Macroeconomics

Mohamed Owais, MBA

Scarcity problem

• A fundamental fact dominates our lives: We want more than we can get. Our inability to get everything we want is called scarcity

• Think about the things that you want and the scarcity that you face.

• What you can afford to buy is limited by your income and by the prices you must pay. And your time is limited by the fact that your day has 24 hours

• You want some other things that only governments provide. You want to live in a peaceful and secure world and safe neighborhood and enjoy the
benefits of clean air, lakes, and rivers.

• What governments can afford is also limited by the taxes they collect. Taxes lower people’s incomes and compete with the other things they want
to buy.

• Because we can’t get everything we want, we must make choices.

• You can’t afford both a laptop and an iPhone, so you must choose which one to buy

• Governments can’t spend a tax dollar on both national defense and environmental protection, so they must choose how to spend that dollar

• An incentive is a reward that encourages an action or a penalty that discourages one. Prices act as incentives. If the price of a laptop is too high,
more will be offered for sale than people want to buy. And if the price is too low, fewer will be offered for sale than people want to buy. But there is
a price at which choices to buy and sell are consistent.
 What is Economics

• Economics is the social science that

studies the choices that individuals,
businesses, governments, and entire
societies make as they cope with
scarcity and the incentives that
influence and reconcile those choices.
• The subject has two parts:
■ Microeconomics
■ Macroeconomics
Macro VS Microeconomocs

• Microeconomics is the study of the choices that individuals and

businesses make, the way these choices interact in markets, and the
influence of governments. Some examples of microeconomic
questions are: Why are people downloading more movies? How
would a tax on e-commerce affect eBay?
• Macroeconomics is the study of the performance of the national
economy and the global economy. Some examples of
macroeconomic questions are: Why is the Egyptian unemployment
rate so high? Can the Central Bank make our economy expand by
cutting interest rates?
Egypt Unemployment and Interest Rates

Unemployment Rate in Egypt decreased to 9.90

percent in the second quarter of 2018 from 10.60
percent in the first quarter of 2018. Unemployment
Rate in Egypt averaged 10.91 percent from 1993 until
2018, reaching an all time high of 13.40 percent in the
third quarter of 2013 and a record low of 8.10 percent
in the second quarter of 1999.

The Central Bank of Egypt kept its key overnight

deposit Interest rate steady at 16.75 percent on August
16th 2018, as widely expected. Policymakers said the
decision remains consistent with achieving the
inflation target of 13 percent (+/- 3 percent)
 Big Economic Questions

Goods and services are the objects that people value and produce to satisfy human wants. Goods are physical objects
such as cell phones and automobiles. Services are tasks performed for people such as cellphone service and auto-
repair service.
• What to produce
• What we produce varies across countries and changes over time. In the United States today, agriculture accounts for 1 percent of total
production, manufactured goods for 22 percent, and services for 77 percent.
• In contrast, in China today, agriculture accounts for 11 percent of total production, manufactured goods for 49 percent, and services for
40 percent.
• What determines these patterns of production? How do choices end up determining the quantities of cell phones, automobiles, cell-
phone service, autorepair service, and the millions of other items that are produced in the United States and around the world?

• How to produce it
• Land
• Labor
• Capital
• Entrepreneurship

• For Whom?
• Who consumes the goods and services that are produced depends on the incomes that people earn.
Can the Pursuit of Self-Interest Promote the
Social Interest?

Every day, you and 311 million other Americans, along with 6.9 billion
people in the rest of the world, make economic choices that result In what,
how, and for whom goods and services are produced.
• Self-Interest A choice is in your self-interest if you
think that choice is the best one available for you.
You make most of your choices in your self-interest.
You use your time and other resources in the
ways that make the most sense to you, and you
don’t think too much about how your choices affect
other people.
• Social Interest A choice is in the social interest if it leads to an outcome
that is the best for society as a whole. The social interest has two
dimensions: efficiency and equity (or fairness).
• What is best for society is an efficient and fair use of resources.
Economists say that efficiency is achieved when the available resources
are used to produce goods and services at the lowest possible cost and in
the quantities that give the greatest possible value or benefit.
The Big Question

Can we organize our economic lives so that when each one of us

makes choices that are in our self-interest??!
The goal of learning Economics is to become a better
decision maker
How to measure our performance

• Macroeconomics is relatively a new subject that was not exist until 1930
• After the great depression Economists appreciated the need for a
systematic way to measure the overall economy and that we might need
theories to guide policies and fix potential problems
• A hundred years ago there was no comprehensive data on economic
activit, so there was no macroeconomics
• Today economic data is plentiful but that does not mean the economists
agree about where the economy is, where it is going, or what should be
done to help
• Macroeconomists make predictions based on data, theoretical models and
historical trends, but end of days it is just a prediction
How can we tell…?

Right now the Egyptian economy is not going well

How can we tell is it going well or bad is it going to get better or it is
going to get worse ??!!!
What are the policy makers goals

To keep the
economy
growing over
time

To Keep process To limit

stable Unemployment
How to measure the achievemen of these goals??

Gross Domestic
Productivity
(GDP)
So what is the GDP??!

•GDP Defined
•GDP or gross domestic product is the market value of all final goods and
services produced in a country in a given time period.

•This definition has four parts:

Final In a
Produced
Market goods given
within a
value and time
country
services period
Gross Domestic Product

GDP is a market
value—goods and
GDP is the value of the
final goods and services GDP GDP
services are valued
produced.
A final good (or service)
measures measures
at their market
prices.
is an item bought by its
final user during a
production production

Final Goods & Services

within a country

In a given period
Market Value

To add apples and

specified time period. within a during a
A final good contrasts
oranges, with an intermediate country— specific time
computers and good, which is an item
popcorn, we add
that is produced by one domestic period,
firm, bought by another
the market values firm, and used as a production. normally a
so we have a total component of a final
value of output in
good or service. year or a
dollars.
Excluding the value of
intermediate goods and quarter of a
services avoids counting
the same value more year.
than once.
 Egypt GDP

Egypt GDP in USD (millions)

332.7 332.9
305.5
288.6
279.4 The Gross Domestic Product (GDP) in
Egypt was worth 235.37 billion US
236 235.37
218.9 dollars in 2017. The GDP value of Egypt
189 represents 0.38 percent of the world
162.8 economy. GDP in Egypt averaged 76.57
USD Billion from 1960 until 2017,
reaching an all time high of 332.90 USD
Billion in 2016 and a record low of 4
USD Billion in 1962.

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