Prepared By Mr. Bin Chhom1 Chapter 1: Introduction to Macroeconomics I- Definition: -m:aRkUesdækic©- sikSaBIdMeNIrRbRBwtþénexÓnesdæki c©kñúgRTg;RTayTUlaydUcCakareRbIR

Prepared By Mr. Bin Chhom 1

Chapter 1:

Introduction to MacroeconomicsI- Definition:

- m:aRkUesdækic©- sikSaBIdMeNIrRbRBwtþénexÓnesdækic©kñúgRTg;RTayTUlaydUcCakareRbIR)as; srub> karvinieyaKsrub/ karnaMecjsrub/ nigéfømFüménTMnij nig esvakmµTaMgGs; .

- mIRkUesdækic©- sikSaBIdMeNIrRbRBwtþénmuxgar \riyabf nig esckþIsMerccitþrbs ;shRKas rWRKYsar kñúgRTg;RTaytUc rWÉkbuKÁl dUcCa³ tMrUvkar nigkarpÁt;pÁg;rbs;GñkeRbIR)as;> PaBejacéntMrUvkar rWkarpÁt;pÁg;eTAnwgéfø> CMerIs nig GtßRbeyaCn_rbs;GñkeRbIR)as; CaedIm.


•kñúgkareRCIserIsnUv neya)aym:aRkUesdækic©

eFVI[RbCaCatimYyGac³1- BnøÓn b¤ BnüWtkMenInesdækic© 2- beBa¢H[man

GtiprNa b¤ bnßykareLIgéfø 3- eFVI [man»n PaBBaNiC¢kmµ b¤ begáIt[manplelIsxagBaNiC¢kmµ .

•enAkñúgm:aRkUesdækic©viTüaeyIgBinitüemIlkMritTUlayén³

1- bNþakalaGnuvtþPaB (Opportunity) 2- ]bsKÁEdlRbQmmuxedayexOnesdækic©TaMg mUl dUcCa³ karekIneLIgénkMritéfø GRtanikmµPaB

•kñúgkarviPaKm:aRkUesdækic©eyIgEtgEtCYbRbTHGBaØatþiCaKnøwHénm:aRkUesdækic©xøH dUcCa ³ GNP, GDP, The unemployment rate, Net Export, . . .


The Diverse Fields of Economics

Examples of microeconomic and macroeconomic concernsProduction Prices Income Employment

Microeconomics

Production/Output in Individual Industries and Businesses How much steelHow many officesHow many cars

Price of Individual Goods and Services Price of medical carePrice of gasolineFood pricesApartment rents

Distribution of Income and Wealth Wages in the auto industryMinimum wagesExecutive salariesPoverty

Employment by Individual Businesses & IndustriesJobs in the steel industryNumber of employees in a firm

Macroeconomics

National Production/Output Total Industrial OutputGross Domestic ProductGrowth of Output

Aggregate Price Level Consumer pricesProducer PricesRate of Inflation

National IncomeTotal wages and salaries

Total corporate profits

Employment and Unemployment in the Economy Total number of jobsUnemployment rate


II- Major Macroeconomic Issues

1-Economic Growth: CakarekIneLIgén TniñplsrubnigTinñplkñúg mñak;². keNIenHmann½yfakMrit CIvPaBrs;enA CamFümekIneLIg .

•bBaðamYyeTotkMnt;fakarlUtlas;esdækic© Tak;TgeTAnwgeKal neya)ayrbs; rdæaPi)al. ]bmafa »nPaBfvikarbs;rdæaPi)al eFVI[mankarkat;bnßyPaBlUt las;esdækic©. krNI enHdUcCa³ - cMnayelIscMnUlBnV- karx©IluyxageRkA - karmanGRtakarR)ak;x<s;- karkat;bnßykarvinieyaK- karFøak;cuHesdækic©.


2-Business Cycles

esdækic©manninñkarpøas;bþÚrCabnþbnÞab; KWmaneLIg nigcuHEdleKehAfaxYbGaCIvkmµ . xYbGaCIvkmµsMedAeTAelIkarFøak;cuHnwglMhUrénskmµPaBGaCIvkmµCabnþbnÞab ;Edl)anekIt

eLIgCMrujninñakarry³eBlEvg . Figure1-1: Business Cycle Trough

Rec

over

y

Peak

Recession

Trend Growth

Rea l

GD P

Time

Trough


Trouhg ¬Føak;cuHdl;)at¦- FFansl;TMenreRcIn.- kMritén

TinñplTabeFobeTAnwgsmtßPaBplitrbs;exOnesdækic©. dUecñHmanTMhM énsmtßPaBplitd¾FMminRtUv)an eKeRbI .

- R)ak;cMenjGaCIvkmµTabRkumh‘unmYycMnYnmankarxatbg;eTotpg.

- KµanPaBeCOCak;elIsßanPaB esdækic©eBlGnaKt CalTV plnaM[shRKasmYy cMnYnKµanqnÞHcg;vinieyaKfµI .


Recovery ¬karegIbeLIgvij¦ - ]bkrN_brikçacas;²

hYssm½yRtUv)andUrecj. - kareRbIR)as;FnFan/ cMnUl/ nig

cMnayrbs;GñkeRbIR)as;cab;epIþmekIneLIg .

- kþIsgÇwmelIGaCIvkmµekIneLIg CalTVplnaM[plitkmµ/ karlk; nig R)ak;cMenj ekIneLIg.

- GnikmµPaB nig TinñplsrubekIneLIg .


Peak ¬ekIneLIgdl;kMBUl¦- smtßPaBEdlmanRtUv)aneKeRbIdl;kMri

tkMBUl.- BlkmµxVH

CaBiessRbePTBlkmµEdlmanCMnajx<s;

- vtßúFatuedImsMxan;²Rk naM[éføedIm plitkmµekIneLIg b:uEnþedaysarEt éfø plitplekIneLIgEdr GaCIvkmµenAEtcMenj .


Recession ¬karFøak;cuH¦- skmµPaBesdækic©Føak;cuH .

karFøak;cuHenHmann½yfaplitplCatisrub

(Gross Domestic Product=GDP) Føak;cuH . - tMrUvkarFøak;cuHCalTVplnaM[plitkmµ

nig GnikmµPaB Føak;cuH . enAeBl GnikmµPaBFøak;cuH cMnUlrbs;RkumRKYsarFøak;cuH .

- R)ak;cMeNjFøak;cuH naM[ shRKas mYycMnYnmanbBaðaxaghirBaØvtßú .


III- Key Macroeconomic Phenomena

1-Output and Income ¬Tinñpl nig cMnUl¦

National Income:

CatMélTwkR)ak;srubénplitplnigesvakmµcugeRkaykñúgesdækic©mYy

elIry³eBlCak;lak; Biessry³eBlmYyqñaM.


Output or National product:

CacMnYnsrubénplitplnigesvakmµcugeRkayEdlRtUv)anplit. ehIyRtUv )anvas;CaÉkta

dUcCa KitCaetanénEdkEfb CaetA énRsUvsaLI

CacMnYnmnusSénesvakmµkat;sk;. l. tamniymn½yplitplCati (National Output)

esµInwgcMNUlsrub (National Income) Edl)an begáIteLIgedayplitkmµTMnij nig esvakmµenaH . GacniyayedayxøIfa eBlEdleyIg sikSaBIplitplCati (National Product or National

Output) KWeyIgkMBugsikSapgEdr BIcMnUlCati (National Income)


The Circular Flow of Expenditure and Income


1.1- Aggregating Total Output ¬Tinñpl srubTaMgmUl¦

CakarbUkbBa©ÚlnUvTinñplxus²KñaCatMélsac;R)ak;. tamry³ karKuN brimaN TinñplénTMnij mYyCamYynwg éføkñúgmYyÉktarbs;eKehIybnÞab;mk bUktMélTaMgenaHcMeBaH TMnij nImYy²Edl)an plit eyIgGacKNnabrimaN én Tinñpl srubEdl)anKitCaduløar.


1.2- Real and Nominal Values ¬tMélBit nig tMélrUbPaB¦- Nominal National Income:

CakarbUkbBa©ÚlnUvTinñplxus²KñaCatMélsac; R)ak;. karERbRbYlénrgVas; enHGacbNþalmkBIkar ERbRbYlTaMgbrimaN nigTaMg éføCamUldæan rbs;va .

- Real National Income :

Canic©CakalRtUv)aneKehAfacMnUlCatiCaduløaefr. karvas;EvgenH tMélrbs;Tinñpl mYy² KWminEmnCaéføbc©úb,nñeT KWCa

éføefr EdlKitkñúgkMritéføqñaMeKal. dUecñHkrNI Real National Income mankar ERbRbYlKWvaERbRbYlEtbrimaNb:ueNÑaH.


1.3- National Income ¬R)ak;cMnUlCati¦

rgVas;Edl)aneRbICaTUeTAbMputénR)ak;cMnUlCatiehAfaplitplCatidul ( Gross Domestic Product = GDP)

National Income:

CatMélTwkR)ak;srubénplitpl nigesvakmµcugeRkay

kñúgesdækic©mYy elIry³eBlCak;lak; Biessry³eBlmYyqñaM.


2- Employment, Unemployment and the Labor Force

•PaBmankargareF VI¬GnikmµPaB =

Employment) sMedAeTAelIcMnYnGñk eFVIkar eBjv½y ¬tamc,ab; enA shrdæGaemrikcab; BI16qñaMeLIgeTA¦mankargareFVI .

•PaBKµankargareF VI¬nikmµPaB =

Unemployment) sMedAeTAelIcMnYnGñk eFVIkareBjv½yEdlminRtUv)an eKeRbI b:uEnþkMBugEtEsVgrkkargareFVI .


•kMlaMgBlkmµ ( Labor force)

KWCacMnYnRbCaCnsrubEdlmankargareFVIbUknwgcMMnYnEdlKµankargareFVI .

cMnYnnikmµCn GRtanikmµPaB =

KuN 100 cMnYnénkMlaMgBlkmµ•enAeBlEdlexOnesdækic©sßitenARtg; GDP

skþanuBleyIgcat;Tukfa kMritén PaBmankargareFVIx<s; b¤eBlxøHmankargareFVIRKb;²Kña (Full

employment) .


3-Inflation and the price Level ¬GtiprNa nig kMritéfø¦• GtiprNa (Inflation)

mann½yfaéføCaTUeTAeLIgx<s;minEmnRKan;EtéføénTMnijb¤

esvakmµ EtmYymux b¤BIrmuxenaHeT EtCaéfø esÞIr Et RKb; TMnij TaMgGs; .

• edIm,IsikSaGtiprNa (Inflation) Gñkesdækic©eRbIsBaØaNBIr ³

- TImYyKWkMritéfø (Price level)

EdlsMedAeTAelIkMriitCamFüménéføTaMgGs; kñúgexOnesdækic©ehIy tag eday (P) .

- TIBIrKWGRtaGtiprNa (Rate of inflation) CaGRtaEdlkMritéføTUeTA kMBugEt

ekIneLIg .


•]TahrN_tMélén CPI kñúgEx5 qñaM1998 esµInwg 162,8 nigkñúgEx5 qñaM1997 esµI160,1 . GRtaGtiprNakñúgkMLúgeBlmYyqñaMKWCa PaKry bMERbbMrYl kMritéfø EckeGaykMritéføqñaMdMbUg ehIyKuNnwg 100.

162,8 – 160,1

GRtaGtiprNa Inflation = x 100 = 1,7 %

160,1


•edIm,Ivas;EvgkMritéfømFüm Gñkesdækic©begáItnUvsnÞsSn_éfø (Price Index) EdlCamFümPaKénéførbs;TMnijepSg² .

•snÞsSn_éføEdleKniym eRbICageKKW snÞsSn_éførbs;GñkeRbIR)as; (Consumer

Price index = CPI) Edlvas;EvgéfømFüménTMnij nig esvakmµ TijedayGñkeRbIR)as;mFüm (Average consumer) .


Price of Basket of Goods and Service CPI = × 100 Price of Basket in Base Year

CPI in Year 2 - CPI in Year 1 Inflation in Year 2 = × 100 CPI in Year 1


•]TahrN_³ manTinñn½ydUctaragxageRkamYear

1 Basket= 4 Coca + 2 Beer

Cost of the

Basket

Consumer

Price Index (CPI)

(Base year 2005) The Rate of InflationPrice

of Coca

Price of Beer

2005 1$ 2$1×4+2×2=

8$/ basket8/8×100= 100

2006 2$ 3$2×4+3×2=

14$/ bask.

14/8×100= 175(175 – 100)/ 100×100 = 75%

2007 3$ 4$3×4+4×2=

20$/ bask.

20/8×100= 250(250 – 175)/ 175×100 =

43%


• Why inflation matters ¬ehtuGVIGtiprNaCabBaða¦• karERbRbYlkMritéfømYy eFVI[mankarpøas;bþÚr

tMélBitrbs;rUbiyvtßú . BaküfakMlaMgTijén rUbiyvtßú (Purchasing power of money ) nigtMél BiténrUbiyvtßú (Real value of money ) sMedAeTAelIbrimaNénTMnij nigesvakmµ EdlGacRtUv)an eKTijCamYy nwg cMnYnluymYykMnt;. kMlaMgTijénrUbiyvtßú manTMnak;TMngCaGviC¢man CamYykMritéfø.

]TahrN_ebIsinCakMritéføekIn BIrdg enaHmYyduløanwgTij)anEtBak; kNþal b:ueNÑaH ebIsinCakMritéføfycuHBak;kNþalenaH naM[mYy duløanwgTij)anBIrdg.

•GtiprNa k¾kat;bnßypgEdrnUvtMélBiténGVImYy Edl éførbs;vaefr KitCasac;R)ak; . dUecñH tMélBiténR)ak;Ex KNnIsnSM RtUv)ankat;bnßyedayGtiprNa .


4- The Interest Rate ¬GRtakarR)ak;¦ GRtakarR)ak;KWCaéføEdlRtUv)aneKTUTat;cMeBaHluyx©IsMrab;ry³eBlmYykMNt; ehIyRtUv)an eKKitCacMnYnPaKrykñúgmYy duløaEdl)anx©I . ]TahrN_ GRtaTUTat; 12 % kñúgmYyqñaM mann½yfa Gñk x©I RtUvTUTat; 12

% kñúg 1qñaM sMrab; erogral;duløa EdleKx©I .


4.1- Interest Rates and Inflation ¬GRtakarR)ak; nig GtiprNa

¦ etIGtiprNaCH\TVBlelIGRtakarR)ak;dUcemþc?

]bmafa x©I $100 sgvij $108 mann½yfa $100 CaR)ak;edIm cMENkÉ $8 CakarR)ak; . kñúgkrNIenHGRtakarR)ak;rUbPaBesµI $8. enAeBlkMritéføekIneLIgnaM[tMélénduløaEdl GñkeRbI sMrab;TUTat;fycuH . GRtakarR)ak;Bit vas;nUvplcMnUlelIkm©IBit (Real return on loan) EdlCakMlaMgTijénluy .


- ebIsinCakMritéføkñúgqñaMenaHenA efrdédl GRtakarR)ak;BitesµInig 8% BIeRBaH Kat;GacTijTMnijnigesvakmµeRcInCagmun 8% CamYy nwg $108 eFobnwg $100 R)ak;edIm .

- ebIsinkMritéfø ekIn 8% enaHGRta karR)ak;BitesµI 0 BIeRBaH $108 Tij)an TMnijkñúgbrimaNdUc $100 EdlKat;[x©IdMbUg .

- ebIsinkMritéf ekIneLIg 10% enaHGRtakarR)ak;BitesµInwg -2% . mann½yfaR)ak; $108 nigTij)anbrimaNTMnijticCagkm©IedIm $100 .


4.2- why Interest Rate Matter ¬ehtuGVI)anCaGRtakarR)ak;manbBaða¦

• karERbRbYlGRtakarR)ak;BitCH\TViBlelIsþg;darénkarrs;enArbs;GñksnSMpgGñkx©Ipg . ]ThrN_GñkcUlnivtþn_CaeRcInenAedImTsvtSqñaM 1990s

enAeBlGRtakarR)ak;Føak;dl; 2-3% naM[GñkcUl nivtþn_CYbRbTHnUvkarFøak;cuHy:agxøaMgéncMNUlBitrbs;BYkeK . pÞúyeTAvijbNþaGñkx©Inwgl¥CagCamYynwgGRtakarR)ak;BitTab .

• GRtakarR)ak;manbBaðapgEdrcMeBaHexOnesdækic©TaMgmUl . GRtakarR)ak;BitCYykMNt;

TMhM karvinieyaK . GRtakarR)ak;Bitx<s;karvinieyaKticCagGRtakarR)ak;BitTab . dUecñHtamry³\TViBl énkarvinieyaK GRtakarR)ak;Bit k¾CH\TViBlelIGnikmµPaB nig TinñplkñúgdMeNIrkarx©I .


We can calculate real interest rate in mathematical terms:

r = i – I

r: the real interest rate, i: the nominal, or market, interest rate,

I: the inflation rate,


Real interest rates in the years following:

Year Interest rate % Inflation rate %Real interest rate %

1970 6.5 5.7 0.8

1975 5.8 9.1 -3.3

1980 11.5 13.5 -2.0

1985 7.5 3.6 3.9

1990 7.5 5.4 2.1

1995 5.5 2.8 2.7

2000 5.9 3.4 2.5

Documents

Prepared By Mr. Bin Chhom1 Chapter 1: Introduction to Macroeconomics I- Definition: -m:aRkUesdækic©- sikSaBIdMeNIrRbRBwtþénexÓnesdæki c©kñúgRTg;RTayTUlaydUcCakareRbIR