BEEB 1013 Introduction to Macroeconomic 宏观经济学的简介

UUM BEEB 1013 Principles of Economics

Chapter 20: Introduction to Macroeconomics

20.1 Macroeconomic Concerns

Output Growth

1) Business cycle (Kitaran Perniagaan / 经济循环) :  The cycle of short-term ups and downs in the economy.

2) Aggregate output (Keluaran agregat / 总合产量) : The total quantity of goods and services produced in an economy in a given period.

Figure 1: A Typical Business Cycle

1.      Expansion or boom (Pengembangan ekonomi / 经济繁荣期): The period in the business cycle from a trough up to a peak during which output and employment grow.

Example: The economy is expanding as it moves through point A from the trough to the peak.

2.      Recession / Contraction / Slump (Kemerosotan ekonomi / 经济衰退期): A period during which aggregate output declines. Conventionally, a period in which aggregate output declines for two consecutive quarters. The period in the business cycle from a peak down to a trough during which output and employment fall.

Example: The economy is in recession when it moves through point B from a peak down to a trough.  

3.      Depression (Kemelesetan ekonomi / 经济萧条期):  A prolonged and deep recession

Example: The economy is in depression when it is at trough point.

4.      Recovery (Pemulihan ekonomi / 经济复苏期): The period in the business cycle from a trough up to a peak during which output and employment grow again

Example: The economy is in recovery when it raises up again from the trough to the peak.

Economy in Reality (US Economy)

Figure 2: U.S. Aggregate Output (Real GDP), 1900–2009

Unemployment

1) Unemployment rate:  The percentage of the labor force that is unemployed.

Kadar pengangguran 失业率: Satu ukuran yang menunjukkan peratusan jumlah tenaga buruh yang tidak melakukan sebarang kegiatan ekonomi berbanding dengan jumlah tenaga buruh di pasaran.

Inflation and Deflation

1) Inflation: An increase in the overall price level of goods and services.

Inflasi 通货膨胀: Satu keadaan yang menunjukkan kenaikan tingkat harga umum barang dan perkhidmatan secara berterusan.

2) Hyperinflation: A period of very rapid increases in the overall price level of goods and services.

Hiperinflasi 恶性通货膨胀: Satu proses kenaikan tingkat harga umum barang dan perkhidmatan secara berterusan dan melampau pada kadar yang sangat tinggi (> 10%).

3) Deflation: A decrease in the overall price level of goods and services.

Deflasi 通货紧缩：Satu proses penurunan tingkat harga umum barang dan perkhidmatan secara berterusan.

20.2 The Components of the Macroeconomy

To see the big picture, it is helpful to divide the participants in the economy into four broad groups:

(1)    Households (Isi Rumah / 家庭成员)

(2)    Firms (Firma / 商家)

(3)    The government (Kerajaan / 政府）

(4)    The rest of the world (Sektor Luar Negara / 外国机构）

Households and firms make up the private sector, the government is the public sector, and the rest of the world is the foreign sector.

The Circular Flow Diagram

1) Circular flow: A diagram showing the income received and payments made by each sector of the economy. 

2) Transfer payments: Cash payments made by the government to people who do not supply goods, services, or labor in exchange for these payments. They include social security benefits, veterans’ benefits, and welfare payments.

Circular flow (English version) :

Figure 3: Circular Flow Diagram 1

·         Households receive income from firms and the government, purchase goods and services from firms, and pay taxes to the government.

·         They also purchase foreign-made goods and services (imports).

·         Firms receive payments from households and the government for goods and services; they pay wages, dividends, interest, and rents to households and taxes to the government.

·         The government receives taxes from firms and households, pays firms and households for goods and services—including wages to government workers—and pays interest and transfers to households.

·         Finally, people in other countries purchase goods and services produced domestically (exports).

Note:  Although not shown in this diagram, firms and governments also purchase imports.

Circular flow (Malay version) :

Figure 4: Circular Flow Diagram 2

1) Isi Rumah (家庭成员)

·         Menerima pendapatan dalam bentuk upah, sewa, kadar bunga atau untung daripada firma dan kerajaan  

·         Membelanjakan pendapatannya untuk membeli barang dan perkhidmatan yang dikeluarkan oleh firma  

·         Menabung baki pendapatan yang tidak dibelanjakan di institusi kewangan 

·         Membayar cukai (seperti cukai pendapatan perseorangan) kepada kerajaan  

·         Mengimport barang dan perkhidmatan dari luar negara

2) Firma (商家)

·         Membayar pendapatan faktor kepada isi rumah atas penggunaan faktor pengeluarannya

·         Memperoleh pendapatan / hasil jualan daripada isi rumah dan kerajaan

·         Membayar cukai (seperti cukai keuntungan syarikat) kepada kerajaan

·         Membuat pinjaman dan pelaburan daripada institusi kewangan

·         Mengimport barang modal, barang perantaraan dan bahan mentah dari luar negara

·         Mengeksport barang dan perkhidmatan ke luar negara 

3) Kerajaan（政府）

·         Memungut cukai pendapatan perseorangan daripada isi rumah dan cukai keuntungan syarikat daripada firma

·         Melakukan perbelanjaan kerajaan (seperti membeli barang dan perkhidmatan yang dikeluarkan oleh firma dan memberikan bayaran pindahan dan subsidi kepada isi rumah)

·         Mengimport barang modal dan kelengkapan pertahanan awam dari luar negara

The Major Economic Goals

1) Price Stability (Kestabilan tingkat harga umum 市场价钱稳定)

We need to understand how to measure prices to control price stability to avoid inflation issue

2) Low Unemployment (Kadar pengangguran yang rendah 低失业率)

We need to know how to measure unemployment

3) High and Sustained Economic Growth (Meningkatkan pertumbuhan ekonomi 提升经济成长率)

We need to know how to measure economic growth – which takes us to a discussion of nominal GDP and Real GDP

U may refer the previous notes in malay version:

https://jlcy2020.blogspot.com/2020/04/bab-1-pengenalan-kepada-makroekonomi.html?m=1

The Three Market Arenas

1) Another way of looking at the way households, firms, the government, and the rest of the world relate to one another is to consider the markets in which they interact.

2) We divide the markets into three broad arenas:

(1)     The goods-and-services market.

(2)     The labor market.

(3)     The money (financial) market.

Goods-and-Services Market

·         Households and the government purchase goods and services from firms in the goods-and-services market.

·         Firms purchase goods and services from each other and also supply to the goods-and-services market.

·         Households, the government, and firms demand from this market.

·         The rest of the world buys from and sells to the goods-and-services market.

Labor Market

·         In the labor market, households supply labor and firms and the government demand labor.

·         Labor is also supplied to and demanded from the rest of the world.

Money Market

·         Households supply funds to the money market—sometimes called the financial market—in the expectation of earning income in the form of dividends on stocks and interest on bonds.

·         Households also demand (borrow) funds from this market to finance various purchases.

·         Firms borrow to build new facilities in the hope of earning more in the future.

·         The government borrows by issuing bonds.

·         The rest of the world borrows from and lends to the money market.

·         Much of this borrowing and lending is coordinated by financial institutions, which take deposits from one group and lend them to others.

Monetary Terms

·         Treasury bonds, notes, and bills: Promissory notes issued by the federal government when it borrows money.

Bil-bil perbendaharaan dan bon kerajaan: Nota janji atau sekuriti hutang yang dikeluarkan oleh kerajaan pusat apabila mereka ingin meminjam wang.

·         Corporate bonds: Promissory notes issued by firms when they borrow money.

Bon korporat: Nota janji atau sekuriti yang dikeluarkan oleh firma semasa mereka meminjam wang.

·         Shares of stock: Financial instruments that give to the holder a share in the firm’s ownership and therefore the right to share in the firm’s profits.

Saham: Sekuriti yang mewakili sebahagian modal pemilik dalam perniagaan dan pemegang saham juga merupakan pemilik perniagaan dan mempunyai hak untuk berkongsi keuntungan atau kerugian sesebuah perniagaan.

·         Dividends: The portion of a firm’s profits that the firm pays out each period to its shareholders. 

Dividen: Bahagian keuntungan syarikat yang dibayar oleh syarikat kepada pemegang sahamnya pada setiap tempoh.

The Role of the Government in the Macroeconomy

1) Fiscal policy (财政政策): Government policies concerning taxes and spending.

Dasar fiskal: Tindakan kerajaan mengubah perbelanjaan kerajaan dan cukai untuk menstabilkan keadaan ekonomi negara.

2) Monetary policy (货币政策): The tools used by the Federal Reserve to control the short-term interest rate.

Dasar kewangan: Tindakan bank pusat mengawal penawaran wang dan kadar bunga dalam ekonomi untuk menstabilkan keadaan ekonomi negara.

20.3 A Brief History of Macroeconomics in US

1) Great Depression: The period of severe economic contraction and high unemployment that began in 1929 and continued throughout the 1930s.

2) fine-tuning: The phrase used by Walter Heller to refer to the government’s role in regulating inflation and unemployment. 

3) stagflation: A situation of both high inflation and high unemployment.

BEEB 1013 Introduction of Economics （经济学的简介）

 UUM BEEB 1013 Principles of Economics

Chapter 1: What Economics is About

1.2 A Definition of Economics

Goods and Bads

1) Good: Anything from which individuals receive utility or satisfaction

2) Utility (kepuasan / 效用): The satisfaction one receives from a good

3) Bad: Anything from which individuals receive disutility or dissatisfaction

Resources

1) Land (Tanah / 土地) : All natural resources, such as minerals, forests, water, and unimproved land

2) Labor (Buruh / 员工) : The work brought about by the physical and mental talents that people contribute

3) Capital (Modal / 资本) : Produced goods, such as factories, machinery, tools, computers, and buildings, that can be used as inputs for further production

4) Entrepreneurship (Usahawan / 企业家) : The talent that some people have for organizing the resources of land, labor, and capital to produce goods, seek new business opportunities, and develop new ways of doing things

Scarcity and a Definition of Economics

1) Economics (Ekonomi / 经济) : The social science of how individuals and societies deal with the fact that wants (for goods and services) are greater than the limited resources (land, labor, capital and entrepreneurship) available to satisfy those wants

2) Scarcity (Masalah kekurangan / 缺乏) : The condition in which our wants are greater than the limited resources available to satisfy those wants

3) Choice (Pilihan / 选择) : The ability of a consumer or producer to decide which good, service or resource to purchase or provide from a range of possible options

4) Opportunity Cost (Kos lepas / 机会成本) : The most highly valued opportunity or alternative forfeited when a choice is made

Example 1 (Opportunity Cost) Wei Quan has to choose either Amelia or Amy to be his girlfriend. If Wei Quan choose Amelia as his girlfriend due to Amelia is more pretty and smart compare to Amy, then Amy is his opportunity cost to be his girlfriend.

5) Rationing Device (分配机制): A means for deciding who gets what of available resources and goods or it called as price system, such as Ringgit Malaysia price (RM)

6) Competition (Persaingan / 竞争) : It takes the form of people trying to get more of the rationing device

Example 2 (Scarcity, Choice & Opportunity Cost Concept) Jin Xian already received monthly salary, which is RM 5000, but he planned to buy an iPhone 12 with the price RM4000 and the Acer brand laptop with the price RM 3500. By the way, he faced scarcity problem because he not enough money to buy two of goods. As resources are scarce, Jin Xian has to make choice between these two electronic devices. So, he should decide on how best to use his resources (Jin Xian’s salary) to choose a best choice (purchase which electronic devices) in order to maximise his utility. If Jin Xian choose to buy Acer laptop with doing assignment purpose, then iPhone 12 will be forfeited by him. So, iPhone 12 is opportunity cost of Jin Xian to buy laptop because iPhone 12 is the most highly valued opportunity or alternative forfeited when he decides to buy the laptop.

 

1.3  Key Concepts in Economics

Opportunity Cost and Behavior

·         Economists believe that a change in opportunity cost can change a person’s behavior

·         The higher the opportunity cost of doing something, the less likely it is that it will be done

(semakin tinggi kos lepas bagi melakukan pilihan pertama, semakin kurang pilihan untuk melakukan pilihan pertama tersebut)

Benefits and Costs

1.      Benefits rarely come without costs

2.      If we passed a law stating that anyone caught driving a car would go to prison for 40 years, few would drive, and car pollution would be gone

3.      But many would think that the cost was too high

4.      Economists think in terms of both costs and benefits

Decisions Made at the Margin

1) Marginal benefits (MB): Additional benefits; the benefits connected with consuming an additional unit of a good or undertaking one more unit of an activity

Manfaat marginal: Peningkatan progresif / manfaat yang memihak kepada pengguna akibat peningkatan penggunaan oleh unit tambahan produk atau perkhidmatan yang dibeli

2) Marginal costs (MC): Additional costs; the costs connected with consuming an additional unit of a good or undertaking one more unit of an activity

Kos marginal: Peningkatan daripada kos pengeluaran yang dihasilkan akibat peningkatan jumlah keluaran yang dihasilkan dalam satu unit

3) Decisions at the Margin: Decision making characterized by weighing the marginal benefits of a change against the marginal costs of a change with respect to current conditions

Example 3 (Decisions Made at the Margin) 1.      Bryan just finished eating a piece of fry chicken and drinking a soda at KFC but he is still a bit hungry, and considering whether to order another piece of fry chicken 2.      If the marginal benefits are greater than the marginal costs, he expects a net benefit, and he order another; But if the marginal benefits are less than marginal costs, he expect a net cost 3.      What he doesn’t consider are the total benefits and total costs; the benefits and costs associated with the first piece of fry chicken are no longer relevant to your decision 4.      The question is whether to eat another fry chicken after already having eaten one

 

Efficiency

1.      Efficiency: Exists when marginal benefits equal marginal costs

2.      Suppose you are studying for an economic quiz, and for the first hour of studying, the marginal benefits (MB) are greater than the marginal costs (MC):

MB studying first hour > MC studying first hour

3.      So, you will certainly study for the first hour; suppose for the 2^nd hour, MB is still greater than MC

MB studying 2^nd hour > MC studying 2^nd hour

4.      You will continue to study as long as the MB is greater than the MC

5.      Maximizing Net Benefits: If you had stopped studying after the 1^st hour, you would have given up the net benefits of studying longer

6.      Efficiency is consistent with MB = MC, and also consistent with maximizing net benefits

Economics is About Incentives

1) Incentive (Insentif / 激励) : Something that encourages or motivates a person to undertake an action such as giving some allowances to hardworking employees

2) Unintended Effects

Economists think in terms of unintended effects

·         If a minimum wage law is passed, might some lose their jobs?

·         Do mandatory seat belt laws cause more accidents because people feel safer?

3) Exchange

Exchange (Trade): The giving up of one thing for something else

·         People enter into exchanges to make themselves better off

·         Think of the trade in terms of utility or satisfaction

·         After a trade, you expect that your utility rate has risen

1.4 Ceteris Paribus

Ceteris Paribus Thinking

1.      Ceteris Paribus: A Latin term meaning all other things constant or nothing else changes

 

什么是Ceteris Paribus ??? ·         Ceteris paribus的字面意思是“保持其他事物不变”，是一个拉丁语短语，通常翻译为英文，表示“其他条件都相同”。 如果所有其他变量保持不变，它是主流经济思想中的主要假设，它是一种经济变量对另一种经济变量的影响的简写形式。   ·         在经济和金融领域，当对因果论据进行辩论时，经常会使用“ ceteris paribus”。 经济学家 可能会说提高最低工资会增加失业，增加货币供应会导致通货膨胀，降低边际成本会提高公司的经济利润，或者在城市建立租金控制法会导致供应 可用房屋减少。

 

2.      Economists specify ceteris paribus because they want to clearly define what they believe to be the real-world relationship between two variables

What is a Theory?

1.      Theory: An abstract representation of the real world designed with the intent to better understand it

2.      Abstract: The process (used in building a theory) of focusing on a limited number of variables to explain or predict an event

1.5 Economic Categories

Positive Economics and Normative Economics

1) Positive Economics: The study of what is in economics

2) Normative Economics: The study of what should be in economics

Microeconomics and Macroeconomics

1) Microeconomics: The branch of economics that deals with human behavior and choices as they relate to relatively small units: an individual, a firm, an industry, a single market

微观经济学（Mikroekonomi），有时称为价格理论，是现代经济学的一个分支，研究微观经济体系中最基本单元（个体、企业）的经济行为。微观经济学重视需求与供给，如何影响个人，达成交易，并形成市场中的均衡价格。微观经济学关注人们的决定和行为影响商品和服务的供给和需求、谁负责决定价格、或者反过来，价格怎样决定商品和服务的供给量和需求量。

Example of microeconomics questions:

·         How does a market work?

·         What level of output does a firm produce?

·         What price does a firm charge for the good it produces?

·         How customer maximize their utility?

·         How firm maximize their profit?

2) Macroeconomics: The branch of economics that deals with human behavior and choices as they relate to highly aggregate markets (e.g., the market for goods and services) or the entire economy

宏观经济学（Makroekonomi），是指用国民收入、经济整体的投资和消费等总体性的统计概念来分析宏观经济运行规律的一个经济学领域。

Example of microeconomics questions:

·         How does the economy work?

·         Why is the unemployment rate sometimes high and sometimes low?

·         What causes inflation?

·         How about GDP and GNP country?