Group #1 FDNECON C39

Bautista, Elyssa Burt, A. November 06, 2019

Magcase, Rafael Francis, F.

Malveda, Krystine L.

Villaseñor, Christian Theodore, D.

Stephen Learns Macroeconomics on a Rollercoaster

Stephen Colbert, a late night TV show host, invited Paul Krugman, an American

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economist to talk about macroeconomics on a roller coaster. Stephen Colbert picked a roller

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coaster as the venue of discussion because he believes that a roller coaster is a perfect classroom.

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According to him, roller coasters keep one awake despite talking about topics that usually makes
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one sleepy. He also talked about different economic concepts such as inflation, recession, and the

global macroeconomic theory as a whole.

Paul Krugman, the guest on the Stephen Colbert show, specializes in the global
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macroeconomic theory, an economic concept raised in the video. It is the branch of economics

that analyzes and studies the economy as a whole. It is different from microeconomics because
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microeconomics focuses more on the specific and single factors that affect economic decision-

making while macroeconomics focuses more on the general factors or the bigger picture of the
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economy. It focuses on three main factors namely, gross domestic product, unemployment rate,
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and inflation (Hall, 2019). For the first main point of global macroeconomics, gross domestic

product refers to the total amount of goods and services a country produces. The gross domestic
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product serves as a snapshot of the country’s economy at a certain time. For the second main

point of global macroeconomics, the unemployment rate tells macroeconomists the number of

people from the available pool of labor will be unable to find work. The unemployment rate and

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 gross domestic product have a two-fold effect on each other. If the unemployment rate is high,

the gross domestic product of the country will be low. This happens because since more people

are out of work, this means there’s a decrease in manpower; hence, a decrease in the quantity of

outputs. However, if the unemployment rate is low, the gross domestic product is high because

this means there’s more manpower to create more outputs. For the third main point of global

macroeconomics, the inflation rate is the rate at which prices increase. The inflation rate is

usually measured in two ways, consumer price index and gross domestic product deflator.

Furthermore, macroeconomics also talks about macroeconomic issues that are faced such

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as the issue of recession, an economic concept brought up by Stephen Colbert. According to

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Amadeo (2019), a recession is when the economy declines significantly for six months. The

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National Bureau of Economic Research defines a recession as "a period of falling economic
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activity spread across the economy, lasting more than a few months". A recession can happen

anytime; hence, there are six recession indicators to watch out for to determine when a recession
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is coming. These recession indicators are yield curve, confidence indexes, employment data, the
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Federal Reserve Bank of New York’s recession probability model, leading economic index, and

gross domestic product. When a recession happens, people might prefer economic austerity over
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economic stimulus. Economic austerity is a set of economic policies created by the government

to control a public sector debt while economic stimulus consists of attempts by the government
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to financially stimulate an economy. Under economic stimulus, the attempts to do so are done
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through monetary policy and fiscal policy.

Monetary Policy is concerned with drafting, announcing and implementing the plan of
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action taken by competent monetary authorities, that controls the quantity of money in an

economy. It consists of the management of money supply and interest rates that aims to satisfy

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 macroeconomic objectives. These macroeconomic objectives include controlling inflation,

consumption, growth and liquidity. In addition, it can be used in combination with or as an

alternative for fiscal policy (Chappelow, 2019).

On the other hand, fiscal policy is when the government adjusts its spending levels and

tax rates to be able to monitor and influence a country’s economy. It is based on Keynesian

Economics that states that the government can influence the productivity level by decreasing or

increasing taxes and public spending.

An example where both monetary and fiscal policy was before the great depression. The

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government used laissez-faire to control the economic phenomena. Laissez-faire is an economic

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theory that opposed any government intervention in business affairs. Here the government had to

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take a proactive role, where they had to regulate unemployment, business cycles (which is the
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rise and fall in production), inflation, and the cost of money (Kramer, 2019).

To conclude, it is important to understand how global macroeconomic theory is all about

because it focuses on gross domestic product (GDP), inflation and unemployment rate. These are
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all important factors to consider as we go about our day-to-day activities and it is something that

should be taught not only in schools but also barangays and villages in the Philippines. It is also
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important to learn because it focuses on recession, an issue that we can prevent as a country if it

is properly promulgated and communicated.

References

Amadeo, K. (2019, October 27). 5 Warning Signs of a Recession. Retrieved November 6, 2019,
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from https://www.thebalance.com/what-is-a-recession-3306019

Chappelow, J. (2019). Monetary Policy. Investopedia. Retrieved on November 5, 2019 from

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 https://www.investopedia.com/terms/m/monetarypolicy.asp

Foster, S. (2019, August 14). Watch For These 6 Indicators To Know When A Recession Could

Be Coming.com. Retrieved November 6, 2019, from https://www.bankrate.com/

personal-finance/smart-money/watch-these-indicators-know-when-recession-

could-be-coming/

Hall, M. (2019, June 22). Explaining The World Through Macroeconomic Analysis. Retrieved

November 6, 2019, from https://www.investopedia.com/insights/

macroeconomic-analysis/

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Hayes, A. (2010, August 13). Austerity Definition. Retrieved November 6, 2019, from

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https://www.investopedia.com/terms/a/austerity.asp

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Kenton, W. (2012, February 14). Economic Stimulus. Retrieved November 6, 2019, from
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https://www.investopedia.com/terms/e/economic-stimulus.asp

Kramer, L. (2019) Fiscal Policy. Investopedia. Retrieved on November 5, 2019 from

https://www.investopedia.com/insights/what-is-fiscal-policy/
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YouTube [Video file]. (n.d.). Retrieved from

https://www.youtube.com/watch?v=ir7lwqnPlrg&feature=youtu.be
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