵽ35,000
Juan buys an imported 60-inch smart television at
Ᵽ90,000 in South Korea
Juan invests Ᵽ500,000 in the stock market.
Juan purchases the new Iphone smartphone
priced at Ᵽ45,000
Juan sells his used Toyota car to his friend at
Ᵽ500,000
Juan wins Ᵽ100,000 from an illegal gambling
Juan earns an income of Ᵽ5 million pesos derived
from his restaurant business
TOTAL
152.Identify which of these transactions are included in Gross
Domestic Product (GDP) and determine how much does
each transaction adds to GDP.
153.Calculate the total amount or value contributed by Juan to
GDP.
H. Use the following information to calculate the following.
Item Amount
(in billion pesos)
Consumption 350
Imports 12
Investment 44
Government purchases 65
Exports 25
Capital consumption allowance
(Depreciation)
25
Receipts of factor income from the
rest of the world
15
Payments of factor income to the
rest of the world
12
154.Calculate the GDP.
155.Calculate the GNP.
156.Calculate the Net National Product (NNP)
157.Calculate the NI.
I. Suppose that the GDP of a particular economy is measured with
the use of expenditure approach. The hypothetical data are
represented by the following table.
158.Calculate consumer spending.
159.Calculate private investment spending.
160.Calculate net exports.
161.Calculate government purchases of goods and services.
162.Calculate gross domestic product.
163.Calculate consumer spending on services as a
percentage of total consumer spending.
164.Calculate exports as a percentage of imports.
165.Calculate the percentage of GDP measured by personal
consumption spending.
Country Nominal GDP Population GDP per
Capita
Country A 600 102
Country B 3,024 1,200
Country C 486 60
Country D 1,560 345
Country E 560 24
Category
( of trillion pesos)
Components of
GDP
Personal Consumption Expenditure (C)
Durable goods 844.37
Nondurable goods 1162.24
Services 3596.55
Private Domestic Investment ( I )
Fixed investment spending 512.51
Nonresidential 265.18
Structures 98.56
Equipment and software 103.45
Residential 91.78
Change in private inventories - 102.23
Government expenditure on goods and services (G)
Personal services 500.31
Capital Outlay 212.65
Infrastructure 433.53
Other Services 194.47
Net Exports (X - M)
Exports on goods and services 956.25
Imports on goods and services 732.09
30

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J. The following table reveals the national income data for a given
year of a hypothetical economy.
National Income Account Amount
(billions of pesos)
Compensation of employees 525
Contributions for social security 44
Corporate's Profit 78
Depreciation 87
Export 27
Government expenditure 156
Gross private domestic investment 92
Import 32
Indirect business taxes 81
Net Interest 36
Personal consumption expenditure 661
Personal taxes 51
Proprietor's income 72
Rental income 25
Transfer payment 77
166.Calculate GDP using the expenditure approach.
167.Calculate GDP using the income approach.
168.Compute the national income (NI) by making the required
subtraction from GDP.
169.Derive personal income (PI) from national income (NI).
170.Calculate the disposable income.
K. The following table reveals the national income data for a given
Industry Value Added
(in billion pesos)
Percent of
GDP
Agriculture 122
Construction 125
Electricity, gas and water 99
Finance and housing 207
Fisheries 86
Forestry 40
Government services 176
Manufacturing 579
Mining and Quarrying 42
Private services 213
Trade 576
Transportation 139
Total GDP
171.Determine the size of the primary sector in terms of value
added and percentage of GDP.
172.Determine the size of the secondary sector in terms of
value added and percentage of GDP.
173.Determine the size of the tertiary sector in terms of value
added and percentage of GDP.
174.Calculate the total GDP.
L. The following table depicts the national income data for a given
National Income Account Amount
(billions of pesos)
Agriculture, fisheries and forestry 211
Compensation of employees 1223
Construction 111
Contributions for social security 89
Corporate's Profit 282
Depreciation 212
Electricity, gas and water 88
Export 87
Finance and housing 198
Government expenditure 702
Government services 179
Gross private domestic investment 191
Import 55
Indirect business taxes 190
Manufacturing 568
Mining and Quarrying 46
Net Interest 93
Personal consumption expenditure 1340
Personal taxes 104
Private services 201
Proprietor's income 190
Rental income 75
Trade 535
Transfer payment 250
Transportation 128
175.Calculate GDP using the expenditure approach.
176.Calculate GDP using the income approach.
177. Calculate GDP using industrial-origin approach.
178.Compute the national income (NI).
179.Derive personal income (PI) from national income (NI).
180.Calculate the disposable income.
31

WORKTEXT 4 : INFLATION Econ 102 – Macroeconomics
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EXERCISE 1
statements is true or false. Write the answer on the blank after the
number.
1. Inflation is a sustained fall in the average level of prices.
_________
2. Inflation refers only to rising prices at a given time period.
_________
3. Consumer Price Index measures the overall cost of the
goods and services produced by firms. _________
4. The inflation rate is the percentage rate of change of a
price index over time. _________
5. A CPI of 110 for a given year indicates that prices in that
year are 100 percent higher than prices in the base year.
_________
6. There is deflation if the CPI increases from 108 to 121.
_________
7. The higher the price level, the lower the real value or
purchasing power of money. _________
8. Inflation becomes a problem when income rises at a
slower rate than prices. _________
9. Consumers are better off during inflation because they
would get more goods and services for the same amount
of money. _________
10. Hyperinflation is characterized by a single-digit
percentage increase in inflation rate annually. ________
11. Unexpectedly high inflation hurts those creditors and
benefits those debtors. _________
12. The lower the CPI, the lower the cost of living. ________
13. Demand-pull inflation is caused by increasing demand for
output. _________
14. Real interest rate is approximately the nominal interest
rate minus the inflation rate _________
15. Inflation reduces the purchasing power of people on fixed
incomes. _________
EXERCISE 2
16. Inflation means that
A. there is a decrease in the general price level.
B. sustained increase in the general price level.
C. all prices of commodities are rising and at the same rate.
D. there is an increase in the rate of interest.
E. sustained rise in the level of national income.
17. Price stability takes place when
A. the general price level rises at a steady and low rate.
B. there is deflation.
C. there is no change in the exchange rate.
D. there is neither inflation nor deflation.
E. cost of living stays constant.
18. If the CPI fell from 99.5 in 2014 to 95.6 in 2015 to 2015 in
2000, this would be an example of
A. deflation.
B. disinflation.
C. hyperinflation.
D. inflation.
E. recession.
19. The consumer price index (CPI) in 2015 was 104 and the CPI
in 2016 was 109. The rate of inflation was
A. 7.50%. B. 5.55%.
C. 4.80%. D. 217.35%.
E. 10.75%.
20. Which one of these changes could lead to a rise in the rate of
inflation?
A. A fall in exports
B. A fall in consumer spending
C. A fall in the government budget deficit.
D. A fall in the money supply.
E. A fall in the exchange rate.
21. The base year in the consumer price index (CPI) is
A. the market basket of consumer goods and services.
B. the current year price.
C. given a value of zero.
D. a year chosen as an index reference for prices in all other
years.
E. the same as the inflation rate.
Lingayen Campus
WORKTEXT 4 : INFLATION
NAME: _______________________________________ SCORE: ___________________________________
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