PENGANTAR ILMU EKONOMI MAKRO

1. PENGANTAR ILMU EKONOMI MAKRO CHAPTER 2 MARKET AND GOVERNMENT IN A MODERN ECONOMY (PasardanPerananPemerintahdalamPerekonomian)

2. INTRODUCTION • Padatahun 1900an munculdoktrin “Laissez-faire”, artinya: leave us alone (biarkanakusendiri), atau:”hold that government interfere as little as possible in economic”. Iniadalahdoktrinkebebasanekonomi (sistemekonomipasar) • Sistemekonomipasarmelahirkankegagalanpasar (market failure), seperti: inefficiency, inequality, macroeconomic problem, etc) • Karenaterjadikegagalanpasar, makasetelahtahun 1900an muncul “welfare state”, yaitusebuahdoktrin yang menghendakiperlunyacampurtanganpemerintahdalamperekonomian. Misalnya: pajak, subsidi, JPS, pensiun, dst

3. 2.1. PASAR DAN PEREKONOMIAN Mekanisme pasar adalah bentuk organisasi ekonomi di mana pembeli dan penjual bertemu dan berinteraksi melalui pasar untuk memecahkan tiga masalah ekonomi yang mendaar • Pasar (market): “market is a mechanism through which buyers and sellers interact to set prices and exchange goods and services” • Market Equilibrium QD =QS, menghasilkanhargadanjumlahkeseimbangan • Jenis-jenispasar (bisadilihatdaribeberapasisi, misalnya: derajatpersaingan, jenisbarang, dst) • Pasardapatmenyelesaikan 3 masalahekonomi: What, how, and for whom • Penentuanhargadalamsistemekonomipasar (lihatbaganberikut):

4. Price on factor markets (wages, rents, interest) Supply of factors: Labour, land, capital Demand for factors What CONSUMERS BUSINESSES (firms) How For whom Price on product markets Demand for goods Supply of goods

5. 2.2. TRADE, MONEY, AND CAPITAL • Trade (Perdagangan) Kenapaadaperdagangan: untukapa: apamanfaatperdagngan (gain from trade, specialization and division of labor); • Money: Lubricant of exchange What is money? Fungsiuang: 1. The means of exchange/ a medium of exchange 2. Unit of account 3. Store of value (wealth) 4. Standard of defered payment • Capital • Jenis-jenis modal: bangunan, mesindsb • Capital formation • Human capital • Fungsi modal • Perbedaan modal denganinvestasi

6. 2.3. THE ECONOMIC ROLE OF GOVERNMENT • To increase efficiency Sistemekonomipasarpadapelaksanaannyamengalamikegagalan (market failure) olehkarenaitupemerintahperlucampurtangandalamperekonomian • To promote equity Pasartidakselalumelakukandistribusisumberdayasecaraadil, makaperlucampurtanganpemerintah. Bentukcampurtanganmisalnyadalampenarikanpajak, subsidi • To foster macroeconomic growth and stability • Growth: sumberpertumbuhan, LPE, pertumbuhandankualitaspembangunan, kebijakanfiskaldanmoneter • Stability of economic: indikatorstabilitas, kebijakanpemerintahuntukstabilitasekonomi, dst.

7. Government Can Remedy The Shortcoming of The Market

8. CHAPTER 20 OBJECTIVES AND INSTRUMENT OF MACROECONOMIC (THE GOALS OF MACROECONOMIC POLICIES)

9. INTRODUCTION The birth of macroeconomics (ME) • Founded by John Maynard Keynes 1930an • Central ME questions: (a). Why do output and employment sometimes fall, and how can employment be reduced (b) What are the sources of inflation , and how can it be keft under control; and (3) How can a nation increase its rate of economic growth

10. OBJECTIVES AND INSTRUMENTS OF MACROECONOMIC

11. INTERNATIONAL LINKAGES 1. All nation participate in the world economy: trade and finance (export and import) 2. Trade policies: tariffs, quotas, etc 3. International financial management (foreign exchange rates) 4. Exchange rates represents the price of its own currency in terms of the currencies of other nations

12. AGGREGATE SUPPLY AND DEMAND(AS AND AD) • AS refers to the total amount/quantity of goods and services that the nation’s business willingly produce and sell in given period AS = f(Price, Level, Prod Capacity of the ec, costs level) AS dan P memiliki hubungan positif • AD refers to the total amount that different sector in economy willingly spend in given period (sektor perekonomian: consumers, business, government, foreigners), AD = f(Price level, Monetary Policy, Fiscal Policy, etc) AD dan P memiliki hubungan negatif

13. 3. Macroeconomic Equilibrium P Equilibrium consequences: -. Terjadi output danhargakeseimbangan -. Terdapat employment -. Terjadi international trade AS B C P1 E PE AD Q QB QE QC

14. 3. The causes of Shifting in AD P The causes of shipfting in AD: Increase aggregate spending Exp: increase in military spending, etc AS F PF E AD1 PE AD Q QE QF

15. 4. The causes of shipting in AS AS1 P The causes shifting in AS. The cost of production increase Increase of the world price of crude oil, rate of electricity, etc. The consequences of it is decline of output, employment, inflation, etc. it lead to determination of macroeconomic goals AS G PG E PE AD Q QG QE

16. 5. Long-run Economic Performance P The causes of price increase in the long run (P1900-P2000): AS P-2000 AD AS P-1900 AD Q Q-1900 Q-2000 20 T 2 T

17. CHAPTER 21 MEASURING ECONOMIC ACTIVITY (NATIONAL PRODUCT/INCOME)

18. 1. GROSS DOMESTIC PRODUCT (GDP) • Definition:’it is the sum of the dollar values of consumption ( C ), gross investment ( I ), government purchases of goo and services ( G ), and net export (X-M) produced within a nation during a given year” (Samuelson), 2002:434). GDP = C + I + G + (X-M) • The purpose of measuring GDP is to measure the overall performance of an economy

19. 2. THE METHOD OF MEASURING GDP • Production Approach (value added approach) value added is the different between a firmsales and its purchases of materials (cost of intermediate product) from after firms.

20. b. Expenditure approach, and ( C ) Earning/cost approach

21. 3. THE PROBLEM OF DOUBLE COUNTING We defined GDP as the total production of final goods and services. A final product (goods) is one that is produced and sold for consumption or investment. GDP excludes intermediate goods (i.e. goods that are used up to produced other goods). GDP therefore includes bread but not wheat, and home computers but not computer chips. If bread and wheat sumed in the economic activity, the double counting is happened.

22. 4. DETAILS OF THE NATIONAL ACCOUNTS • Nominal GDP (GDP at market prices/current prices) • Real GDP (GDP at constant prices): is multiplying the quantities of goods by fixed set of prices, or Q = real GDP = Nominal GDP divided by GDP deflator = PQ/P GDP deflator = (Nominal GDP/real GDP) = general prices = index number of prices • The kinds of price indexes: - Consumers price index (CPI), atau IHK - Producers price index (PPI or IHP) is the price index of goods sold at the wholesale level (such as steel, wheat, oil, ect) (Samuelson, 2002:774) - GDP deflator

23. 5. COMPONENT OF GDP • Consumption ( C ) • durable goods: automobiles, motorcycles, etc • nondurable goods: food, drink, etc • services (medical care, bank, etc 2. Investment and capital formation ( I ) • physical investment (additional capital stock) • financial investment (using money to buy stock, or to open saving account 3. Government expenditure ( G ) • payroll expenditures on its employees • gross investment/public goods • office equipment, etc. (excluded; transfer payment 4. Net exports ( X-M): it is measurement of inter linkages

24. 6. FROM GDP TO DISPOSIBLE INCOME (DI) GDP = C + I + G + (X – M) NI = National Income = GDP – (Depreciation + Indirect Taxes) DI = Disposible Income = NI – (Direct Taxes + Net Business Saving) + Tr Or: NI = w + r + i + π GDP = NI + Depreciation + Indirect Taxes Notes: w = wages, r = rent, i = interest, π = profit See diagram below

25. Net Export Depreciation Government Expenditure Indirect Taxes National Income Direct Taxes Investment Transfer payment Net business saving Consumption DI GDP National Income ( NI ) Disposible Income ( DI )

26. 7. BEYOND THE NATIONAL ACCOUNT • Omitted non market activities: meals, loundering, child care services, ect • Omitted environment demages • Calculation is normally in averages, ect