PRINCIPLES OF

MACROECONOMICS
Lecturer
• Hồ Thị Hoài Thương, MSc
• Faculty of International Economics
• Email: [email protected]
• Phone: 0989514148
• Email for an appointment or for questions

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INTRODUCTION TO THE COURSE

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 Course objectives
• To introduce the fundamentals of Macroeconomics
such as GDP, inflation, unemployment, interest rate,
exchange rate and macroeconomic policies.
• On completion of this course, students should be able
to understand regular macroeconomic events or
policies by using macroeconomic tools to analyze and
predict the effects to the economy.

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 Reading materials
• Textbook(s)
N. Gregory Mankiw, Principles of Macroeconomics,
Cengage Learning, Eighth Edition.

OR
N. Gregory Mankiw, Principles of Economics, Cengage
Learning, Eighth Edition.

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• Some websites
http://vneconomy.vn
http://vef.vn
https://www.worldbank.org/
https://www.economist.com/
http://www.nytimes.com/pages/business/index.html
http://www.bloomberg.com
https://www.khanacademy.org
 Assessment

• Class participation (10%)

• A mid-term exam (30 %)
• A final-term exam (60%)

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 Course content
Chapter 1: Introduction to Macroeconomics
Chapter 2: Measuring macroeconomic variables
Chapter 3: Aggregate Demand and Fiscal policy
Chapter 4: Aggregate Demand and Aggregate Supply
Chapter 5: Money and monetary policy
Chapter 6: Inflation and Unemployment
Chapter 7: Economic growth
Chapter 8: Saving, investment and financial system
Chapter 9: Macroeconomics of the open economy

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 Chapter 1

Introduction to Macroeconomics
 Chapter objectives

1. The fundamental economic problem

2. Microeconomics vs. Macroeconomics
3. Major Macroeconomic Issues
4. Macroeconomic Policies

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1. The fundamental economic problem
• Few people are satisfied with the things
they have unlimited wants
• Resources (such as labor, tools, land, and
raw materials ) are limited.
• Society does not have enough resources to
produce all the things people would like to
have SCARCITY

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1. The fundamental economic problem
• Because of scarcity, every society, at every
level, must make choices about how to use
its resources.
– What to produce
– How to produce
– For whom to produce
Figure 1: The fundamental economic problem
1. The fundamental economic problem
• Economics is the study of how humans
make decisions in the face of scarcity.
2. Microeconomics vs. Macroeconomics
• Economics is divided into two categories:
Microeconomics and Macroeconomics
• Microeconomics (the term ‘Micro’ comes from a
Greek word ‘Mikros’ meaning ‘Small’)
– Study of how individuals and firms
• Make decisions
• Interact in markets
• Macroeconomics (the term ‘Macro’ comes from
a Greek word ‘Makros’ meaning ‘Large’)
– Study of the economy as a whole
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 Discussion question
Classify the following topics as relating to
microeconomics or macroeconomics.
a) A family's decision about how much income to save
b) The impact of higher national saving on economic growth
c) A firm's decision about how many workers to hire
d) The relationship between the inflation rate and changes in
the quantity of money
Figure 2: Microeconomics vs. Macroeconomics
 3. Major Macroeconomic Issues

• Economic growth
Economic growth is the increase in the amount of the
goods and services by an economy over time.
Economic growth is measured in terms of real Gross
Domestic Product (GDP).

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 3. Major Macroeconomic Issues

• Inflation/deflation
When the prices of most goods and services
are rising over time, the economy is said to
be experiencing inflation.
In contrast, deflation is the fall in the average
level of prices.

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 3. Major Macroeconomic Issues
• Unemployment
Unemployment occurs when people are without
work and actively seeking work.
The prevalence of unemployment in an economy is
measured by the unemployment rate, which is
calculated as a percentage by dividing the number
of unemployed individuals by all individuals
currently in the labour force.

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 3. Major Macroeconomic Issues
• Open economy
An economy which has trading and financial
relationships with other national economies is an open
economy.
– Exports are goods and services that are produced in one
country and sold to buyers in another.
– Imports are goods or service bought in one country that
was produced in another.
– Net exports are the value of a nation’s exports minus the
value of its imports
– Net capital outflow are the purchase of foreign assets by
domestic residents minus the purchase of domestic assets
by foreigner 21
 4. Macroeconomic Policies
• National economic goals include low
unemployment, low inflation and increasing
productivity.
• Two major types of policies are fiscal policy
and monetary policy.

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 4. Macroeconomic Policies
• What is fiscal policy?
• Definition: the use of
Government expenditures
and taxes to influence
economic performance.
• Tools: government
expenditures (G) and
taxes (T).
 4. Macroeconomic Policies
• What is monetary policy?
• Definition: the process by
which the Central Bank
controls the money supply
and interest rates to influence
economic performance.
• Tools: reserve requirements,
the discount rate, and open
market operations.
 QUESTIONS

True or False
1. Economic phenomena such as the rate of unemployment and
inflation are studied in microeconomics.
2. During a recession, the economy often has higher rates of
unemployment, whereas during a boom, the economy often has
higher rates of inflation.
3. The government should use monetary policy to boost aggregate
demand during a recession.
 Chapter summary
• Economics is the study of how humans make
decisions in the face of scarcity.
• Economics is divided into two categories:
Microeconomics and Macroeconomics.
• Major macroeconomic issues include economic
growth, inflation/ deflation, unemployment and
open economy.
• The two major types of policies are fiscal policy
and monetary policy.