I.

INTRO

1. The Birth of Macroeconomics

Economics study how society allocates scarce resources to meet unlimited

demands of people.
Microeconomics: shows consumers and firms how to maximize their benefits in the economy
(MU>= MC) Supply > Demand The whole economy’s inefficiency Macroeconomics

2. What is Macroeconomics?
2.1. Definition
Macroeconomics is the study of economy wide phenomena, including inflation,
unemployment and economic growth.
2.2. Its Study
The whole economy
2.3. Contents for researching
National yield ( Y): the most important measure of a nation’s achievement (GDP, GNP).
Inflation: is an increase in the overall level of prices.
Unemployment: expresses the situation of people who are in working ages, able to work,
seeking jobs but haven’t found it yet.
International transactions ( Trade balance): Export - Import
3. Positive versus normative analysis
Positive statements: are statements that attempt to describe the world as it is. o Called
descriptive analysis
Normative statement: are statements about how the world should be. o Called prescriptive
analysis

4. Management Tools
>Fiscal policy: G and T. ( Gov’s purchase & Taxes) - 2 TOOLS ( GOV)
> Monetary policy: MS and i -> Y. ( Money Supply & Interest Rate) - 3 TOOLS ( CENTRAL
BANK )
=> Only affects AD
> Income policy: P, W -> limit inflation.
> External economic policy: exchange rate, tariff and non-tariff -> NX and BOP.

II. *MEASURING A NATION’S INCOME ( GDP & CPI)

1. GROSS DOMESTIC PRODUCT (GDP)

1.1 Definition

Gross Domestic Product (GDP) is the market value of all final goods and
services produced within a country in a given period of time.

The treatment of Inventories:

+ If produced G&S spoil, it does not alter GDP.

+ If produced G&S is put into inventory, GDP rises.
1.2. Measuring GDP
- Expenditure Approach :
+ Consumption (C): the value of all G&S bought by households.
+ Investment (I): Investment spending by businesses and households.
> Business fixed investment: Spending on plant and equipment that firms
will use to produce other goods & services.
> Residential fixed investment: Spending on housing units by consumers
and landlords.
> Inventory investment: The change in the value of all firms’ inventories.
+ Government Purchases (G): The spending on goods and services by local,
state, and federal governments.
∟ G excludes transfer payments. (e.g, unemployment insurance payments).
+ Net Exports (NX): Exports minus imports.

Y = GDP = the value of total output

C + I + G + NX = aggregate expenditure ( AE) = Equilibrium

- Income/ Factor Cost Approach:

+ W: wage
+ i: Interest rate
+ R: rental payment
+ Pr: Profit = Total Revenue -Total Cost
+ Ti: Indirect tax (VAT)
+ De: Depreciation value
(total I = 300, net I = 200 -> De = 300-200)

- Value Added Aproach : summing up VA of all firms in the economy together

1.3. Nominal GDP vs Real GDP

GDP nominal: current price>> show difference in both Price and Ouput
GDP real: base year price>> Difference in GDPr>> Difference in output of economy
>GDP Deflator

1.4. Gross National Output ( GNP)

Gross National Product (GNP) ∟ is the total value of all final goods and services
produced by a nation’s citizens in a given period of time

1.5. Some other measures….

+ Net National Product (NNP): NNP = GNP – Dep
+ National Income (NI) NI = NNP – Te
+ Personal Income (PI) PI = NI – Pr
+ retained earnings + Tr
+ Disposable Income (YD) YD = PI – TPI YD = C + S

2.CONSUMER PRICE INDEX ( CPI)

CPI ∟ Is a measure of the overall cost of the goods and services bought by a typical
consumer.
3. GDP DEFLATOR & CPI
4. CORRECTING VARIABLES FOR THE EFFECTS OF INFLATION
4.3. Real vs Nominal Interest Rate

III. *AGGREGATE DEMAND & AGGREGATE SUPPLY

( Nếu AD/AS tăng -> shift right / Nếu AD/AS giảm -> shift left )

1.Aggregate Demand
Why AD slopes down : 3 theories: the wealth effect, the interest-rate effect, and the
exchange rate effect.
+ Pigou's wealth effect ( P&C): When the price level falls, cùng 1 income như cũ,
mua đc nhiều hàng hòa hơn -> consumers feel that they are wealthier, a condition
which induces more consumer spending>>a drop in the price level induces
consumers to spend more, thereby increasing the aggregate demand.

+ Keynes's interest-rate effect ( P & I ): Price decreases>> Consumers need less

money to buy a certain number of goods and services>> They can have more money
to save >> supply for loanable funds market increases (supply for money) + ít nhu
cầu vay -> cầu vay giảm >> Real interest rate falls >> Investment of businesses
increases >> AD increases (other factors keep unchanged)
 + Mundell-Fleming's exchange-rate effect ( P & Nx) : Price decreases>> more
savings>> interest rate falls>> the people don’t want to invest domestically, instead
they invest aboard (gửi tieefn sang nước ngoài) >> the demand for foreign currency
increases, demand for domestic currency decreases, the value of domestic currency
decreases>> Export increases, Import decreases>> NX increases>> AD increases
Policies:
+ Fiscal policy: Government: Tax, Government spending (or subsidies)
+ Monetary policy: Central Bank: 3 tools (in chapter Money and Monetary Tools) Fiscal
or Monetary Policies ONLY AFFECT AD CURVE Policies to increases AD >> AD
shifts right and vice visa

2. AGGREGATE SUPPLY

LRAS :

The long – run Aggregate Supply Curve (LRAS) : The natural rate of output (Y*) is the
amount of output the economy produces when unemployment is at its natural rate. Y* is
also called potential output.

Why LRAS Is Vertical? Y* determined by the economy’s supplies of labor, capital, and
natural resources and on the level of technology. An increase in P does not affect any of
these, so it does not affect Y*.

Why the LRAS Curve Might Shift ? depends on Technology, Human Resources (
Labour(population)), Natural Resources, Labour, Capital (ngoại sinh)

SRAS :

Slopes up due to 3 theories :

+ Sticky wage: Price increases, but nominal wage stated in the contract (tiền lương kí
hợp đồng) doesn’t change immediately >> TR=PxQ of business increases, TC
decreases relatively tương đối so với cũ >> Profit increases>> Motive to produce
more>> AS increases

+ Sticky price: Price increases, but the price on the menus or catalogues has not
been changed>> Consumers take chance to buy more in present (so that they can
buy at cheaper price in comparison with that in the future)>> TR=PxQ increases,
other factors keep unchanged, then profit increases, more motives to produce>>
supply increases

+ Misconception: Price increases, the businesses think that the increase in prices
may be due to the increase in demand, so they produce more to meet the demands

What factors make SRAS shift? (include but not limited) Bất lợi -> trái Có lợi -> phải

+ Prices of input for productions: tăng -> TC tăng -> profit giảm -> đluc sx giảm ->
SRAS left
 + Tax levied on production or businesses
+ Future price (expected price): tăng -> sx trong tg lai có lợi hơn -> trái
+ Recession(suy thOÁI) -> trái Disruption in GSC (global supply chain)

AD-AS MODEL:

Equilibrium in short term: SRAS and AD meet

Equilibrium in long term: point where LRAS, SRAS, AD meet.
We have Y*: potential yield Y
Y<Y* : recession
Y= Y*: balance
Y>Y*: “hot” economy
In long run, the yield of economy always = Y*

ANALYZE:
===Analyze in long term===

Step 5. 1: SRAS dịch phải -> Y at new equilibrium in short term > Y* (hot economy) , then
to increase Y, have to increase the wage paid for employees >> cost of businesses
increases, other factors keep unchanged>> Profit decreases>> motives to produce
decrease>> SRAS shifts to the left, economy returns to balanced point

Step 5.2: AD dịch trái -> Y at new equilibrium in short term umemployment rate có xu Y Y*
Y* Downloaded by Hoàng Khanh (khanhdphlx@gmail.com) lOMoARcPSD|15504527 hướng
cao hơn -> to hire employees, businesses might pay less>> Their cost decreases, Profit
increases>> motives to produce increases>> SRAS shifts to the right, economy returns to
balanced point Quay về Y* với P < P*

IV. *AGGREGATE DEMAND & FISCAL POLICY

1.AGGREGATE EXPENDITURE ( AE)

2. FISCAL POLICY:

Expansionary fiscal policy: làm tăng AD decreases

Tax>> Yd tăng >> C tăng increases government spending>>G tăng >>AD tăng>>AD dịch
phải>> slg tăng và giá tăng ( cơ chế của CSTK mơ rông) ̣ o Mechanism: makes Yd (C) of
houses holds and G increase>> APE increases, shift to higher position, equilibrium yield of
economy increases>> AD shifts to the right, price and yield increase o Used: recession, high
unemployment rate, deflation (equilibrium Y is low) o Note: the period of time used
(because the consequences are high budget deficit and inflation)

Contractionary fiscal policy: increases Tax>> Yd giảm>>C giảm decreases government

spending>> G giảm >>AD giảm ( AD dịch trái >> SLg giảm, giá giảm) o Mechanism: makes
Yd (C) of houses holds and G decrease>> APE decreases, shift to lower position,
equilibrium yield of economy increases>> AD shifts to the left, price and yield decrease o
Used: high inflation, heated growth, property bubbles (equilibrium Y is too high) o Note:
targets, time, (consequences: high unemployment rate, recession)

Limit of fiscal policy: CROWDING EFFECT: governments increase spending, making the
budget deficit, governments has to borrow more and lend less, Supply on loanable funds
decreases, demand increases>> Interest rate increases>> Investment decreases T-G giảm,
thực hiên quá liều>> thâm hụt ngân sách >> chính phủ đi vay nhiều hơn, savings ̣ của chính
phủ sẽ bị giảm đi >> Savings giảm, demand của vốn thì lại tăng >>Lãi suất tăng>> đầu tư
giảm >> AD không tăng được nhiều như dự kiến ban đầu.

V. THE MONETARY SYSTEM

1.MONEY:
Functions: 3
- Medium of exchange
- Unit of Account
- Store of value
Types: 2
- Commodity
- Fiat

How commercial banks create money

MONETARY SYSTEM : Adjust Money Supply ( MS)

1. OMOs: Central banks buy or sell government bonds: easy to do, affect MB (money base)
Buy: pay money for gov>> pump money to the economy>> MB=Cu+R increase>>MS
increase Sell: people pay money for central banks>> collect money from economy back to
the bank>>MB decrease>>MS decrease

2. Reserve requirements (Rr)>> Số nhân tiền>>MS Ra=rr+re>> Rr affect ra>> money

multiplier Rr increase>>ra increases>>money multiplier=(cr+1)/(cr+ra) decreases>> MS
decreases Rr decrease>>ra giảm>> số nhân tiền tăng >> MS tăng

3. Discount rate: interest rate that the central bank applies when they let the commercial
banks borrow Discount rate increases>> đông lực đi vay của NHTM giảm đi. ̣ Discount rate
decreases>> đông lực đi vay của NHTM tăng đi ̣ NHTM nhân 1 khoản tiền Gửi : Dự trữ 1
phần – Cho vay 1 phần ̣ Giả sử: dùng tiền gửi cho người khác vay thu về được ls là 10%
Nếu 1 ngày quá nhiều ng đến rút tiền -> NHTM k đủ tiền -> NHTM đi vay từ NHTW họ phải
trả 1 mức lãi suất là ls chiết khẩu : 12% >> Khi ls ck càng cao >> NHTM tự điều chỉnh hành
vi của mình>>tăng dự trữ lên và cho vay ít đi >> R( dự trữ của NHTM)/D tăng =ra >>
(cr+1/cr+ra) giảm >> số nhân tiền tăng >> MS= số nhân tiền x MB giảm
Monetary policy mechanism:

CSTT mở rông >> tăng MS ̣ MS tăng >> MS dịch chuyển sang phải >> Lãi suất cân bằng
giảm >> Đầu tư tăng mà AD= C+I+G+NX , I tăng >> AD tăng >> AD dịch phải >> sản lượng
của nền ktế tăng, và mức giá tăng >> khi thực hiên cstt mở rô ̣ ng thì sản lượng cải thiê ̣ n
tuy nhiên lạm phát tăng
̣
CSTT thắt chăt >> giảm MS ̣ MS dịch trái >> ls danh nghĩa tăng >> đầu tư giảm >>AD
giảm, AD dịch trái >> sản lượng và mức giá chung đều giảm

+ Khi NHTW tăng lãi suất chiết khấu điều này sẽ khiến slượng giảm :
NHTƯ tăng ls ck >> đông lực đi vay của NHTM giảm >> dữ trữ nhiều lên, cho vay ít đi
>>R/D ̣ tăng>>ra tăng >> mm giảm >> MS giảm >> trái>> ls tăng >> I giảm >> AD giảm >>
trái >>slg và giá giảm >> Nhân định này là nhâ ̣ n định đúng ̣

+ NHTW bán tp cp trên thị trường mở, điều này sẽ khiến mức giá và sản lượng tăng
Bán : NHTW thu bớt tiền măt về mình >> MB giảm >> MS giảm >> dicchj trái >> r
tăng>> I ̣ giảm >> AD giảm dịch trái >>giá và sảng lượng giảm >> nđịnh này là nđịnh
sai

+ NHTW giảm tỉ lê dự trữ bắt buô ̣ c thì sẽ gây ra lạm phát cao ̣ Giảm tl dự trữ bb >>ra
giảm >> số nhân tiền tăng >> MS tăng >> phải >> lãi suất giảm >> I tăng >> AD tăng
>> giá và sản lượng tăng >> lp tăng >> Nđịnh này là đúng
 VI. MONEY GROWTH AND INFLATION

VII. OPEN ECONOMY MACROECONOMICS : BASIC CONCEPT

VIII. UNEMPLOYMENT

Phillips in short term and long term

Short term: trade off between inflation rate and unemployment rate
Demand shocks: move on phillips: positive>> move to the left side,
negative: right side, cs ảnh hưởng đến đường cầu

+ Khi AD tăng >>AD dịch phải>> giá tăng và sản lượng tăng >> lạm
phat tăng và sản lượng tăng ( thất nghiêp giảm) ̣
+ AD dịch trái >> Lạm phát giảm và thất nghiêp ̣
+ Supply shocks: shift on phillips: positive: shift to the left, >> mqh
đánh đổi giảm đi negative: shift to the right >> mqh đánh đổi càng
lớn
+ Steep Phillips: should choose to solve inflation Để giảm 1 lượng
infl -> thay đổi (tăng) U ít hơn giảm Inf
+ Shallow (flat) Phillips: should choose to solve unemployment
+ Long term: Inflation and unemployment has no relationship/link

IX. SAVING, INVESTMENT, THE FINANCIAL SYSTEM