MACROECONOMIC POLICY All governments intervene through certain macroeconomic policies in a bid to achieve certain policy objectives and

d improve the overall performance of the economy. OBJECTIVES Objectives: are the aims or goals of government policy Macroeconomic Policy Objectives 1. Price Stability- Keep Inflation Under Control 2. Full Employment- Maintain a Low Level of Unemployment 3. Sustainable Economic Growth- Achieve a High but sustainable Level of Growth Rate 4. External Balance- Equilibrium in the balance of payments wherein exports equal imports over the long run Philippine Scenario (OUR OBJECTIVES): 1. Inflation needs to be stable and at an average target of 3-5% 2. There should be an employment rate of 95% thus, an unemployment rate of 5% (giving way to frictional and seasonal employment) 3. Economic Growth measure in terms of the rate of change of Gross Domestic Product should be sustainable at 5-7% - however, this margin, as we believe is too small therefore, we alter this from 5-8% 4. There should be equal amount of exports and imports. INSTRUMENTS Instruments: means by which these aims might be achieves The main policy instruments available to meet macroeconomic objectives are: 1. Fiscal Policy - involves use of government spending, taxation and borrowing to influence both the pattern or economic activity and also the level and growth of aggregate demand, output and employment. 2. Monetary Policy- involves the use of interest rates, the supply of money and credit and also changes to the value of the exchange rate to control the level and rate of growth of aggregate demand in the economy 3. Supply Side Policies- micro-economic policies designed to make markets work more effectively by aiming to improve efficient supply of goods and services. METHODOLOGY Current 2010 Values: For Price Stability: Inflation is 2.2%

 For Sustainable Economic Growth: Gross Domestic Product is 9.2% For Balance of Payments: Trade Balance is -130567 (With Exports USD: 23.2 and Imports USD: 16.7) Instruments to be Used: 4 Assumptions of Government expenditures and NFPS outlays (excl. interest payments) - Chosen Assumption: 2 (Lagged endogenous path) which resulted to a GDP of 8.0 - If Assumption 1 is chosen, GDP would be 26.1 - If Assumption 3 is chosen, GDP would be 8.3 - If Assumption 4 is chosen, GDP would be 9.2 4 Assumptions of Inflation Expectation - Chosen Assumption: 2 (combination between target and past inflation) which resulted to price of 3.2 - If Assumption 1 is chosen, prices would be 1.9 - If Assumption 3 is chosen, prices would be 2.0 - If Assumption 4 is chosen, prices would be -0.9 New 2010 Values: For Price Stability: Inflation is now 3.2%, a percentage higher than the old For Sustainable Economic Growth: Gross Domestic Product is now 8.0, with a 1.2% decrease Effects on Balance of Payments - Trade Balance increased from -130567 until -121434 - Current Account increased from -66.6 to -62.9 CONCLUSION With the Instrument Settings you used, did you achieve your target? YES