Republic of the Philippines

UNIVERSITY OF EASTERN PHILIPPINES

LAOANG CAMPUS
Laoang, Northern Samar

Module 1
(SSE 109a)

Macroeconomics

Prepared by:

Oscar D. Parane, Jr.

Faculty
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Course Guide
About the Course

Welcome to the SSE 109a (Macroeconomics) class!

This subject is under the Social Studies Major subject component of the new Teacher
Education curricular program. As a future teacher, It is a must that you know the different
literacies that should possessed by our learners. But of course, the future teachers, you my
dear students should also build and enhance in yourselves the same literacies we expect
from our students. This subject is designed for you to acquire this goal.

This course examines the development perspectives in Asian countries, cultures, and
values as well as issues and challenges, historical roots, and Asian responses. The course
is designed to enable students to make comparative study of Asia societies. Our official
schedule is

 8:00 – 9:30 MWF BSEd 2 - Macroeconomics Class ID 1039179

Study Tips

How will you maximize your learning in this subject? Here are some tips

1. You are the master of your fate. Meaning, your success will totally depend on how you will
strive to pass the subject.

2. Do not procrastinate. Manage your time well in reading the module and answering the
concept checks. Remember, this is not the only module you will be reading as there are more
modules in your other subjects.

3. Be mindful of your study schedule. After getting the study schedule for all your subjects, make
a general study schedule for all your subjects.

4. Take note of deadlines of submission. But it would be better if you could submit ahead of
time.

5. While reading the modules, you may encounter some words which are quite unfamiliar to you,
hence, a dictionary can be of help in this situation.

6. While the modules contain concepts taken from various sources, you are still encouraged to
look for other references along the topics in the module to validate the ideas coming from the
authors referred to in this module.
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7. Keep your modules in good condition, the way we also keep our books and other reading
materials in a safe place.

8. In answering the activities, particularly the Concept Check after every lesson, please bear in
mind that you don’t have to copy what is in the module. Your answer should manifest more of
your understanding as well as, the higher order thinking skills of analysis and synthesis.

9. Be sure to take note of the University Link where you would submit your requirements. After
submitting, make a private message telling me of the details: what you submitted and the date
and time of submission.

10. While waiting for your Journal to be checked and returned, please work on the next module
and make a draft for the meantime.

11. If there are clarifications regarding the modules and the content, for as long as they related to
the subject, do not hesitate to contact me through our messenger group chat or my mobile
number 09753014866. However, be sure to introduce yourself on your first message.

12. You are the learner. While you can ask for help from other people, like your siblings or
parents, the bulk of the work rests on you, my dear student. Let us ensure that the values of
honestly, patience, and perseverance would be exhibited in you, dear future teachers.

Module Organization

The whole module material for this course is composed of seven (7) modules. Each module is
made up of the following parts:

1. Module Number and Title

2. Overview. The overview describes the course in general and how the module could be
helpful in you as learner.

3. Learning Outcomes. The learning outcomes are the target competencies which you are
expected to gain after learning the module.

4. Lessons. The module is divided into lesson chunks or mini-lesson

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5. Concept Check. After every mini-lesson is a Concept Check which text box is colored Pink.
This is an open-ended question which measures your understanding of the concepts in the
lesson chunk.

6. Feedback. The feedback is your teacher’s way of checking your journey in learning the
module and your readiness in moving to the next module.

7. Summary. This is the synthesis of the concepts presented in the module.

8. Suggested Readings/Videos. These are some links which were not included in the main
references for the module but are materials to read to watch on the internet to give you more
understanding about the topics.

Study Schedule

Week and Dates Topic Activity

Week 1 1. Read this Course Guide thoroughly
2. Be sure you are a member of the
 Course Overview
Messenger Group Chat for this subject.
 Introduction
Please format your nickname using this
template:
First Name, Surname and Brgy./
Municipality
3. As a manifestation of your first attempt to
be recognized in the class, please
introduce yourself by telling the group
some few things about yourself.
4. After posting your response for #3,
please post your photo for familiarization
purposes.
5. Your Course Syllabus is posted in your
Group Chat on messenger. If there will
be a way as there is always a way if you
will really intend to, please access your
email. A copy of the modules can also be
found in your email for downloading.
Week 2 – 3 Module 1 1. Read and understand Module 1.
2. Answer the Concept Check after
 Introduction and the Ten every lesson in your Journal
Principles of Economics 3. Your Journal should be submitted to
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the University Links

Week 4 - 5 Module 2 1. Read and understand Module 2.
2. Answer the Concept Check after
 Inflation, Labor and every lesson in your Journal
Unemployment 3. Your Journal should be submitted to
the University Links
Week 6 – 7 Module 3 1. Read and understand Module 3.
 Production and 2. Answer the Concept Check after
Growth every lesson in your Journal
3. Your Journal should be submitted to
the University Links
Week 8 Module 4 1. Read and understand Module 4.
 Savings, 2. Answer the Concept Check after
Investment, and every lesson in your Journal
Financial System 3. Your Journal should be submitted to
the University Links
Week 9 Mid-term Examination 1. Please be updated on the
Messenger Group Chat for the
detailed instructions for the Mid-term
Examination.
Week 10 – 12 Module 5 2. Read and understand Module 5.
3. Answer the Concept Check after
 Fiscal Policy every lesson in your Journal
4. Your Journal should be submitted to
the University Links or send through
email
Week 13 – 15 Module 6 1. Read and understand Module 6.
2. Answer the Concept Check after
 Money and Monetary every lesson in your Journal
Policy 3. Your Journal should be submitted to
the University Links or through email
Week 16-17 Module 7 1. Read and understand Module 7.
 Money Growth 2. Answer the Concept Check after
every lesson in your Journal
3. Your Journal should be submitted to
the University Links or through email
Week 18 Final Output 1. Prepare this week for the
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submission of your research and

analysis as Final output.
2. Deadline of submission is December
2022

Assessment Tasks

How will you be graded in this subject? To pass the subject, you should submit all
required activities and pass the exams.

1. Journal. You must come up with a journal where you will write your answers on the Concept
Check in every module. Write your answer in A4 size bond paper. Make sure to have cover,
write the subject, your name and your subject professor.

2. Midterm Examination. You must pass the Midterm examination which will be accomplished
through the Email. Details of the examination will be posted in our Messenger Group Chat.

3. Final Output. The Final Output is in the form of Research Paper/ Reaction Paper of current
issues related to the subject.

In computing for your final grade for SSE 109a, the following percentages will be allotted for
the above-mentioned assessment task:

Journal / Activities 30%

Mid-term Examination 20%
Final Output 50%
Total 100%

Again, welcome to SSE 109a and have fun in learning the subject!

INST. OSCAR D. PARANE, JR.

Course Instructor
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OVERVIEW OF THE MODULE

This module will prepares students to think like economists. They will
make decisions based on the principles and concepts in economics.
Students will learn about the key macroeconomics indicators of GDP,
unemployment, and inflation, then apply these concepts to analyze
economic behavior. Content coverage includes concepts and principles,
inflation, labor and unemployment. This is the first module of two modules
before the midterm examination.

PURPOSE OF THE MODULE

The purpose of this module is to help students learn the fundamental

lessons of economics and to show such lessons can be applied to the world
in which they live. Toward that end, I have used various learning tools that
recur throughout the module.

Definition of Key Concepts. When key concepts are introduced in the

chapter, they are presented in bold typeface. This treatment should aid
students in learning and reviewing the materials.

List of key Concepts. A list of key concepts in the beginning of each

chapter offers students a way to test their understanding of the new terms
that have been introduce. Page references are included so that students can
review the terms they do not understand.

Chapter Summaries. Each chapter ends with a brief summary that reminds
students of the most important lessons that have just learned. Later in their
study it offers an efficient way to review for exams.
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Problems and Applications. Each chapter also contains a variety of

problems and applications that ask students to apply the materials they
have learned.

Table of Contents

Course Guide 1

Overview of the Module 6

Purpose of the Module 6

Table of Contents 7
Module 1. Introduction and the Ten Principles
Introduction 8
Learning Objectives 8
Key Terms 8
Definition of Economics 8
Unlimited Human Wants and the Economic Problem 9
Economics and Philosophy 9
Basic Assumption of Economics 10
Economic Resources or Factors of Production 10
Activity 1 11
Ten Principles of Economics 11
Synthesis 13
Activity 2 13
Application 14
Assessment 14
Feedback 16
Conclusion 16
Summary 16
References 17
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Rubric 17

MODULE 1

Introduction and the Ten Principles of Economics

INTRODUCTION
How can the study of economics help you? Most importantly, a
knowledge of economics will help you to analyze economic issues that are
reported daily in the press and on television. Although the laws of economics
may not be as absolute as the law of gravity, they will help you deal with
facts and opinions about economic issues. As a result, you will be able to
come to intelligent, informed conclusions when faced with both day-to-day
problems and questions of national policy.

1. Explain what economics is and

explain why it is important
2. Define the four factors of
production.
3. Explain the principles of
economics.

Economics Scarcity Opportunity cost

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Scarcity Needs Wants

Marginal costs Marginal benefit

Definition of Economics
Economics is a field of knowledge concerned with managing scarce
resources to satisfy unlimited human wants and needs. Scarcity refers to
the limitation of resources (i.e., land labor, capital, and entrepreneurship) to
be allocated properly to all sectors of the economy. As aforementioned, the
lack of parking spaces is an example of land allocated improperly. It can be
assumed that land in the city is improperly managed due to a large
population density and thus, a high demand for space.

Unlimited Human Wants and the Economic Problem

Individually, personal objectives are concentrated in getting what one
desires. The problem is nobody can have everything. Even if one works an
entire lifetime, he/she will never earn enough to buy everything that he/she
wants. For instance, a young adult, after buying his/her first dream car and
dressing it up, will eventually think of buying a new one. As fast as he/she
acquires a new car, his/her tastes and references change.
Needs consist of the products and services that an individual cannot
live without based on his/her existing lifestyle. For example, a middle class-
family living in the city spends its budget on food, school uniforms, work
attire, car gasoline, allowances, and payments for rent and utilities. As the
family’s income increases, it is possible that its need will change.
Wants refers to products and services that a person can do without
regardless of his/her lifestyle. Specifically, they include items that have base
models. For example, a cellular phone in its basic form is a device that can
make and receive calls wirelessly. Regardless of the user, this is the purpose
of a cellular phone. However, additional features or parts such as camera,
music player, and video recorder are integrated in the latest models. If the
objective is communication, then a basic cellular phone can be classified as
a “need”. As other features are desired, then the cellular phone becomes a
“want”.
The distinction between needs and wants, however, is not strictly
fixed. The wants of today may become the needs of tomorrow. Cellular
phones with various features are fast becoming a need rather than a want
because of the convenience and utility that technology provides.
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It is also important to understand that each person has different

needs and wants which keep on changing. There is always something new
that will come out in the market.
Economics and Philosophy
Adam Smith (1776) wrote the famous An Inquiry into the Nature and
Causes of the Wealth of Nations and separated economics from philosophy
as a source of knowledge. He explained that society is based on the
interdependence of all people regardless of what they do. The underlying
interconnection lies on the movement of goods and services in relation to the
needs and wants of people. This means that each individual has needs and
wants to fulfill, which are the ultimate reason for working.
Basic Assumption of Economics
Economics is able to predict actions of the people based on
rationality. Rationality is defined as the decision-making process of an
individual that is consistent and results in a logical outcome most beneficial
to the person. To illustrate further, the rationality test may be considered.
For example, if a person prefers mango over banana and banana over guava,
then it follows that he/she prefers mango over guava. Economics assume
that individual make decisions rationally, and thus, it is able to predict
certain behavioral outcomes.
Economic Resources or Factors of Production
Land covers all natural resources that exist without man’s
intervention. It encompasses all things derived from the forces of nature
such as air, water, forest, vegetation, and other forms beneath the earth’s
surface, like minerals. These resources are irreproducible. The payment for
land is called rent.
Labor refers to human inputs such as manpower skills that are used
in transforming resources into different products that answer people’s
needs. Payments for labor are called wages and salaries.
Capital is the man-made factor of production used to create another
product. Examples are machinery and equipment used by manufacturing
companies. The payment for capital is interest.
Entrepreneurship integrates land, labor, and capital to create new
products. An entrepreneur is a person who innovates and reinvents an old
product by creating a new one. A person who sells baskets will find it
difficult to find a proper market for the product. However, he/she can
innovate and repackage the basket with grocery items, not to sell the grocery
item alone, but to sell the whole bundle as one merchandise. In this way,
the basket of grocery items can be sold as a different item with proper
packaging.
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The scarcity of these four factors of production does not mean people
cannot produce much; rather, wants or desires are only relative to the
availability of these resources. The finite nature of land, labor, capital, and
entrepreneurship consequently makes the existence of shortage, on top of
the unlimited human wants and needs, a universal and perpetual
phenomenon.

ACTIVITY 1

THINK…DISCUSS

Why do laborers want to work

abroad?

Search on the google web some the reasons why

Filipinos go abroad.
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Ten Principles of Economics

1. People face trade-offs. Each time a person makes a decision, he/she
also makes a trade-off. An example is a choice between buying a
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favorite band’s concert ticket and purchasing a new gadget. Only one
can be selected over the other. It is always important to know what
item is prioritized or forgone.
2. The cost of something is what one gives up to get it. This principle
is about comparing the costs of several alternatives or choices.
Although it might seem easy to identify costs, the dilemma is
identifying the implicit ones. Opportunity cost is the value of the
second best choice. When resources are limited or scarce, consumers
are compelled to decide how to manage them efficiently and determine
how much of their wants and needs will be satisfied. Hence, when a
particular need is pursued, all other alternatives are forgone.
3. Rational people think at the margin. Marginal approach is about
incremental changes or differences in small amounts. Decisions
should be made by comparing marginal costs and marginal benefits.
4. People respond to incentives. One reason for workers’ low
productivity is poor attendance. To correct this problem, a particular
firm can give a health bonus. The incentive given can be a one
month’s worth of salary bonus for a year’s perfect attendance. After a
year, workers may even insist on working during holidays.
5. Trade can make everyone better off. If there are two countries
producing goods A and B with different levels of efficiency, is it better
to let these countries continue manufacturing both goods or make one
country produce good A and the other B and trade the excess with the
other country that does not produce the good respectively? A trade-off
between participants usually gets a bigger output with less input.
6. Markets are usually a good way to organize economic activity.
There was a particular time in the economic history where the central
planners in a command economic system used to decide the allocation
of a country’s economic resources. This centralized system proved to
be instrumental in boosting one’s output. Most nations turned into a
market system where the decisions on allocating resources are
dependent on households and firms. It is better for them to determine
such because central planners do not know anything about price
adjustments due to buyer’s tastes and preferences, or price changes
due to consumer speculations. For these reasons, communism failed
in its raison d’etre which is the society’s well-being. In fact, nations
were able to achieve such well-being using a market economic system,
where there is an existence of an “invisible hand” that places
everything correctly to achieve equilibrium.
7. Governments can sometimes improve market outcomes. Although
the “invisible hand” seems to put everything in place, the existence of
the government is still necessary to enforce laws and ensure that the
mechanisms of the market work systematically.
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8. A country’s standard of living depends on its ability to produce

goods and services. Why do Filipinos seek greener pastures and work
abroad? Is it because they don’t have opportunities in the Philippines?
Comparing the goods and services produced by Philippines with those
of the United States or Japan, it can be noticed that the outputs
directly correlate with the standard of living in the countries. Filipinos
seek greener pastures because they need to improve their standard of
living instantly. To improve the quality of their life, they need to work
overseas.
9. Prices rise when the government prints too much money. In the
later chapters, it will be explained why an increase in money supply
without an increase in the nation’s output leads to inflation. For
instance, if the total output of the economy is 1kg of fish for P100 and
the government increases money supply by P50, the price of the same
output of 1 kg of fish changes to P150.
10. Societies face a short-run trade-off between inflation and
unemployment. The increase in money supply in the short run fuels
the economy to increase spending, prompting firms to increase output
and raise prices. This, in turn, leads to an increase in employment
and a decrease in unemployment.

SYNTHESIS

Ten Principles of Economics

How People Make Decisions #1: People Face Tradeoffs
#2: The Cost of Something Is What You Give Up to Get It
#3: Rational People Think at the Margin
#4: People Respond to Incentives
How People Interact #5: Trade Can Make Everyone Better Off
#6: Markets are usually a Good Way to Organize Economic Activity
#7: Governments Can Sometimes Improve Market Outcomes
How the Economy as a Whole Works #8: A Country’s Standard of Living depends on its Ability to Produce Goods and Services
#9: Prices Rise When the Government Prints Too Much Money
#10: Society Faces a Short-Run Tradeoff between Inflation and Unemployment

ACTIVITY 2
Look at a newspaper or at the Web site
http://www.economist.com to find stories
about the economy that have been in the
news lately. For each story, identify one (or
more) of the Ten Principles of Economics
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discussed in this lesson that is relevant, and explain how it is relevant.

(Print the news page and submit your answer in a separate sheet of paper)

APPLICATION
You are trying
the vacation (airfare, hotel, forgone wages)
are measured in peso, but the benefits of the
vacation are psychological. How can you
compare the benefits to the cost.
Your roommate
quickly than your roommate can. If your
roommate did all of the cooking and you did all of the cleaning, would your
chores take you more or less time than if you divided each task evenly? Give
a similar example of how specialization and trade can make two countries
both better off.

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Using your own words, answer the following

questions.
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1. What is economics and how it is important to understand the

concepts or ideas now that we have scarce resources because of
COVID-19?
2. What are the factors of production? Explain each.
3. Give an example of trade-off.
4. Explain whether each of the following government activities is
motivated by a concern about equity or a concern about efficiency. In
the case of efficiency, discuss the type of market failure involved.
a. Regulating cable TV prices
b. Providing some poor people with vouchers that can be used to buy
food.
c. Prohibiting smoking in public places.
d. Imposing higher personal income tax rates on people with higher
incomes.

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Feedback
One word that best describe your learning in this module. Why?

CONCLUSION
Throughout this course we will refer back to the Ten Principles of
Economics. Whenever we do so, an icon will be displayed in the margin, as it
is now. But even when that icon is absent, you should keep these building
blocks in mind. Even the most sophisticated economic analysis is built
using the ten principles introduced here.

SUMMARY
 Economics deal with managing scarce resources to satisfy unlimited
human wants and needs.
 The factor of production – land, labor capital, and entrepreneurship – are
scarce. Thus, wants or desires are relative to the availability of these
various resources.
 Scarcity refers to the limitation of resources (i.e., land, labor, capital, and
entrepreneurship) to be allocated properly to all sectors of the economy.
 Land covers all human resources that exist without man’s intervention.
 Labor refers to human input such as manpower skills that are used in
transferring resources into different products that meet people’s needs.
 Capital is the man-made factor of production used to create another
product.
 Entrepreneurship integrates land, labor, and capital to create new
products. An entrepreneur is somebody who innovates and reinvents an
old product by creating a new one.
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 The finite nature of land, labor, capital, and entrepreneurship

consequently makes the existence of scarcity, on top of the unlimited
human wants and needs, a universal and perpetual phenomenon.
 The ten principles of economics are as follows:
1. People face trade-offs.
2. The cost of something is what one gives up to get it.
3. Rational people think at the margin.
4. People respond to incentives.
5. Trade can make everyone better off.
6. Markets are usually a good way to organize economic activity.
7. Governments can sometimes improve market outcomes.
8. A country’s standard of living depends on its ability to produce goods
and services.
9. Prices rise when the government prints too much money.
10. Societies face a short-run trade-off between inflation and
unemployment.

REFERENCES
Carlos L. Manapat, et al., (2015). Macroeconomics, an Introduction, C & E
Publishing, Inc.
N. Gregory Mankiw, Brief Principles of Macroeconomics, Third Edition

RUBRIC

Criteria 3 2 1
(Exemplary) (Adequate) (Needs
Improvement)

Quality of Information

Grammar

Organization

Neatness

Timeliness
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