For the convenience of studying the material, the article Macroeconomic equilibrium is divided into topics:

The merit of L. Walras in the development of the theory of economic equilibrium lies, first of all, in the fact that he substantiated the need for an approach to the analysis of the economy as a single macroeconomic whole, connected in single system markets for various goods. The general equilibrium model of L. Walras is based on the position that contracts are conditional and can be reviewed within a certain period even before receiving goods and paying money, if demand exceeds supply or supply exceeds demand. The latter, with a constant budget of the participants in transactions, will stimulate the growth of relative prices, in which the price of one product is expressed in natural units of another product, and the excess of supply over demand will cause prices to decline.

The interaction of relative prices, supply and demand leads to the fact that a change in demand is accompanied by a change in the relative prices of goods. Moreover, buyers will purchase goods at a higher price in order to satisfy their demand with their low supply. Producers will not sell goods at a lower price if demand is lower than supply, so as not to lose income. Similar dynamics of prices, supply and demand is observed in the markets, if buyers seek to maximize the utility from the purchase of goods, and sellers - to minimize their costs and maximize their income. Based on this, it is possible to give a definition of the law of L. Walras, according to which the amount of excess demand and the amount of excess supply in all the markets under consideration coincide.

The general equilibrium model of L. Walras, based on the analysis of supply and demand, includes a whole system of equations. Among them, the leading role belongs to the system of equations that characterizes the equilibrium of two markets: productive services and consumer goods. In the market of productive services, the owners of factors of production (land, labor, capital, mainly money) act as sellers. The buyers are entrepreneurs producing consumer goods. In the market for consumer products, the owners of factors of production and entrepreneurs change places. It turns out that these prices are due to the aggregate values ​​of supply and demand, when they become equal to each other. It is these prices that provide each rational member of the economic system with maximum utility. Therefore, according to the general equilibrium model of L. Walras, in the process of concluding contracts for the sale and purchase of goods in the markets, such relative prices are set at which all desired goods are sold and bought and there is no excess demand and excess supply.

In the final form, the system of equations of L. Walras will look like this:

The general equilibrium model of L. Walras had a great impact on the development of economic science. However, it differs in many respects from the real state of bourgeois society. Suffice it to say that it allows for the possibility of zero unemployment, full utilization of the production apparatus, the absence of cyclical fluctuations in production, does not take into account technical progress, capital accumulation. L. Walras, like his predecessors, could not explain the nature of prices, moving in vicious circle when prices depend on supply and demand, and the latter - on prices.

L. Walras's model is inherent in the contradiction with the practice of money and price movement. So, according to L. Walras, no changes in the demand and supply of goods will occur if, in the presence of equilibrium in all markets, relative prices remain the same, and absolute prices for all goods increase. However, he does not show that an increase in absolute prices leads to an increase in the demand for money.

The American scientist D. Patinkin resolved this contradiction in his book Money, Interest and Prices (1965). He introduced into the model of L. Walras such an additional component as the money market and real cash balances, which are the real value of the money remaining in the hands of sellers and buyers.

D. Patinkin created a general equilibrium macroeconomic model that included not only commodity markets, but also the money market with real cash balances. At the same time, D. Patinkin proceeded from the fact that the real value of cash balances affects not only commodity demand, but also money demand. Suppose that the amount of money left in the hands of buyers and sellers has not changed in nominal terms. However, the general increase in prices has led to the fact that their purchasing power has decreased, and therefore the demand for goods in all markets has decreased. Therefore, the balance will be disturbed, which will cause an excess supply of goods, which, according to the law of L. Walras, will lead to an excess demand for money. The latter does not mean that there is less demand on the market. In conditions of scarcity of money, which is not enough to buy a given quantity of goods, absolute prices will decrease at constant relative prices. As a result of the decrease in absolute prices, the real value of cash balances will increase. The overall balance will be restored, which indicates the system's ability to self-regulate.

However, it should be borne in mind that the general equilibrium of the economy is carried out more efficiently on the basis of self-regulation in conditions of perfect competition. Ideal conditions for general equilibrium exist in an economy free of , with a quick and flexible response of prices to changes in supply and demand, with an overflow of capital and labor as a result of intersectoral competition. Naturally, in this case there should not be such phenomena that violate the general balance of the economy, such as errors in state regulation of the economy, social and natural shocks.

Keynesian model of macroeconomic equilibrium

Unlike neoclassics, John Keynes proceeded from the fact that market macroeconomics is characterized by disequilibrium: it does not provide full employment and does not have a self-regulation mechanism. At the same time, John Keynes criticized two fundamental theses of the neoclassical theory of equilibrium.

First, he disagreed with the nature of the relationship between investment, savings, and the interest rate. The fact is that there is a discrepancy between investment and savings. After all, the subjects of savings and investors represent different groups of the population, which are guided by different economic interests and motives. Thus, some make money savings to buy a house, others - land, others - a car, etc. The motives for investments are also different, which are not reduced only to the rate of interest. Such a motive can be, for example, profit, depending on the size and effectiveness of investments. It should be taken into account that the source of investments, in addition to savings, can be credit institutions. As a result, the processes of saving and investment are not coordinated, which gives rise to fluctuations in the aggregate size of production, income, employment and price levels.

Secondly, the economy is developing inharmoniously, there is no elasticity in the ratio of prices and wages, as the neoclassicists believe. Here the imperfection of the market is manifested, associated with the existence of monopolists-producers. Under these conditions, according to J. Keynes, aggregate demand becomes volatile, and prices become inelastic, which supports unemployment for a long time. Therefore, state regulation of aggregate demand is necessary.

According to J. Keynes, the amount of goods and services produced is directly dependent on the level of total spending (or aggregate demand), that is, the cost of goods and services. The most important part of total expenditure is consumption, which, together with saving, equals income after taxes (disposable income). Therefore, this income determines not only consumption, but also savings. In addition, the amount of consumption and savings depends on such factors as the amount of consumer debt, the amount of capital, etc.

The next component of total costs are investments, the value of which depends on two factors: the real interest rate and the norm. The amount of investment costs is affected by the costs of acquiring, operating and maintaining fixed capital, changes in the availability of this capital, in technology and other temporary factors.

Thus, these expenditures on consumption and investment, which determine the amount of aggregate demand, are unstable. This causes instability in market macroeconomics.

In order to balance the economy, to ensure its balance, it is necessary, according to John Keynes, to have "effective demand". The latter consists of consumption and investment costs. The effective demand should be maintained with the help of a multiplier that relates the increase in this demand to the increase in investment. Each investment turns into individual income for consumption and savings. As a result, the increase in "effective demand" becomes a multiplied value of the increase in the original investment. Moreover, the multiplier is directly dependent on what part of the income people spend on consumption. But personal consumption rises with income, although to a lesser extent than income. This is due to the psychological factor, which consists in the desire of people to save. It is the latter, according to J. Keynes, that leads to a decrease in the share of consumption in total income.

Considering the decline in the share of consumption in total income as a natural phenomenon inherent in human nature, J. Keynes notes that it is necessary to support such a component total income as an investment. Private investment should be supported through taxation, credit monetary policy and government spending. In this way, the lack of "effective demand" is compensated by additional government demand, which contributes to the achievement of macroeconomic equilibrium.

Modern macroeconomics is characterized by inflation and unemployment. Prices and wages are dynamic and may go down or up. Therefore, the aggregate supply curve AS does not have a strictly vertical and horizontal value, as it is presented in the neoclassical and Keynesian models of general market equilibrium. It should be noted that the shape of the aggregate supply curve AS depending on the change in AD has not only theoretical but also practical significance for the stabilization and economic growth in the country.

Thus, in the current crisis conditions in Russia, the Keynesian version of increasing aggregate demand AD, in which the growth of GNP is not accompanied by an increase in prices, is more appropriate. At the same time, the classical concept is not suitable, when an increase in aggregate demand AD does not lead to an increase in GNP, but to an inflationary rise in prices.

Model of macroeconomic equilibrium by K. Marx

The macroeconomic equilibrium model of K. Marx is based on the adequate theory of the movement of the total social product and capital. Social capital functioning at the macro level is a set of individual capitals in their interconnection and interdependence in the process of circulation. The connection between circuits and turnovers of individual capitals forms the movement of social capital.

In the process of functioning of social capital, a total social product (SOP) is formed, which has a cost and natural form.

The cost of the SOP consists of three parts:

Constant capital - c (the cost of consumed means of production);
variable capital - v (reproductive fund of labor force);
surplus value - t (surplus value created during the year).

Thus, the cost of SOP will be equal to c + v + m = T.

In kind, the SOP is divided into two main divisions:

I - production of means of production that are used in production and are capital;
II - the production of consumer goods that are used for consumption and constitute income.

The process of social reproduction, which offers macroeconomic equilibrium, means, firstly, under what conditions entrepreneurs sell all their goods; secondly, how workers and capitalists buy personal consumption goods on the market from the composition of the social product; thirdly, how do capitalists find on the market the means of production needed to replace the consumed means of production from the composition of the social product; fourthly, how the social product not only satisfies personal and production needs, but also makes it possible to ensure accumulation and expanded reproduction.

When elucidating the conditions for the reproduction of social capital, K. Marx used the method of scientific abstraction. At the same time, he was distracted from a number of secondary, particular processes and phenomena that affect macroeconomic equilibrium.

Among these abstractions are the following:

1) reproduction is carried out with "clean", i.e. only the relations of two classes, capitalists and workers, are taken into account;
2) the exchange of goods takes place according to their value;
3) reproduction is possible without foreign trade;
4) the organic composition of capital (O = C: V, where C is constant capital; V is variable capital) is unchanged;
5) the value of constant capital is wholly transferred to the finished product during the year;
6) the rate of surplus value (r) is unchanged and equal to 100%, etc.

Social reproduction can be carried out both on a fixed scale (simple reproduction) and on an increasing scale (extended reproduction).

The cost and in-kind structure of the SOP is expressed as follows:

I c + v + m (Production of means of production).
II c + v + m (Production of consumer goods).

With simple reproduction, which is the starting point and the basis of expanded reproduction, the entire surplus value is consumed by the capitalists as income.

The process of implementing SOPs in departments I and II is carried out in the following three-pronged way:

I c, consisting of the means of production, is realized within subdivision I; I (v + m) and II c are realized through the exchange between subdivisions I and II;
II (v + m), consisting of the commodities of workers and capitalists, is realized within division II.

As a result, c, v, m are reimbursed in both divisions in kind and in value. At the same time, production is resumed in the previous sizes.

Thus, the main equilibrium condition for simple reproduction will be:

I (v + t) \u003d II s.

The following are the derivatives of the equilibrium conditions:

I (c + v + + t) = I c + II c; II (c + v + t) = I (v + t) + II (v + t).

These equalities mean that the output of Division I must be equal to the compensation funds of both divisions, and the output of Division II must be equal to the net product of society.

With expanded reproduction, a part of the surplus value of both divisions is directed to the purpose of accumulation, i.e. to increase capital. It is used in the purchase of additional means of production and labor.

Therefore, with expanded reproduction, to ensure equilibrium, the following is necessary:

I (v + t) > II s; I (c + v + t) > I c + II c;
II (s + v + t)
From this it follows that the net product of department I must exceed the replacement fund for the means of production in department II by the value of the accumulated means of production needed to expand production in both departments.

V.I. Lenin, based on the macroeconomic model of reproduction by K. Marx, developed and concretized the schemes of simple and extended reproduction. As part of the I division, V.I. Lenin singled out two subgroups: the production of means of production for the production of means of production and the production of means of production for the production of consumer goods. He also considered schemes for expanded reproduction in the context of technological progress and changes in the organic composition of capital. This allowed him to conclude that the fastest growing production of means of production for the production of means of production, then the production of means of production for the production of consumer goods, and the slowest - the production of consumer goods.

The model of social reproduction of K. Marx characterizes the abstract theory of realization, i.e. he showed the conditions under which realization and equilibrium take place. However, in reality, these conditions are by no means always implemented, since the proportions between the various parts of the SOP are formed in the conditions of market forces and competition. IN modern conditions when the international division of labor and trade were developed, when analyzing the reproduction of the social product and equilibrium, it is no longer possible to abstract from foreign trade, economic role the state, which acts as a major consumer, the regulator of the main macroeconomic proportions and processes.

V. Leontiev's intersectoral balance model

The considered models of social reproduction contain the main conditions of macroeconomic equilibrium. However, they do not allow solving such practical problems as forecasting the development of the economy, determining the rational proportions and structure of the national economy, the prospects for their improvement, investment dynamics, material and energy intensity of production, the state of employment and foreign economic relations. To solve these problems, the input-output balance model (IBM) is used.

The idea and the fundamental methodological provisions for constructing the IEP, which is the development of the balance of the national economy, originated in the USSR. The first balance sheet of the national economy of the USSR for 1923-1924, compiled at the Central Statistical Bureau under the leadership of P.I. Popov, already contained the basic principles for constructing the IOB, indicators and tables characterizing intersectoral production macroeconomic ties. However, these innovative works were criticized and administratively interrupted, they were not developed. They were renewed only in the second half of the 50s. based on the use of economic and mathematical methods and computers. The first reporting MOB in the USSR was calculated in 1961 according to 1959 data, and the first planned MOB was calculated in 1962. However, MOBs were used mainly for technological rather than economic purposes.

Equilibrium is stable, because the market forces (primarily prices for factors of production and goods), leveling deviations and restoring "equilibrium". It is assumed that "incorrect" prices are gradually eliminated, as this is facilitated by complete freedom of competition.

Conclusions from the Walras model

The main conclusion that follows from the Walrasian model is the interconnectedness and interdependence of all prices as a regulatory instrument, and not only in the goods market, but in all markets. Prices for consumer goods are set in interconnection and interaction with prices for factors of production, prices for labor - taking into account and under the influence of prices for products, etc.

Equilibrium prices are established as a result of the interconnectedness of all markets (markets of goods, labor, money markets, etc.).

In this model, the possibility of the existence of equilibrium prices simultaneously in all markets is proved mathematically. By virtue of its inherent mechanism, the market economy strives for this equilibrium.

From the theoretically achievable economic equilibrium follows the conclusion about the relative stability of the system of market relations. Establishment ("groping") of equilibrium prices occurs in all markets and, ultimately, leads to an equilibrium of supply and demand for them.

Equilibrium in the economy is not reduced to the equilibrium of exchange, to market equilibrium. From theoretical concept Walras follows the principle of interconnectedness of the main elements (markets, spheres, sectors) market economy.

The Walrasian model is a simplified, conditional picture of the national economy. It does not consider how equilibrium is established in development, dynamics. It does not take into account many factors that operate in practice, for example, psychological motives, expectations. The model considers established markets, well-established and relevant to market needs.

Macroeconomic disequilibrium

The functioning of the market mechanism is sometimes compared with the interaction and strict conjugation of the elements of a watch or other similar mechanism. However, this comparison is very conditional. The market mechanism operates successfully when there is no sharp fluctuation prices, unforeseen and dangerous impact of external factors. Deep and unpredictable price fluctuations confuse the market economy. The usual financial and legal controls do not work. The market does not want to return to an equilibrium state or does not return to normal immediately, but gradually, with significant costs and losses.

As a result, there are many differences between the traditional picture that emerges in the macro market, where equilibrium prices occupy the commanding heights, and the “atypical” situation generated by the unconventional behavior of the aggregate demand and aggregate supply curves.

The system of equilibrium prices as a kind of "ideal" exists only in theory. In real economic practice, there is a constant deviation of prices from equilibrium. Sometimes the "habitual" relationships stop working; contradictory and sometimes unexpected situations arise. Some of them are called "traps".

As an example, let's refer to the so-called trap, in which the amount of money in circulation (in liquid form) grows, and the decrease in the interest (discount) rate practically stops.

"Liquidity trap" - a situation where interest rate turns out to be extremely low. This would seem to be good: the lower the interest rate, the cheaper the credit and, consequently, the more favorable the conditions for productive investment.

In fact, this situation is close to a dead end. It is not possible to “spur” investments with the help of interest, since no one wants to part with money and keep it in banks. Savings do not turn into investments. Keynes believed that lowering the interest rate in order to increase the profitability of investments had its limit. The liquidity trap is an indicator of inefficiency.

A different situation, called the "equilibrium trap", arises in a transitional economy due to a sharp decline in . Equilibrium at an unjustifiably low level of income for the main groups of the population is a dead end. Due to the undermining of effective demand, the way out of this situation is extremely difficult. The “balance trap” impedes the way out of the crisis and the achievement of stability.

Significance of the Walrasian Equilibrium Model

This model helps to understand the features of the market mechanism, self-regulation processes, tools and methods for restoring broken links, ways to achieve stability and sustainability of the market system.

Theoretical analysis of Walras is a conceptual basis for solving more specific and practical problems related to the violation and restoration of equilibrium. The concept of Walras and its development by modern theorists serves as the basis for studying the main problems of macroeconomics: economic growth, inflation, employment. The theory of equilibrium is the initial basis for practical developments and practical activities, analysis of a set of problems related to understanding how equilibrium is disturbed and how it is restored.

Models AD - AS and IS-LM

In the theory of equilibrium, there are both general provisions and specific conceptual approaches of representatives of various schools and trends. Differences in approaches are associated with the depth of development, with changes in economic reality itself. To some extent, they usually reflect national characteristics And specific situations individual countries. An analysis of functional dependencies between individual macro parameters helps to understand the situation, clarify the economic policy, but does not provide universal solutions.

The classical model of macroequilibrium in the economy

The classical (and neoclassical) model of economic equilibrium considers, first of all, the relationship between savings and investment at the macro level. An increase in income stimulates an increase in savings; turning savings into investments increases output and employment. As a result, incomes rise again, and at the same time, savings and investments. The correspondence between Aggregate Demand (AD) and Aggregate Supply (AS) is ensured through flexible prices, a free mechanism. According to the classics, the price not only regulates the distribution of resources, but also provides a "decoupling" of non-equilibrium (critical) situations. According to the classical theory, in each market there is one key variable (price P, interest r, wages W) that ensures the equilibrium of the market. The equilibrium in the commodity market (through the supply and demand of investment) is determined by the rate of interest. In the money market, the determining variable is the price level. The correspondence between supply and demand does not regulate the amount of real wages.

The classics saw no particular problem in turning household savings into firms' investment spending. They considered government intervention unnecessary. But between the deferred expenses (savings) of some and the use of these funds by others, a gap can (and is) emerging. If part of the income is set aside in the form of savings, then it is not consumed. But for consumption to rise, saving must not lie idle; they must be transformed into investments. If this does not happen, then the growth of the gross product is hampered, which means that incomes are decreasing, demand is shrinking.

The picture of the interaction between savings and investment is not so simple and unambiguous. Savings break the macro-equilibrium between aggregate demand and aggregate supply. Relying on the mechanism of competition and flexible prices under certain conditions does not work.

As a result, if investment is greater than savings, there is a danger of inflation. If investments lag behind savings, then the growth of the gross product is hampered.

Keynesian model

Unlike the classics, Keynes substantiated the proposition that savings are a function of income, not interest. Prices (including wages) are not flexible but fixed; the equilibrium point AD and AS is characterized by effective demand. The commodity market becomes key. The balancing of supply and demand occurs not as a result of rising or falling prices, but as a result of changes in stocks.

The Keynesian model AD - AS is the basic one for analyzing the processes of production of goods and services and the price level in the economy. It allows you to identify factors (causes) of fluctuations and consequences.

The aggregate demand curve AD is the quantity of goods and services that consumers are able to purchase at the prevailing price level. The points on the curve are combinations of output (Y) and the general price level (P) at which the commodity and money markets are in equilibrium (Figure 25.1).

Rice. 25.1. Aggregate demand curve

Aggregate demand (AD) changes under the influence of price dynamics. The higher the price level, the less money consumers have and, accordingly, the smaller the amount of goods and services for which effective demand is presented.

There is also an inverse relationship between the size of aggregate demand and the price level: an increase in the demand for money entails an increase in the interest rate.

The aggregate supply curve (AS) shows how many goods and services can be produced and put on the market by producers at different levels of average prices (Fig. 25.2).

Rice. 25.2. Aggregate supply curve

In the short term (two or three years), the aggregate supply curve according to the Keynesian model will have a positive slope close to the horizontal curve (AS1).

In the long run, at full capacity utilization and labor force employment, the aggregate supply curve can be represented as a vertical straight line (AS2). The output is approximately the same at different price levels. Changes in the size of production and aggregate supply will occur under the influence of shifts in factors of production and the progress of technology.

Rice. 25.3. Economic equilibrium model

The intersection of the AD and AS curves at point N reflects the correspondence between the equilibrium price and the equilibrium volume of production (Fig. 25.3). If the equilibrium is disturbed, the market mechanism will equalize aggregate demand and aggregate supply; First of all, the price mechanism will work.

This model has the following options:

1) aggregate supply exceeds aggregate demand. The sale of goods is difficult, stocks are growing, production growth is slowing down, its decline is possible;
2) aggregate demand overtakes aggregate supply. The picture on the market is different: inventories are shrinking, unsatisfied demand is driving production growth.

Economic equilibrium assumes such a state of the economy when all countries are used (with a reserve of capacity and a "normal" level of employment). In an equilibrium economy, there should be neither an abundance of idle capacity, nor excess production, nor excessive overstrain in the use of resources.

Equilibrium means that general structure production is brought into line with the structure of consumption. The condition for market equilibrium is the balance of supply and demand in all major markets.

Recall that, according to Keynesian views, the market does not have an internal mechanism capable of maintaining equilibrium at the macro level. The participation of the state in this process is necessary. To analyze the position of equilibrium under part-time employment, a simplified Keynesian model was proposed. To study the relationship between the interest rate and national income in the goods market, another scheme was developed that combined the analysis of these two markets.

Model IS-LM

The problem of general equilibrium in the commodity market and the money market was analyzed by the English economist John Hicks in his work Value and Capital (1939). Hicks proposed the IS-LM model as an equilibrium analysis tool. IS means "investment - savings"; LM - "liquidity - money" (L - demand for money; M - money supply).

The American Alvin Hansen also took part in the development of the model, which combined the real and monetary sectors of the economy, and therefore it is called the Hicks-Hansen model.

The first part of the model is designed to reflect the condition of equilibrium in the goods market, the second - in the money market. The condition for equilibrium in the commodity market is the equality of investment and savings; in the money market - equality between the demand for money and their supply (money supply).

Changes in the commodity market cause certain shifts in the money market and vice versa. According to Hicks, the equilibrium in both markets is determined simultaneously by the rate of interest and the level of income, in other words, both markets determine simultaneously the level of equilibrium income and the equilibrium level of the rate of interest.

The model somewhat simplifies the picture: prices are assumed to be unchanged, a short period is assumed, savings and investments are equal, and the demand for money corresponds to their supply.

What determines the shape of the IS and LM curves

The IS curve shows the relationship between the interest rate (r) and the level of income (Y), which is determined by the Keynesian equation: S = I. Saving (S) and investment (I) depend on the level of income and the interest rate.

The IS curve represents the equilibrium in the goods market. Investments are inversely related to the rate of interest. For example, at a low rate of interest, investment will grow. Accordingly, income (Y) will increase and savings (S) will increase slightly, and the rate of interest will decrease in order to stimulate the transformation of S into I. Hence, shown in Fig. 25.4 slope of the IS curve.

Rice. 25.4, IS Curve

Curve LM (Fig. 25.5) expresses the balance of supply and demand for money (at a given price level) in the money market. The demand for money rises as income (Y) increases, but the interest rate (r) also rises. Money rises in price, “pushing” the growing demand for them. An increase in the interest rate is designed to measure this demand. A change in the rate of interest contributes to the achievement of some balance between the demand for money and their supply.

If the rate of interest is set too high, the owners of money prefer to buy securities. This "bends" the LM curve upward. The rate of interest falls, and equilibrium is gradually restored.

Rice. 25.5. LM curve

Equilibrium in each of the two markets - the goods market and the money market - is not established autonomously, but is interconnected. Changes in one of the markets invariably entail corresponding shifts in the other.

Interaction of two markets

The intersection point of IS and LM satisfies the double condition of (monetary) equilibrium:

First, the balance of savings (S) and investment (I);
secondly, the equilibrium of the demand for money (L) and their supply (M). "Double" equilibrium is established at point E when IS crosses LM (Fig. 25.6).

Rice. 25.6. Equilibrium in two markets

Suppose investment prospects improve; the rate of interest remains unchanged. Then entrepreneurs will expand capital investments in production. As a result, the national income will increase due to the multiplier effect. As income increases, feedback will work. In the money market there will be a shortage of funds, the equilibrium in this market will be disturbed. The demand of participants will increase economic activity for money. As a result, the rate of interest will rise.

The process of mutual influence of the two markets does not end there. A higher rate of interest will “slow down”, which in turn will be reflected in the level of national income (it will decrease somewhat).

Now the macroequilibrium has been established at the point E1 at the intersection of the IS1 and LM curves.

The equilibrium in the commodity market and in the money market is determined simultaneously by the rate of interest (r) and the level of income (Y). For example, equality between savings and investment can be expressed as follows: S(Y) = I (r).

Equilibrium of regulatory instruments (r and Y) in both markets is formed interrelatedly and simultaneously. Upon completion of the process of interaction between two markets, a new level of r and Y is established

The IS-LM model was recognized by Keynes and became very popular. This model means concretization of the Keynesian interpretation of functional relationships in the commodity and money markets. It helps to represent functional dependencies in these markets, diagram monetary balance according to Keynes, influence economic policy on the economy.

The model contributes to the substantiation of the financial and monetary policy of the state, the identification of their relationship and effectiveness. Interestingly, the Hicks-Hansen model is used by supporters of both Keynesian and monetarist approaches. Thus, a kind of synthesis of these two schools is achieved.

The conclusion from the model is as follows: if the money supply decreases, then the terms of the loan become tougher, and the interest rate rises. As a result, the demand for money will decrease somewhat. Part of the money will be used to acquire more profitable assets. The balance of demand for money and their supply will be disturbed, then it will be established at a new point. The interest rate here will be lower, and there will be less money in circulation. Under these conditions, the central bank will adjust its policy: the money supply will increase, the interest rate will decrease, i.e. the process will go in the opposite direction.

Balance in statics and dynamics

Let us assume that a general equilibrium has been reached in society. Let's try to imagine how long the equilibrium state of the main parameters will remain? As you know, the economy is in constant motion, continuous development: the phases of the cycle, incomes change, there are shifts in demand.

All this suggests that the equilibrium state can only conditionally be considered as static. Coordination of supply and demand, the interconnection of the main links of the economy are achieved only in development, dynamics, and equilibrium at the current moment is only its prerequisite.

Equilibrium in the economy is such a state of the system to which it constantly returns in accordance with its own laws. In the event of a violation of equilibrium, the general direction of the process becomes essential, in other words, we are talking about an increase in nonequilibrium or, on the contrary, about its weakening.

General economic equilibrium is the balance of the entire economy of the country, a system of interconnected and mutually agreed proportions in all spheres, industries, in all markets, for all participants, ensuring the normal development of the national economy.

Macroeconomic equilibrium of the market

General economic equilibrium means the coordinated development of all spheres of the economic system. Equilibrium implies the correspondence of social goals and economic opportunities. The goals and priorities of social development are changing, the needs for resources are changing, therefore, there are changes in proportions, there is a need to ensure a new equilibrium state.

Economic equilibrium assumes such a state of the economy when all the economic resources of the country are used. Of course, at the same time, capacity reserves and a normal level of employment should be maintained. But in an equilibrium economy there should be neither an abundance of idle capacities, nor excess production, nor excessive overstrain in the use of resources. Equilibrium means that the overall structure of production is brought into line with the structure of consumption.

The condition for general equilibrium in the economy is market equilibrium, the equilibrium of supply and demand in all other markets.

The market for goods and paid services is a system of economic relations between sellers and buyers regarding the movement of goods and services that satisfy consumer and investment demand macro economic entities. An important condition for the functioning of the commodity market is the economic freedom of its subjects. They should have the right to freely choose the branch of production, the type of product, dispose of it, establish contacts, conduct their own in accordance with current legislation and so on. The degree of economic freedom is determined by the form of ownership. A viable developed market requires both private and public ownership of the means and results of production. However, a sufficient number of economically independent market entities is still needed, when there is an opportunity to choose a partner, and the creation of a competitive environment. Competition provides (together with other factors) effective regulation of the commodity market. Competition performs a number of functions: regulation, distribution, motivation. The function of regulation lies in the fact that, in a competitive environment, the market mechanism guarantees the transfer of factors of production into industries for the products of which there is the greatest demand. The distribution function means that the market equilibrium achieved under competitive conditions determines the income of enterprises, which are further redistributed between households and other enterprises and institutions. The function of motivation lies in the fact that competition creates incentives for enterprises to save costs and introduce advanced technologies.

IN economic theory There is the concept of perfect competition. It is considered that the competition is perfect if none of the sellers or buyers is able to significantly affect the price of the goods. Perfect competition is achieved under the following conditions: a large number sellers and buyers of a particular product, the homogeneity of the product from the point of view of buyers, the absence of entry barriers for a new manufacturer to enter the industry, the existence of the possibility of free exit from the industry. Entry barriers can be: the exclusive right to engage in this type of activity; legal barriers (export licensing, etc.); economic advantages of large-scale production, high advertising costs; full awareness of all market participants about prices and their changes; rational behavior of all market participants who care about their own interests. Perfect competition is rare in modern practice. The opposite of a perfectly competitive market is a monopolized market. The strength of a monopolist is the greater, the higher the entry barriers in the industry and the fewer substitute products for this product. The main manifestations of monopolism in the commodity market are the washing out of the “cheap” assortment, the imposition of favorable delivery conditions on consumers by manufacturers: volumes, terms, and the creation of an artificial shortage of products produced by monopolists. Thus, the monopolist forms a convenient and profitable market structure, which destroys and deforms market relations, and the profit received by the monopolist is inflationary in nature.

A manifestation of monopolization is also price discrimination, when a monopolist sells the same goods or services to different buyers at different prices, depending on their ability to pay. Price discrimination occurs if a monopoly company controls production and prices, or can determine individual groups of goods with a different level of price.

However, both perfect competition and pure monopoly are extreme variants of market structures. For modern market typical synthesis of competition and monopoly in the form of . An oligopoly is a market structure in which a single sector of the economy is dominated by several large corporations that compete with each other. At the same time, there are high entry barriers to the industry for other manufacturers. Thus, a situation arises when external competition is practically absent, but remains within the oligopolistic structure itself.

Characteristic features of an oligopoly are: a small number of enterprises in the industry. Most often, their number does not exceed ten.

In this regard, there are:

- "hard" (when the market for a given product is dominated by 2-3 large enterprises) and "vague" oligopolies (when the market is dominated by 6-7 enterprises);
- the presence of high entry barriers to the industry, which is associated with the savings that arise from large enterprises (this is the so-called economies of scale), ownership of patents, control over raw materials, high advertising costs;
- interdependence, which is manifested in the fact that each enterprise (assuming a small number of them) is obliged to take into account the reaction of competitors in the formation of its economic policy.

That is why the state limits monopolization, protecting competition.

For this, various antimonopoly measures are applied, including the recognition of the actions of individual enterprises as illegal in such cases:

Explicit monopolization of the market, when the share of the hotel manufacturer in general exceeds 35%;
- price fixing;
- merger of enterprises, if the creation of a new large enterprise leads to a decrease in competition;
- related contracts, when the purchase of a product is possible only if another product is also purchased; exclusive contracts, when it is forbidden to buy goods from a competitor of this manufacturer.

In reality, some forms of competition affect the monopolist: potential competition (the possibility of a new producer appearing in the area), competition for innovations from substitute goods, competition with imported goods.

To determine the degree of competition in the commodity market, a number of indices are used:

Harfizzal-Hirschman Index (HNI);
- market concentration ratio (CR);
- stage (level) of market monopolization (MR); market monopolization index (IMR).

Competition plays an important role in establishing equilibrium in the commodity market. Competition forces manufacturers to look for ways to reduce the cost of their products in order to maximize profits and thus stimulate the introduction of resource-saving technologies and continuous scientific and technological progress. Equilibrium in the commodity market is achieved when aggregate demand is equal to aggregate supply (AD-AS model), when investments are equal to savings (withdrawal-injection model), when the total expenditure of the national economy is equal to GDP (input-output model). Macroeconomic theory studies the construction of these models. But for the analysis of the national economy, it is important to pay attention to some features of achieving equilibrium in the commodity market.

The equilibrium of the market for an individual product and the dynamics of its parameters - price, profit and volume of commodity mass - is a partial equilibrium (i.e., equilibrium according to individual product). General equilibrium is considered as a set of partial equilibrium states in each commodity market.

The mechanism for establishing partial equilibrium is predetermined by the action of supply and demand factors. At the macroeconomic level, equilibrium is established as a result of aggregate demand and aggregate supply.

As you know, there are price and non-price factors of aggregate demand. Let's dwell on the price: the effect of the interest rate, the effect, the effect of import purchases.

Analyzing these effects, it should be emphasized that the effect of the interest rate affects aggregate demand through a change, first of all, in the demand for investment goods, to pay for which you need to borrow money. This changes the demand for investment. Enterprises react by changing the volume of production, the source of expansion of which is investment. For example, a decrease in production leads to a decrease in the demand for labor, unemployment increases, household income decreases, which affects the decrease in consumer demand. Consequently, the interest rate effect acts through investment demand on consumer demand, together they make up a large share of aggregate demand and therefore cause its change. Conversely, the wealth effect causes first a change in consumer demand of households, and hence a change in savings. As a result, investment demand changes, as well as the entire aggregate demand.

Analyzing the macroeconomic equilibrium of the commodity market, it is necessary to take into account the following methodological principles (provisions):

Assume that a manufacturer operating in a commodity market expands production and sales. Then he inevitably turns to the market for the means of production, the market for labor power, the market for money and securities. At the same time, he can only rely on the amount of equipment, materials, labor that can be purchased in the relevant markets.

In the framework of microeconomic analysis, the market was considered separately, i.e. on the assumption that it is unrelated to other markets. However, it is clear that an entrepreneur operating at the micro level is at the same time an element of the entire market system, i.e. thus it is involved in macroeconomic processes.

Secondly, to expand the production of goods, investments are required, which can be obtained from various sources (using one's own profits, obtaining loans, securities).

To make a decision on the use of profits or attraction borrowed money affected by the rate of interest. For example, if the rate of return expected by an entrepreneur on his project exceeds the rate of bank interest, then he will be interested in the implementation of his investment intentions. Similar comparisons are made in the case of lending and issuing securities: the higher the rate of interest (the rise in the cost of credit and servicing the circulation of securities), the less profitable investments are.

Thirdly, for all options for obtaining investments, it is logical to formulate the dependence of investment demand on the rate of interest I. For any options for financing investments, the rule applies: the higher the rate of interest, the lower the investment demand, and vice versa.

This dependence acts as a trend. Of course, there are cases when investment demand is weakly dependent on changes in the interest rate. For example, if the prospect of developing a new market with unpredictable demand boundaries has opened up, then the entrepreneur will risk investing capital there, despite the conditions for granting a loan. He may even incur losses, hoping to compensate for them with income in the future. However, these individual cases are rare and do not cancel the noted pattern.

Fourth, in order to establish equilibrium in commodity markets (AD=AS), it is necessary that the investment demand presented by entrepreneurs be in in full satisfied with expected savings: I(i)=S(Y).

It should be recalled here that investment demand implies continued savings that can become investments. Entrepreneurs offer demand for investment, while households offer savings, which are guided by different motives. Producers, forming investment demand, are guided by the expected income in the future. Owners of money incomes, based on their present value, allocate their funds for current consumption and savings, focusing on current prices, the rate of interest, etc. As a result, savings and investments may not match.

Thus, in order for the markets for consumer and investment goods, as well as labor, to be simultaneously in equilibrium, four conditions must be met.

Namely:

1. The volume of production of consumer goods and services must be equal to the sum of expenditures of the population and the state on consumer goods and services. In addition to equality in monetary terms, there must be equality of needs and production for each significant group of goods (food, clothing, footwear, heat, light, communication services, etc.) in kind.
2. The amount of funds invested by enterprises and the state should be equal to the amount of savings. At the same time, the equality of the production of investment goods and the need for them in kind must be observed.
3. The volume of exports should be equal to the costs of its purchase by foreigners, and the volume of imports - the costs of its acquisition by consumers and investors of their country. If the sum of exports and imports is equal, net exports are equal to zero.
4. The number of people offering their labor power for sale must be equal to the number . At the same time, the cost of the necessary product consumed by employees should be equal to their wage fund, excluding taxes.

The latter condition is the factor that gives rise to all the practical and theoretical problems of ensuring macroeconomic equilibrium.

Macroeconomic equilibrium Keynesian

The Keynesian model of macroeconomic equilibrium is built on principles that are different from the postulates of the classical school.

There is no price flexibility in the Keynesian model, since, firstly, in the short term, economic entities are subject to monetary illusions, and besides, in the economy, due to institutional factors (long-term contracts, monopolization, etc.), there is no real price flexibility.

Of particular importance is the relative rigidity of nominal wages. Keynes emphasized that the nominal wage in the short run is fixed, as determined by long-term labor contracts, in addition, if it changes, then only in one direction - an increase during periods of economic recovery. The decrease in it during periods of economic recession is hampered by trade unions that have great influence in developed countries. Because of this, the labor market is imperfect and equilibrium is established, as a rule, in conditions of part-time employment.

However, the main feature of the Keynesian model is that the real and monetary sectors of the economy are interrelated. This relationship is determined by the specifics of the Keynesian interpretation of money demand, according to which money is wealth and has an independent value, and is expressed through the transmission mechanism of the interest rate.

The most important market in the Keynesian model is the market for goods. In the link "aggregate demand - aggregate supply" the leading role belongs to aggregate demand. But since its value is adjusted as a result of interaction with the money market, the determining parameter of the general equilibrium becomes effective demand, the value of which is set in the joint equilibrium model.

The Keynesian model of macroeconomic equilibrium describes the economy as complete system, in which all markets are interconnected, and a change in the equilibrium conditions in one of the markets causes a change in the equilibrium parameters in other markets and the conditions of macroeconomic equilibrium as a whole. At the same time, the classical dichotomy (the division of the economy into two sectors: the real and money markets) is overcome, the strict division of variables into real and nominal disappears, and the price level becomes one of the general equilibrium parameters.

One of central concepts General economic equilibrium is the relationship between the planned economic agents, population and government spending and national product. At the same time, personal consumption, investment and government spending are usually singled out in the item of expenditure. An increase in each of the noted components increases the total planned costs as a whole.

The amount of income received by each economic agent is not always equal to the amount of his personal consumption. As a rule, at a low level of income, the savings of the previous periods are spent (savings are negative). At a certain level of income, they are completely spent on consumption. Finally, with the growth of income, economic agents have more and more opportunities to increase both consumption and their savings.

According to Keynes, all public spending consists of 4 components of the same type:

Personal consumption;
- investment consumption;
- government spending;
- net export.

When analyzing personal consumption, it is important to investigate the role of objective and subjective factors that influence the total amount of resources spent by society on consumption. The total volume of consumption, as a rule, depends on the total amount of income. The ratio between a change in consumption and the change in income it causes is called the marginal propensity to consume.

According to the "basic psychological law", the value marginal propensity consumption is between zero and one, and the marginal propensity to save is equal to the ratio of the change in savings to the change in income.

When total income rises, part of the increase will go to consumption and the other part to saving.

If there is a very tangible savings factor in the economy, the ideal situation, from the point of view of compliance with the state of general economic equilibrium, will be a situation where all savings are fully accumulated and mobilized by existing financial institutions (institutional investors), and then directed to investments. That is, a situation where investment / is equal to saving S in the short and long run.

The level of investment has a significant impact on the volume of the national income of society; many macroproportions in the national economy will depend on its dynamics. Keynesian theory emphasizes the fact that the level of investment and the level of savings are determined in many ways by different processes and circumstances.

Investments (capital investments) on a national scale determine the process of expanded reproduction. The construction of new enterprises, the construction of residential buildings, the laying of roads, and, consequently, the creation of new jobs depends on the process, or capital formation.

The source of investment is savings. Savings is disposable income less spending on personal consumption. Of course, the source of investment is the accumulation of industrial, agricultural and other enterprises functioning in society. Here "savers" and "investor" coincide. However, the role of household savings, which are not at the same time entrepreneurial firms, is very significant, and the discrepancy between the processes of saving and investing, due to these differences, can lead the economy to a state that deviates from equilibrium.

Factors determining the level of investment:

The investment process depends on the expected rate of return, or expected investment. If this profitability, according to the investor, is too low, then investments will not be made.

When making decisions, the investor always takes into account alternative investment opportunities and the level of interest rate will be decisive here. If the rate of interest is higher than the expected rate of return, then investments will not be made, and, conversely, if the rate of interest is lower than the expected rate of return, entrepreneurs will carry out investment projects.

Investments depend on the level of taxation and the general tax climate in a given country or region. Too high a level of taxation does not stimulate investment. The investment process reacts to the rate of inflationary depreciation of money. In conditions of galloping inflation, when costs represent a significant uncertainty, the processes of real capital formation become unattractive, and rather speculative operations will be preferred.

The difference between the classical and Keynesian models of equilibrium I and S lies in the impossibility of the existence of long-term unemployment in the classical model. The flexible response of prices and interest rates restored the disturbed equilibrium. In the Keynesian model, the equality of I and S can also be carried out with part-time employment. Keynes questioned the existence of a flexible price mechanism: entrepreneurs, faced with a drop in demand for their products, did not lower prices, but reduced production and laid off workers.

So, equilibrium on the scale of society in all interconnected markets for goods and services, i.e. equality between aggregate demand and aggregate supply requires the equality of savings and investment. The fact that investment is a function of interest and saving is a function of income makes the problem of finding equality a very difficult problem.

The national income is used in two main channels: for consumption and investment, i.e. Y = C + I. Total spending is personal consumption (C) and productive consumption (I). In a stagnant economy, the level of propensity to consume is low, and the level of national income, corresponding to the equality of income and expenditure (for personal consumption), is at the level of zero savings. The more investment, the higher and the closer the "cherished" level of full employment. If the state will not only stimulate private investment, but also carry out a whole range of various expenditures.

Let us first turn to the accelerator effect, which demonstrates the relationship between changes in real GDP and derivative investments? One of the first to pay serious attention to this effect was the American economist John Maurice Clark, who actively studied the problems of economic cycles. Clark believed that the increase in demand for commodities generates a chain reaction leading to multiple increases in demand for equipment and machinery. This regularity, which, according to Clarke, was the key moment of cyclic development, was defined by him as the "principle of acceleration" or as the "accelerator effect".

To understand the accelerator effect, the capital intensity ratio is used. Entrepreneurs try to maintain the ratio of capital / finished products at the desired level. At the macroeconomic level, the capital intensity ratio is expressed by the capital/income ratio, i.e. K/Y. Various industries economies differ in different levels of capital ratio. Thus, it is high in shipbuilding, where the production of a unit of finished products requires large expenditures of fixed capital. It is much lower in light industry sectors. A change in the volume of sales of finished products will also entail the need for changes in investment in fixed assets, in order for the capital intensity ratio to remain at the desired level.

When considering the principle of acceleration, we are primarily interested in net investment. Net investment cannot be of any size. Since gross investment on the scale of the national economy cannot be negative, the maximum limit that negative net investment can reach is the amount of depreciation.

When creating the multiplier model, we assume that the increase in investment occurs in the same year as the increase in sales. However, when building an accelerator model, economists proceed from a certain lag (time delay) in the reaction of economic agents making investments to an increase in sales or real GDP growth. Indeed, it is hard to imagine new factories and plants being built immediately in response to an increase in annual sales. Even if the entrepreneur is extremely quick to react, he will first sell off stocks of finished products, calculate various options investment projects and only then make investments.

Thus, the accelerator can be represented mathematically as the ratio of the investment of period t to the change in consumer demand or national income in previous years.

In addition, the accelerator effect, in combination with the known multiplier effect, generates the multiplier-accelerator effect. This model was designed by Paul Samuelson and John Hicks.

The multiplier-accelerator effect shows the mechanism of self-sustaining cyclic fluctuations of the economic system.

As is known, an increase in investment by a certain amount can increase the national income by many times the amount due to the multiplier effect. The increased income, in turn, will cause in the future (with a certain lag) an outstripping growth of investments due to the accelerator. These derivative investments, being an element of aggregate demand, generate another multiplier effect, which will again increase income, thus encouraging entrepreneurs to make new investments.

The multiplier-accelerator model assumes several options for cyclic fluctuations. These options are determined by a combination of different values ​​of MPC and V. In real economy MRS>1 and 0.51, at which the values ​​of national income indicators should have become huge in 5-10 years. But practice does not demonstrate explosive vibrations. The fact is that the amount of income or real GDP is actually limited by the "ceiling", i.e. value of potential GDP. This is a limitation of the amplitude of fluctuations on the part of the aggregate supply. On the other hand, the fall in national income is limited by "sex", i.e. negative net investment equal to depreciation. Here we are faced with a limitation of the amplitude of fluctuations on the part of aggregate demand, an element of which is investment. A wave of growing national income, hitting the "ceiling", leads to its reverse dynamics. When the downward trend of business activity reaches the "floor", then the opposite process of recovery and recovery begins.

The traditional view of classical theory on the processes of saving and investing emphasizes the beneficial nature of high savings. After all, the higher the savings, the deeper the “reservoir” from which investments are drawn. Therefore, a high propensity to save, according to the logic of the classical school, should contribute to the prosperity of the nation.

The modern view of this problem, originally formulated by Keynes, differs significantly from the classical interpretation. J.M. Keynes concluded that "such arguments (i.e., the arguments of the classics) are completely inapplicable to countries that have reached a high stage of economic development." In countries that have reached this level, the desire to save will always be ahead of the desire to invest. This happens for the following reasons. First, with the growth of capital accumulation, the marginal efficiency of its functioning decreases, since the circle of alternative possibilities for highly profitable investments narrows more and more. Secondly, with the growth of incomes in industrialized countries, the share of savings will increase - suffice it to recall that S is a function of Y, and this dependence is positive.

In order to answer this question, it is necessary to turn again to the category of investments. There are so-called autonomous investments, i.e. capital investments independent of the volume and dynamics of national income. This is a kind of simplification of the relationships that exist on the scale of the national economy. In reality, there is an interaction between investment and income. Autonomous investments, made in the form of the initial "injection", due to the multiplier effect, lead to an increase in national income.

The revival of business activity, the growth of employment will lead to an increase in the propensity to invest among various entrepreneurs. These investments are usually called derivatives. they depend on the dynamics of national income. Derivative investments, being "superimposed" on autonomous ones, strengthen and accelerate it.

But the acceleration wheel can turn in the other direction. A reduction in income will (due to multiplier and acceleration effects) also reduce derivative investment, and this will lead to economic stagnation.

If the economy is underemployed, an increase in the propensity to save naturally means nothing more than a decrease in the propensity to consume. Reduced consumer demand means it is impossible for manufacturers of goods to sell their products. Overstocked warehouses can in no way encourage new investment. Production will begin to decline, mass layoffs will follow, and, consequently, a fall in the national income as a whole and in the incomes of various social groups. This is what will be the inevitable result of the desire to save more! The virtue of saving, about which the classical school spoke, turns into its opposite - the nation becomes not richer, but poorer.

Consequently, the Protestant ethic, which preaches thrift as one of the indispensable conditions for increasing wealth, does not always lead to the desired results. Under conditions of part-time employment, the "paradox of thrift" manifests itself as an unplanned result of quite conscious actions of individual economic entities, guided by their personal ideas about rational behavior.

The volume of the real national product (the value of the product at constant prices) and the rate of inflation, which ensure equality between aggregate demand and supply, are usually called the state of general macroeconomic equilibrium (balance) of the economy. This is the most important component of the national economic balance.

In any national economy, there is always a certain amount of real gross national product, the excess of which contributes to the accelerated development of inflationary processes. The latter, as is known, to a large extent stimulates the development of speculative motives among manufacturers and various intermediaries - to the detriment of the real needs of the economy. As practice shows, this volume, which should not be exceeded, is determined mainly by the existing structure of the national economy. Moreover, this structure always corresponds to a certain level of involuntary unemployment. In fact, the indicated volume of real gross national product reflects the growth potential of a given economy without the threat of a rapid inflationary spiral.

If the current production of real GNP is below the indicated potential, then there is an opportunity to significantly reduce the unemployment rate, stimulating an increase in aggregate demand. This can be achieved using three main levers of state economic policy: tax cuts, an increase in money (primarily credit) supply, and an increase in government spending. On the contrary, if the actual production of real GNP sufficiently exceeds the indicated potential, the economy is said to be in an "overheated" state. It is characterized by "overemployment" (a kind of "unemployment at work"), increased development of inflationary processes, turning into hyperinflation, exacerbation of commodity and budget deficits. In such a situation, society lives beyond its means, the national income is "eating away", and the lag in the technical level of production development is growing.

All this dictates the need for an energetic state policy aimed at reducing aggregate demand and transferring the economy to a position close to the state of E11. Theoretically and practically, the latter is achieved by tightening the tax pressure, reducing the money (primarily credit) supply, and significantly reducing (saving) government spending. However, it is not always possible for state bodies to effectively use all these three main levers. The stronger the deviations from the parameters of the state of general economic equilibrium, the smaller the corresponding opportunities.

With regard to the current economy of Kyrgyzstan, it is difficult to demand a rapid transformation that previously existed into a classical world-class system. This does not allow full use of bank leverage to reduce the cash and credit money supply, although today the process of "compression" of the latter is undoubtedly underway.

With an existing serious condition state budget a significant reduction in public spending is also a difficult task. After the liberalization of prices, in conditions of progressive inflation, it is unrealistic not to increase social spending. The structure of the national economy cannot be changed quickly. Opportunities to reduce military spending are limited by the traditionally established high share in the economy defense complex. It is on them that today the center of gravity has been forced to shift in carrying out economic reforms and in solving the most complex problems of national economic balance.

In turn, the over-tough implementation of the stabilization financial policy may lead to the fact that economic agents will be forced to significantly reduce the size of supply with the same price change: the AS curve in Fig. will move to position AS1. In this case, the reduction in aggregate supply is likely to cause a new wave of price increases, largely determined by the elasticity characteristics of the AD curve. As a result, a decline in production can be accompanied by rather high inflation. On the contrary, the growth of inflation caused by the stimulation of aggregate demand can be moderated to a certain extent if, as a result of the measures taken, an increase in aggregate supply simultaneously occurs. The given AD-AS - analysis of general economic equilibrium is distinguished by a certain schematism. At the same time, it can be useful in assessing the logic of the ongoing changes and the sequence of steps taken as part of the state policy of achieving economic equilibrium.

Macroeconomic equilibrium classical

The classical model of macroeconomic equilibrium dominated economic science for about 100 years, until the 1930s. It is based on J. Say's law: the production of goods creates its own demand. For example, a tailor makes and offers a suit, while a shoemaker offers shoes. The tailor's supply of a suit, and the income he receives, is his demand for shoes. Similarly, the supply of shoes is the shoemaker's demand for a suit. And so it is throughout the economy. Each producer is simultaneously a buyer - sooner or later he acquires a product produced by another person for the amount received from the sale of his own product. Thus, macroeconomic equilibrium is provided automatically: everything that is produced is sold. This similar model assumes the fulfillment of three conditions: each person is both a consumer and a producer; all producers spend only their own income; income is spent in full.

But in the real economy, part of the income is saved by households. Therefore, aggregate demand decreases by the amount of savings. Consumption spending is insufficient to purchase all of the products produced. As a result, unsold surpluses are formed, which causes a decline in production, an increase in unemployment and a decrease in income.

In the classical model, the lack of funds for consumption caused by saving is compensated by investment. If entrepreneurs invest as much as households save, then J. Say's law is valid, i.e. the level of production and employment remains constant. The main task is to encourage entrepreneurs to invest as much as they spend on savings. It is solved in the money market, where supply is represented by savings, demand - by investments, price - by the interest rate. The money market self-regulates savings and investment through the equilibrium interest rate.

The higher the interest rate, the more money is saved (because the owner of the capital receives more dividends). Therefore, the savings curve (S) will be upward. The investment curve (I), on the other hand, is downward-sloping because the interest rate affects costs, and entrepreneurs will borrow more and invest more money at a lower interest rate. The equilibrium rate of interest (R0) occurs at point A. Here the amount of money saved is equal to the amount of funds invested, or, in other words, the amount of money offered equals the demand for money.

If savings increase, then the curve S will shift to the right and take position S1. Although savings will outweigh investment and cause unemployment, a surplus of savings implies a lowering of the interest rate to a new, lower equilibrium level (point B). More low rate percent (R1) will lead to a decrease in investment spending until it equals savings, reducing full employment.

The second factor that ensures equilibrium is the elasticity of prices and wages. If, for some reason, the rate of interest does not change at a constant ratio of savings and investment, then the increase in savings is offset by lower prices, as producers seek to get rid of surplus products. Lower prices allow for fewer purchases while maintaining the same levels of output and employment.

In addition, a decrease in demand for goods will lead to a decrease in demand for labor. Unemployment will create competition and workers will accept lower wages. Its rates will decrease so much that entrepreneurs will be able to hire all the unemployed. In such a situation, there is no need for government intervention in the economy.

Thus, classical economists proceeded from the flexibility of prices, wages, and interest rates, i.e., from the fact that wages and prices can move freely up and down, reflecting the balance between supply and demand. According to them, the aggregate supply curve AS has the form of a vertical straight line, reflecting the potential output of GNP. A decrease in price entails a decrease in wages, and therefore full employment is maintained. There is no reduction in real GNP. Here, all products will be sold at different prices. In other words, a decrease in aggregate demand does not lead to a decrease in GNP and employment, but only to a decrease in prices. Thus, the classical theory believes that the economic policy of the state can only affect the price level, and not output and employment. Therefore, its intervention in the regulation of output and employment is undesirable.

General macroeconomic equilibrium

Macroeconomic balance is the main problem of macroeconomic analysis, the balanced state of the economic system as a single integral organism. The form of manifestation of the equilibrium of the economic system as a whole is the balance and proportionality of economic processes.

Correspondence must be achieved between the following parameters of economic systems:

production and consumption;
- aggregate demand and aggregate supply;
- commodity mass and its monetary equivalent;
- savings and investments;
- markets for labor, capital and consumer goods.

Violation of the general proportions will manifest itself in such phenomena as inflation, a decline in production, a decrease in the volume of the national product and a decrease in the real incomes of the population.

Macroeconomic equilibrium can be partial, at the same time general and real.

Partial equilibrium - equilibrium in individual commodity markets that are part of the national economy. The foundations are laid in the works of A. Marshall.

At the same time, the general equilibrium is the equilibrium as a single interconnected system formed by all market processes on the basis of free competition.

Real macroeconomic equilibrium - is actually established under imperfect competition and external factors market impact.

The general economic equilibrium is said to be stable if, after a disturbance, it is restored with the help of market forces. If the general economic equilibrium after a violation does not restore itself and government intervention is required, then such an equilibrium is called unstable. L. Walras is considered the founder of the theory of general economic equilibrium.

General equilibrium, according to L. Walras, is a situation where equilibrium is established simultaneously in all markets: consumer goods, money and labor, and it is achieved as a result of the flexibility of the system of relative prices.

Walras' law: the sum of excess demand and the sum of excess supply in all markets is the same, i.e. of all goods on the supply side is equal to total cost goods on the demand side.

An example of the simplest macroeconomic equilibrium model is the classical SEA model, in which aggregate supply (AS) equals aggregate demand (AD) (see figure). Using this model, you can explore various options for the economic policy of the state.

The intersection of AD and AS shows at point E the equilibrium output and the equilibrium price level. This means that the economy is in equilibrium at such values ​​of the real national product and at such a price level at which the volume of aggregate demand is equal to the volume of aggregate supply.

Macroeconomic Equilibrium AD-AS

The state of the national economy, in which there is an overall proportionality between: resources and their use; production and consumption; financial and financial flows, - characterizes the general (or macroeconomic) economic equilibrium (OER). In other words, this is the optimal realization of the total economic interests in society. The idea of ​​such a balance is obvious and desired by the whole society, since it means complete satisfaction of needs without wasted resources and unrealized product. A market economy built on the principles of free competition has economic self-regulation mechanisms and the ability to achieve an equilibrium state through flexible prices, especially in conditions close to perfect competition, as well as in the long run.

Graphically, macroeconomic equilibrium will mean the combination of AD and AS curves in one figure and their intersection at some point. The ratio of aggregate demand and aggregate supply (AD - AS) characterizes the amount of national income at a given price level, and in general - the equilibrium at the level of society, that is, when the volume of output is equal to the aggregate demand for it. This model of macroeconomic equilibrium is basic. The AD curve can intersect the AS curve in different sections: horizontal, intermediate or vertical. Therefore, there are three options for possible macroeconomic equilibrium (Fig. 12.5).

Rice. 12.5. Macroeconomic equilibrium: AD-AS model.

Point E3 is the equilibrium with underemployment without an increase in the price level, i.e. without inflation. Point E1 is an equilibrium with a slight increase in the price level and a state close to full employment. Point E2 is the equilibrium at full employment, but with inflation.

Consider how equilibrium is established when the aggregate demand curve crosses the aggregate supply curve in the intermediate section at point E (Fig. 12.6).

Rice. 12.6. Establishment of macroeconomic balance.

The intersection of the curves determines the equilibrium price level PE and the equilibrium level of national production QE. To show why PE is the equilibrium price and QE is the equilibrium real national output, suppose that the price level is expressed by P1 and not by PE. Using the AS curve, we determine that at the price level P1, the real volume of the national product will not exceed YAS, while domestic consumers and foreign buyers are ready to consume it in the amount of YAD.

Competition among buyers for the opportunity to purchase a given volume of production will have an upward effect on the price level. In this situation, the natural reaction of producers to an increase in the price level will be to increase output. With the joint efforts of consumers and producers, the market price, with the marked increase in the volume of production, will begin to rise to the value of PE, when the real volumes of the purchased and produced national product will be equal and equilibrium will come in the economy.

In reality, there are constant deviations from the desired stable equilibrium under the influence of various factors, both objective and subjective. These include, first of all, the inertia of economic processes (the inability of the economy to instantly respond to changing market conditions), the influence of monopolies and excessive state intervention, the activities of trade unions, etc. These factors impede the free movement of resources, the implementation of the laws of supply and demand, and other essential market conditions. .

A prerequisite for macroeconomic analysis is the aggregation of indicators. The aggregate supply of goods in an equilibrium state is balanced by aggregate demand and represents the gross national product of society.

The equilibrium national product is ensured by the establishment of an equilibrium aggregate price for the product produced, which is carried out at the point of intersection of the aggregate demand and aggregate supply curves. Achieving an equilibrium volume of production in the conditions of always existing limited resources is the goal of national economic policy.

All the main problems of society, one way or another, are connected with the discrepancy between aggregate demand and aggregate supply.

According to the classical model, which describes the functioning of the economy in the long run, the amount of output depends only on the costs of labor, capital and available technology, but does not depend on the price level.

In the short run, the prices of many goods are inflexible. They "freeze" at a certain level or change little. Firms do not immediately lower their wages, stores do not immediately revise the prices of goods they sell. Therefore, the aggregate supply curve is a horizontal line.

Let us consider the change in the equilibrium state of the economy separately under the influence of aggregate demand and aggregate supply. With a constant aggregate supply, a shift in the aggregate demand curve to the right leads to different consequences, depending on which section of the aggregate supply curve it occurs (Fig. 12.7).

Rice. 12.7. Consequences of increasing aggregate demand.

In the Keynesian span (Figure 12.7 a), characterized by high unemployment and a large amount of unused production capacity, an expansion in aggregate demand (from AD1 to AD2) will lead to an increase in real national output (from Y1 to Y2) and employment without raising the price level ( P1). In the intermediate segment (Fig. 12.7 b), the expansion of aggregate demand (from AD3 to AD4) will lead to an increase in real national production (from Y3 to Y4) and to an increase in the price level (from P3 to P4).

On the classical segment (Fig. 12.7 c), labor and capital are fully used, and the expansion of aggregate demand (from AD5 to AD6) will lead to an increase in the price level (from P5 to P6) and real output will remain unchanged, i.e. not will go beyond its level at full employment.

When the aggregate demand curve shifts back, the so-called ratchet effect occurs (a ratchet is a mechanism that allows the wheel to turn forward, but not backward). Its essence lies in the fact that prices rise easily, but do not show a downward trend with a decrease in aggregate demand. This is due, firstly, to wage inelasticity, which does not tend to fall, at least not for a period of time, and secondly, many firms have sufficient monopoly power to resist price cuts. during periods of reduced demand. The effect of this effect is shown in Fig. 12.8, where, for simplicity, we omit the intermediate segment of the aggregate supply curve.

Rice. 12.8. Ratchet effect.

With an increase in aggregate demand from AD1 to AD2, the equilibrium position will shift from E1 to E2, with real output increasing from Y1 to Y2, and the price level from P1 to P2. If aggregate demand moves in the opposite direction and decreases from AD2 to AD1, the economy will not return to its original equilibrium position at point E1, but a new equilibrium will arise (E3), at which the price level will remain P2. Output will fall below its original level to Y3. The ratchet effect causes the aggregate supply curve to shift from P1aAS to P2E2AS.

A shift in the aggregate supply curve also affects the equilibrium price level and real national output (Figure 12.9).

Rice. 12.9. Consequences of changes in aggregate supply.

One or more non-price factors change, causing aggregate supply to increase and the curve to shift to the right, from AS1 to AS2. The graph shows that a shift in the curve will lead to an increase in real national output from Y1 to Y2 and a decrease in the price level from P1 to P2. A shift in the aggregate demand curve to the right indicates economic growth. The shift of the aggregate supply curve to the left from AS1 to AS3 will lead to a decrease in the real volume of national production from Y1 to Y3 and an increase in the price level from P1 to P3, i.e. to inflation.

We can say that in its most general form, economic equilibrium is a correspondence between the available limited resources (land, labor, capital, money), on the one hand, and the growing needs of society, on the other. The growth of social needs, as a rule, outstrips the increase in economic resources. Therefore, equilibrium is usually achieved either by limiting needs (effective demand), or by expanding capacities and optimizing the use of resources.

Distinguish between partial and general equilibrium. Partial equilibrium is the quantitative correspondence of two interrelated macroeconomic parameters or individual aspects of the economy. This, for example, is the balance of production and consumption, income and, supply and demand, etc. Unlike partial, general economic equilibrium means the correspondence and coordinated development of all spheres of the economic system.

The most important prerequisites for an ERA are:

Compliance with national goals and available economic opportunities;
the use of all economic resources - labor, money, i.e. ensuring a normal level of unemployment and optimal reserves of capacity without allowing an abundance of idle capacity, mass unemployment, unsold goods, as well as excessive strain on resources;
bringing the structure of production in line with the structure of consumption;
the correspondence of aggregate demand and aggregate supply in all four types of markets - goods, labor, capital and money.

It should also be noted that OER models will differ for a closed and open economy, in the latter case, taking into account factors external to the given national economy - exchange rate fluctuations, foreign trade conditions, etc.

Macroeconomic equilibrium cannot be regarded as a static state, it is very dynamic and hardly achievable in principle, like any ideal state. Cyclic fluctuations are inherent in any economic system. However, society is interested in minimizing deviations from the ideal balance (or balance) of economic interests, because too large fluctuations can lead to irreversible consequences - to the destruction of the system as such. Therefore, compliance with the conditions of macroeconomic balance is the basis of the socio-economic stability of a state.

Conditions for macroeconomic equilibrium

The problem of macroeconomic equilibrium arises from the fact that in the market cycle the equality of expenses and incomes is a prerequisite. But if the expenses of (one) really always turn into income (of the other), then incomes do not necessarily turn into expenses, and in any case, they do not necessarily equal them. It is noted that for households, the excess of income over expenses is typical, while for firms, the excess of expenses over income.

Macroeconomic equilibrium in the money market

The money market is a market in which the demand for money and their supply determine the level of the interest rate, the "prices" of money, it is a network of institutions that ensure the interaction of money supply and demand.

In the money market, money is “not sold” and “not bought” like other commodities. This is the specificity of the money market. In transactions in the money market, money is exchanged for other liquid funds at an opportunity cost, measured in units of the nominal rate of interest.

It reflects the equilibrium in the real money market, or real money balances.

demand for real cash balances depends on three main factors:

1. interest rates;
2. income level;
3. circulation speed.

D. Keynes considered the interest rate to be the main factor influencing the demand for money. According to the Keynesian theory of liquidity preference, the rate of interest represents the holding of cash. This means that the higher the interest rate, the more people lose potential income if they keep cash at home instead of keeping it in the bank and earning income from it.

That is, when the interest rate rises, people want to hold less money in their hands, as a result, the demand for real money balances falls.

The second factor affecting the demand for money is real income. As income increases, people enter into more transactions, which consequently requires more money. That is, the relationship between the demand for money and real income is direct.

Macroeconomic equilibrium in the commodity market

The IS (investment-saving) model is a theoretical equilibrium model for commodity markets with fixed prices only. It reflects the relationship between the interest rate (r) and the amount of national income (Y), which is determined by the Keynesian equation S=I.

In an analysis presented by J. M. Keynes and the Stockholm economic school aggregate demand is equal to the demand for consumer and investment goods:

And the aggregate supply is equal to the national income (Y), which is used for consumption and savings:

The equilibrium in commodity markets for the entire economy will look like: AD=AS or C+I=C+S, hence:

That is, savings and investments depend respectively on the level of income and the interest rate.

The resulting Keynesian equilibrium condition allows for a plurality of commodity market equilibria, since the interest rate and income conditions in an economy can constantly change.

To define this set of equilibrium states of commodity markets, the English economist John Hicks used the investment-saving (IS) model. This model allows us to find in each specific case the ratio between the interest rate (r) and the national income (Y), in which investment is equal to savings, other factors being constant.

The IS model is considered in the short run, when the economy is not in a state of full employment of resources, the price level is fixed, the values ​​of total income (Y) and interest rates (r) are mobile.

The “investment-saving” - IS model is of great practical importance, since it can be used to show how much it is necessary to change the interest rate with a change in national income in order to maintain equilibrium in commodity markets. For example, if you reduce the interest rate, then investment will increase, which will lead to an increase in planned spending and an increase in national income. In turn, the growth of national income will cause an increase in savings in society and vice versa.

Rice. 3 - Curve "investment - savings"

If we depict these processes graphically, we will obtain a decreasing IS curve (Fig. 3).

The IS curve is the locus of points that characterize all combinations of Y and r that simultaneously satisfy the identity of income, consumption, saving, and investment functions.

The IS curve divides the economic space into two areas: at all points lying above the IS curve, the supply of goods exceeds the demand for them, i.e., the amount of national income is greater than planned spending (stocks accumulate in society). At all points below the IS curve, there is a shortage in the commodity market (the society lives in debt, stocks are declining).

Investments are inversely related to the rate of interest. For example, at a low rate of interest, investment will grow. Correspondingly, income Y will increase and savings S will rise slightly, and the rate of interest will fall to stimulate the conversion of S into I. Hence the slope of the IS curve shown in (Fig. 3).

This is explained by the fact that in the first case, at a higher interest rate and a certain level of income, people prefer not to consume, but to put money in the bank, i.e. save, which reduces investment and aggregate demand. In the second case, at a low interest rate, society lives in debt and prefers consumption, thereby increasing investment in the economy and its total costs.

If we change factors that were previously considered unchanged, for example, government spending (G) or taxes (T), then the IS curve will shift to the right up or to the left down, depending on the change in these indicators.

For example, if government spending increases and taxes remain unchanged during the stimulus, then the IS curve will shift to the right up. If, however, taxes increase, and government spending remains at the same level during the implementation of the containment fiscal policy, then the IS curve will shift to the left down.

Thus, the IS model can be and is used in economic practice to illustrate the impact of the state's fiscal (fiscal) policy on national income.

The IS curve is the equilibrium curve in the commodity market. It is the locus of points characterizing all combinations of Y and R that simultaneously satisfy the income identity, consumption, investment, and net export functions. At all points on the IS curve, investment and savings are equal. The term IS reflects this equality (Investment=Savings).

The simplest plotting of the IS curve involves using the savings and investment functions.

Algebraic derivation of the IS curve

The IS curve equation can be obtained by substituting equations 2, 3 and 4 into the rest of the macroeconomic identity and its solution for R and Y.

The equation of the IS curve with respect to R is:

R=(a+e+g)/(d+n)-(1-b*(1-t)+m`)/(d+n)*Y+1/(d+n)*G-b/( d+n)*Ta,
T=Ta+t*Y

The equation for the IS curve with respect to Y is:

Y=(a+e+g)/(1-b*(1-t)+m`)+1/(1-b*(1-t)+m`)*G-b/(1-b*( 1-)+m`)*Ta(d+n)/ (1-b*(1-t)+m`)*R,
T=Ta+t*Y

The coefficient (1-b*(1-t)+m`)/(d+n) characterizes the slope of the IS curve relative to the Y axis, which is one of the parameters of the comparative effectiveness of fiscal and monetary policy.

The IS curve is flatter if:

The sensitivity of investment (d) and net exports (n) to interest rate movements is high;
The marginal propensity to consume (b) is large;
The marginal tax rate (t) is low;
The marginal propensity to import (m`) is low.

Under the influence of an increase in government spending G or a tax cut T, the IS curve shifts to the right. Change tax rates t also changes the angle of its inclination. In the long run, the slope of IS can also be changed by income policy, since high-income households have a relatively lower marginal propensity to consume. than the poor. The remaining parameters (d, n and m`) are practically not confirmed by the impact of macroeconomic policy and are mainly external factors that determine its effectiveness.

Types of macroeconomic equilibrium

In its most general form, macroeconomic equilibrium is the balance and proportionality of the main parameters of the economy, i.e. a situation where business entities have no incentives to change the status quo. This means that proportionality is achieved between production and consumption, resources and their use, factors of production and its results, material and financial flows, supply and demand. In a market economy, equilibrium is the correspondence between the production of goods and effective demand for them, i.e. such an ideal situation when the product is produced exactly as much as can be bought at a given price. It can be achieved by restricting needs to economic goods, i.e. a decrease in effective demand for goods and services, or by increasing and optimizing the use of resources.

Macroeconomic equilibrium is classified into several types. First, there are general and partial equilibrium. The general equilibrium is understood as the interconnected equilibrium of all national markets, i.e. the balance of each market separately and the maximum possible coincidence and implementation of the plans of economic entities. When a state of general economic equilibrium is reached, economic entities are completely satisfied and do not change the level of supply or demand to improve their economic situation. Partial equilibrium is the equilibrium in individual markets that are part of the national economy.

There is also a complete economic equilibrium, which is the optimal balance of the economic system. In reality, it is unattainable, but acts as an ideal goal of economic activity. Secondly, equilibrium can be short-term (current) and long-term. Thirdly, equilibrium can be ideal (theoretically desirable) and real. The prerequisites for achieving perfect equilibrium are the presence of perfect competition and the absence of side effects. It can be achieved on the condition that all participants in economic activity find consumer goods on the market, all entrepreneurs find factors of production, and the entire annual product is fully realized. In practice, these conditions are violated. In reality, the task is to achieve a real equilibrium that exists with imperfect competition and the presence of external effects and is established when the goals of economic activity participants are not fully realized.

Equilibrium can also be stable and unstable. An equilibrium is said to be stable if, in response to an external impulse that causes a deviation from equilibrium, the economy returns to a stable state on its own. If, after an external influence, the economy cannot self-regulate, then the equilibrium is called unstable. The study of sustainability and the conditions for achieving a general economic equilibrium is necessary to identify and overcome deviations, i.e. to conduct an effective economic policy of the country.

Disbalance means that there is no balance in various spheres and sectors of the economy. This leads to losses in the gross product, a decrease in the income of the population, the emergence of inflation and unemployment. In order to achieve an equilibrium state of the economy, to prevent undesirable phenomena, experts use macroeconomic equilibrium models, the conclusions from which serve to substantiate the macroeconomic policy of the state.

Let us briefly characterize some models of macroeconomic equilibrium. The first model of macroeconomic equilibrium is the model of F. Quesnay - the famous "Economic Tables". They are a description of simple reproduction in the French economy of the 18th century.

One of the first was developed by L. Walras, a Swiss economist and mathematician, who tried to find out on the basis of what principles the interaction of prices, costs, volumes of demand and supply in various markets is established, whether the equilibrium is stable, and also to answer some other questions. Walras used the mathematical apparatus. In his model, he divided the world into two large groups: firms and households. Firms act as buyers in the factor market and as sellers in the consumer goods market. Households that own factors of production act as their sellers and at the same time buyers of consumer goods. The roles of sellers and buyers are constantly changing. In the process of exchange, the expenses of producers of goods are converted into household expenses, and all household expenses are converted into income of firms.

The prices of economic factors depend on the size of production, demand, and hence on the prices of goods produced. In turn, the prices of goods produced in society depend on the prices of factors of production. The latter should correspond to the costs of firms. At the same time, firms' incomes must be matched with household expenditures. Having built a rather complex system of interrelated equations, Walras proves that the system of equilibrium can be achievable as a kind of “ideal” that a particular market strives for. Based on the model, Walras's law was obtained, which states that in a state of equilibrium, the market price is equal to marginal cost. So the value of the social product is market value used for its production factors, aggregate demand is equal to aggregate supply, the price and volume of production do not increase or decrease.

The state of equilibrium, according to Walras, implies the presence of three conditions:

1. demand and supply of factors of production are equal, a constant and stable price is set for them;
2. demand and supply of goods and services are also equal and are realized on the basis of constant, stable prices;
3. the prices of goods correspond to production costs.

The Walrasian model gives a simplified, conditional picture of the national economy and does not show how equilibrium is established in dynamics. It does not take into account many of the social and psychological factors that affect supply and demand in reality. Thus, the model considers only already established markets with established infrastructure.

At the same time, the concept of Walras and his theoretical analysis provide the basis for solving more specific practical problems related to the violation and restoration of equilibrium.

In the XX century. other equilibrium models have been created.

Consider the neoclassical model of economic equilibrium based on the relationship between investment and savings at the macro level. An increase in income stimulates an increase in savings; turning savings into investments increases output and employment. Then incomes rise again, and with them savings and investments. The correspondence between aggregate demand and aggregate supply is ensured through flexible prices and a free pricing mechanism. According to the classics, the price not only regulates the distribution of resources, but also contributes to the resolution of non-equilibrium situations. According to this theory, in each market there is one key variable (price P, percentage r, wages WIP) that ensures the equilibrium of the market. The equilibrium in the commodity market (through the supply and demand of investment) is determined by the rate of interest. In the money market, the determining variable is the price level. The correspondence between supply and demand in the labor market regulates the value of real wages.

The classics believed that the transformation of household savings into investment expenditures of firms occurs without any problems and government intervention is unnecessary. However, in reality, there is a gap between the savings of some and the use of these funds by others, because if part of the income is saved in the form of savings, then it is not consumed. In order for consumption to grow, savings must not lie idle, they must be transformed into investments. If this does not happen, then the growth of the gross product is hampered, which means that incomes decrease and demand decreases.

Savings break the macro-equilibrium between aggregate demand and aggregate supply. Relying on the mechanism of competition and flexible prices under certain conditions does not work. If investments are more than savings, then there is a danger of inflation, and if less, the growth of the gross product is hampered.

Problems of macroeconomic equilibrium

The problem of macroeconomic equilibrium is the central problem in the course of macroeconomics. Macroeconomic balance is usually understood as the balance of the entire economic system as a whole, which characterizes the balance, proportionality of all economic processes. It is divided into ideal and real.

An ideal balance is achieved with the full realization of the economic interests of economic entities in all sectors and sectors of the economy. It assumes the existence of conditions of perfect competition and the absence of externalities.

The real equilibrium is established in the economy in conditions of imperfect competition and taking into account external factors influencing the market environment.

In macroeconomics, several models are used to determine macroeconomic equilibrium. The model of aggregate demand and aggregate supply is the basis for studying general equilibrium, fluctuations in the volume of national production and the general price level, the causes and consequences of their changes.

Macroeconomic equilibrium in an open economy

Macroeconomic equilibrium has played a large role in economics since the Great Depression in the 1930s. It was at this time that macroeconomics itself appeared. DM Keynes proposed measures to achieve full employment through the regulation of domestic demand.

But in the context of the ever-increasing internationalization of economic life, macroeconomic equilibrium presupposes not only minimum inflation and full employment, but also an equilibrium system of external payments.

Current account imbalances, as well as large balance of payments deficits and rising external debt, could adversely affect internal state economy. This may entail economic downturn, crisis in various spheres and sectors of the economy. But due to the close interrelations between different countries of the world, these consequences will manifest themselves beyond the borders of this state.

To achieve macroeconomic equilibrium, it is necessary to achieve internal and external equilibrium simultaneously. Internal equilibrium assumes the equality of aggregate demand and aggregate supply under the condition of minimum inflation. External equilibrium implies a balanced balance of payments. zero balance current operations, a fixed level of foreign reserves.

If in the domestic economy macroeconomic policy is carried out with the help of monetary and fiscal policy, then for an open economy they use foreign trade, foreign exchange policy, etc. This, of course, implies a complication of macroeconomic relationships between countries of the world. This is done much more difficult, since it requires taking into account ever-increasing factors and conditions.

But in the course of implementing macroeconomic policy, a number of difficulties may arise. For example, due to the fact that it takes a lot of time to discuss monetary and monetary policy, and measures to change it may be needed very quickly. In addition, it is necessary to accurately choose exactly the point that is the equilibrium. Unfortunately, not all parameters are amenable to point estimation and not always.

It is also difficult to foresee changes in demand, investor behavior, and global behavior towards a given commodity.

The effectiveness of the development and implementation of such measures also depends on such indicators as the degree of trust in the government, economic expectations, etc. Macroeconomic equilibrium cannot always be accurately described using an economic model.

If we are talking about the long term, then the national economy will react poorly to changes in the volume of money supply and the level of the exchange rate.

Real macroeconomic equilibrium

The real macroeconomic equilibrium is the equilibrium that is established in the economic system under conditions of imperfect competition and with external factors influencing the market.

Distinguish between partial and complete equilibrium:

Partial equilibrium is called equilibrium in a single market for goods, services, factors of production;
Complete (general) equilibrium is the simultaneous equilibrium in all markets, the equilibrium of the entire economic system, or macroeconomic equilibrium.

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CONCLUSION

LIST OF USED SOURCES

INTRODUCTION

This course work is devoted to the actual topic today, namely the study of macroeconomic equilibrium and its models. The relevance of this topic is determined by the condition that the modern national economy of any country is deeply integrated into the world economy and is subject to general global economic trends. In the conditions of the current long-term financial and economic crisis, the instability of the exchange rates of the world's leading currencies, the fall in employment rates and the growth of inflation, the primary task of the governments of the countries of the world is to bring national economies into balance. To do this, it would be advisable to refer to the accumulated theoretical experience and models of bringing the national economy to a state of equilibrium by influencing aggregate demand, aggregate supply and other indicators.

The equilibrium state of the country's economic system is a guarantee of its progressive and harmonious development, dynamic economic growth and growth in the well-being of the population.

The subject of the study is the concept of macroeconomic equilibrium.

To disclose the purpose of the course work, the following tasks were identified:

Study of the theoretical experience of the concepts of aggregate demand and aggregate supply, as well as the mechanisms for bringing them into balance;

Analysis of the concepts of investment, income and the action of the multiplier effect;

The study of classical and Keynesian models of macroeconomic equilibrium.

CHAPTER 1. THE CONCEPT OF AGGREGATE DEMAND, ITS FACTORS

The national economy in the macroeconomic approach can be represented as a single market, consisting of one aggregate consumer and one aggregate firm producing a single product intended for personal and industrial consumption. This product must be sold at a single aggregate price. Let's start our analysis of this market with aggregate demand AD.

TOTAL DEMAND characterizes the desire and ability of the population, firms, the state and abroad to purchase a certain volume of goods and services at the current price level (Fig. 1).

The abscissa axis on the graph of aggregate demand is taken not nominal, that is, expressed in current prices, but the real product offered to the buyer in the market at base year prices.

Aggregate demand, in contrast to market demand, is a more complex category and, on a society-wide scale, consists of four main components: the first is the demand for goods and services C; the second is the investment demand of firms I; the third is government purchases G, which include all republican and local expenses for the army and weapons, free medical service and education, public investment programs, construction of housing and roads, etc.; the last, fourth, component is net export X n, i.e., the difference between exports and imports.

The AD curve illustrates the change in the aggregate level of spending by households, businesses, governments, and abroad, depending on changes in the price level. When the price level falls, the amount of real GDP that consumers can buy will be greater (i.e., more goods and services will actually be bought).

The negative slope of the AD curve is explained by three major effects in a market economy:

a) the interest rate effect

b) the effect of real wealth;

c) the effect of import purchases.

The interest rate effect shows that the price level affects output through the interest rate. This means that if the price level rises in the country, then with a constant money supply, the interest rate rises (as the demand for money for transactional operations grows). But the higher the interest rate, the lower the level of investment, and hence the volume of production. In addition, the higher the interest rate, the lower consumer demand, as consumer credit becomes more expensive. Therefore, more high level prices will correspond to a smaller amount of real GDP, and vice versa.

The effect of real wealth is manifested as follows. In a market economy, the wealth of households is largely represented in the form of various financial assets (stocks, bonds, term accounts). Assume that some individual has a bond with a face value of 1000 rubles. If the price level doubles, the real wealth represented by this bond will also decrease by a factor of 2. A decrease in real wealth will lead to a decrease in consumer demand, which is reflected in the negative slope of the aggregate demand curve

The effect of import purchases is the effect of price increases on the choice of buyers between domestic goods that have risen in price and imported goods, the prices of which have not changed. In such a situation, buyers will prefer imported goods, as a result of which the volume of aggregate demand for domestic goods will decrease.

A shift in the aggregate demand curve AD can occur as a result of macroeconomic policy changes ( monetary circulation, government spending or taxation) or changes in exogenous variables (production in foreign countries, which affects the volume of exports, or the confidence of businessmen, which have a direct impact on investment).

CHAPTER 2. TOTAL SUPPLY: CONCEPT AND FACTORS

The second component of the single market is the aggregate supply.

Aggregate supply is the amount of product actually produced by all producers in an economic system at a certain price level.

In microeconomics, the supply curve S has a positive slope, indicating that when prices rise, producers will increase production of a given good. In macroeconomics, the aggregate supply curve has a slightly different shape (Fig. 2).

What explains this configuration of the AS curve. The fact is that on the scale of the entire economy, three different states can develop: underemployment, approaching full employment, full employment. Three sections can be distinguished on the AS curve:

a) horizontal, or Keynesian;

b) ascending, or intermediate;

c) vertical, or classic.

The horizontal, or Keynesian, section is characterized by the fact that all factors of production are not fully used on it. There are capacities, raw materials, labor force not involved in the production process. As the volume of production increases, free factors are involved in the production process, without having a significant impact on the price level, it remains stable.

This state can persist up to a certain level of GDP (in Fig. 2 it is designated as Y1). After the volume of production equal to Y1, the state of the economy will begin to change.

The ascending, or intermediate, section corresponds to the gradual involvement in the production of free factors that have certain boundaries. Their further involvement in production ultimately leads to an increase in costs, which affects the cost of production.

There is a general gradual increase in prices for goods and services, and production is not growing as fast as before.

The vertical, or classical, section is interpreted on the basis of the basic premise of the representatives of the classical school: in the economy, all factors must be involved in the production process. In this case, the volume of production reaches the maximum possible level Y*, corresponding to the value of GDP, which can be achieved in the given economic system at full employment.

Thus, the AS curve reflects the dynamics of production costs per unit of output due to changes in the price level. Therefore, the shift of the AS curve to the right or to the left will occur when changing:

a) prices for factors of production;

b) taxes.

CHAPTER 3

The intersection of the AS and AD curves determines the equilibrium output and price level in the economy. Given the complex configuration of the aggregate supply curve, it can be assumed that an equilibrium situation can arise on any of the three sections: Keynesian, intermediate and classical. The most dynamic aggregate demand. He quickly captures the changes that occur in the economy.

The growth of aggregate demand, changing the equilibrium point, is reflected in the volume of national production, therefore, in the employment of the population, as well as in the price level (Fig. 4).

Fig. 4 - The consequences of an increase in aggregate demand: a - in the Keynesian area; b - on the ascending; c - on the classic

Consider the possible options. Let us assume that the curves of aggregate demand and aggregate supply intersect at the Keynesian section (Fig. 4, a). With an increase in aggregate demand from AD0 to AD1, the equilibrium will move from point Eo to point E1. At the same time, the volume of production will increase significantly, and prices will remain at the same level. The increased volume of production will require the additional labor force that is available in the economic system. Involvement additional factors production in the Keynesian area does not cause any increase in prices.

An increase in aggregate demand in the ascending section causes other consequences (Fig. 4b). The volume of production, and hence the employment of the population, will increase, but to a lesser extent than in the Keynesian area. There is a general increase in prices.

In the classical section (Fig. 4c), when all factors of production are involved, with an increase in aggregate demand, there is no increase in production volumes and the number of employees. Here production reaches its potential level Y*. However, this is accompanied by a sharp increase in prices.

Changes that occur in the economy with an increase in aggregate demand were considered, but aggregate demand can not only increase, but also decrease. In this case, the ratchet effect is triggered (Fig. 5).

With the initial aggregate demand AD 0, the equilibrium point E 0 corresponds to the volume of production Y* and the price level Р 0 . With a decrease in aggregate demand to the level AD 2, the equilibrium would have to move to the point which corresponds to the volume of production and the price level. But this does not happen in the real economy, since the price level, as a rule, does not decrease. The equilibrium situation is established at the point E 2 . The price remains at the same level, and the volume of production falls to the level E2, i.e. more than if the equilibrium was established in the traditional way. The aggregate supply line rises and settles at P0E2Eo.

This "behavior" of prices and the aggregate supply curve is explained by the price inertia of production costs. The entrepreneur enters into contracts for the supply of raw materials, the lease of premises and equipment, and the payment of labor at certain prices, which he cannot arbitrarily change downward. Therefore, even with a decline in aggregate demand, he is forced to offer his products at the prices that were originally established, and, in order not to be at a loss, he sharply reduces the volume of production.

Thus, the analysis of a simple model of aggregate demand and aggregate supply AD-AS shows that the laws of market equilibrium also operate at the level of the national economy as a whole. However, it serves as a useful framework for explaining the underlying forces at work in the economy and their consequences. The model distinguishes between its two sides: supply and demand. In the process of their interaction, the AD-AS scheme brings to the fore two main variables - the volume of production and the price level.

As a result, this model leads to the idea of ​​the necessity or undesirability of state intervention in the economy. The debate about such intervention involves both those economists who argue that government action can accelerate the achievement of full employment and price stability, and those who argue that the government can only worsen the economy and make it even less stable than it was. would be otherwise.

CHAPTER 4. INVESTMENT AND INCOME. MULTIPLIER EFFECT

In economic analysis, the term "investment" means the use of savings to create new production facilities and other physical (real) assets.

The structure of investments includes all costs for the purchase of machinery and equipment, the implementation of construction and installation works, changes in inventories. Investing in securities such as stocks and bonds is called financial or portfolio investment. Unlike physical investment, which creates new assets and thereby increases a country's productive capacity, financial investment only redistributes ownership of existing assets from one entity to another. That is why economists associate investment with the investment of capital in the acquisition of physical assets and stocks. It is also important that the implementation of investments is directly related to the commodity market, while the purchase and sale of securities - with the stock market.

Since investments are one of the components of total expenditures, compared to savings, they affect the volume of effective demand in exactly the opposite way: if savings reduce demand, then investments increase it.

Investment is an inverse function of the interest rate: I = f(i). This decreasing function is shown in fig. 6.

An increase or decrease in investment leads to an increase or decrease in production, employment and income. These patterns are observed not only in relation to investment, but also in connection with any other types of spending, including government spending and net exports.

When considering aggregate demand, a special role is given to government spending G. It is they who, in the model of a closed economy, are able to provide "effective demand" to achieve full employment. In connection with private investment and public spending, the problem of the multiplier is also considered.

Translated into Russian, the multiplier means "multiplier" (multiplication - multiplication; multiplier - multiplier, coefficient). The Keynesian multiplier shows how the increase in investment (public and private) affects the increase in output and income.

On fig. Figure 7 shows how changes in private and public investment affect the equilibrium output and income levels.

Rice. 7 Graphical interpretation of the multiplier effect

Income gains dY1 and dY2 turn out to be larger than the changes in private investment dI1 and government spending G, which are labeled dI2, that caused them. This is a graphic illustration of the multiplier effect. In its usual form, this effect can be represented as follows:

where dY - income growth;

dI - growth of investments;

k - multiplier.

Thus, the multiplier is a number showing how many times the initial increase in investment must be increased in order to calculate the increase in national income caused by this. In other words, the multiplier is the ratio of the change in the equilibrium level of national income to the initial change in spending that caused it.

Let us assume that investments in the economy have increased by 10 billion rubles. If due to this the total (national) income of the country increases by 30 billion rubles, then in such an economy the multiplier is equal to 3. If the increase in income caused by additional investment were 50 billion rubles, then the multiplier would be equal to 5.

Obviously, an increase in investment in the development of the production base of society cannot in a short period turn into a quick return in the form of an increase in the output of finished products. What is the reason for the multiplier effect?

J. Keynes associated the multiplier effect not at all with the return on investment in the form of the production of additional products or services. He believed that an increase in purchases of investment goods means an increase in the income of those economic agents from whom these goods are purchased. This refers to firms that produce machine tools, machines, equipment, computers, building materials, etc. An increase in the income of workers in these firms in accordance with the Keynesian consumption function causes an expansion of their consumption based on their own marginal propensity to consume. The growth in consumption, in turn, contributes to a further increase in effective demand and national income. This essentially increases the purchasing power of the economy, and hence the overall volume of demand. The increased purchasing power ultimately leads to firms being able to sell more, which requires them to expand their hiring and purchase of other factors of production, after which purchasing power increases even more. Increased purchasing power is a new source of additional consumption and investment that generates even more purchasing power, and so on.

Thus, the chain reaction of income generation, increased costs and expansion of production captures industries more and more distant from each other. There is a kind of effect of circles on the water. Moreover, the wider this process becomes, the less intense the perturbation effect becomes. The attenuation is explained by the fact that not all the income received at each stage is spent on new consumption, i.e., it becomes again someone's income. At each new stage, part of the income received is saved and thus excluded from further income generation. And this means that the strength of the multiplier effect depends on how much income will go to each subsequent stage, i.e., on the marginal propensity to consume MRS of the participants in the sequence of events.

To estimate the magnitude of the multiplier effect, let's look at a hypothetical example to help understand why the multiplier is always greater than one. Let's say that for the available funds 100 thousand rubles. a certain entrepreneur decided to build a small brick factory. Thanks to the implementation of this investment project, workers participating in the construction will receive 100 thousand rubles. additional income. What will happen next? If each person in the economy is characterized by a marginal propensity to consume 0.8, then 80 thousand rubles. they spend on buying new goods and services. It is by this amount that sellers will reduce inventory. The reaction of producers to the reduction of stocks will be an increase in production by 80 thousand rubles, after which other workers who received it will spend 0.8 of this amount on their own consumption (64 thousand rubles). This process will continue uninterruptedly in such a way that at each next stage the costs will amount to 80% of the costs incurred at the previous stage.

This endless chain of secondary expenses is caused only by the fact that our entrepreneur made an initial investment of 100 thousand rubles. However, although theoretically this chain has no end, it is easy to see that in practice it tends to a finite value that lends itself to arithmetic calculation:

100 thousand rubles income - 100 thousand x 0.8 (consumption)

80 thousand rubles income - 80 thousand x 0.8 (consumption)

64 thousand rubles income - 64 thousand x 0.8 (consumption)

The incremental income will be:

100 thousand + 80 thousand + 64 thousand + ... = 100 thousand (1 + 0.8 + 0.8 2 + 0.8 3 + ...).

The limit of the sum of a geometric progression will look like this:

In this equation, 100 thousand rubles. - investment growth dI, and the denominator of the fraction (1-0.8) is a value equal to (1-MPC).

Thus, the calculation shows that if MRS = 0.8, then the multiplier is 5. It includes a unit of initial investment and four units of additional (secondary) consumer spending. The same result can be obtained using the concept of marginal propensity to save MPS. If MPC = 0.8, then MPS = 0.2:

The general multiplier formula is as follows:

(2)

From this formula it follows that the greater the marginal propensity to consume (the lower the marginal propensity to save), the greater the multiplier. And this means that the greater will be the final increase in national income due to the increase in investment.

Once again, we note that any autonomous costs, and not just private investments, can cause a multiplier effect. We are talking about changes in autonomous consumption, government purchases, and exports.

The manifestation of the multiplier effect itself implies the existence of certain conditions. It is observed primarily in an economy that is in a state of deep crisis, with high unemployment and underutilization of production capacity. The increase in spending with the help of the multiplier ensures a more complete use of the resources already available in society. By itself, the multiplier does not have the property of multiplying the factors of production. If the economy were in a state of full employment, then the increase in spending would result in higher prices and inflation, since there would be an excess of aggregate demand over aggregate supply.

The peculiarity of the multiplier effect is that it is a “two-blade mechanism”: it can enhance both the growth of national income and its decline.

As a destabilizing factor, the multiplier is the stronger, the larger the MPS value, and vice versa. To understand this relationship, consider an unusual phenomenon called the thrift paradox. Its essence, as John Keynes showed, is that the desire of people to save will outpace the desire of entrepreneurs to invest, as a result of which there will be a reduction in the growth of national income.

This phenomenon will be observed, firstly, due to the fact that with the growth of capital accumulation, the marginal efficiency of its functioning decreases, as the circle of alternative possibilities for highly profitable investments narrows more and more; secondly, because the share of savings increases with income growth, since S = f (Y). An exception is the situation of inflationary overheating of the economy at the level of potential output Y*. IN this case an increase in savings is socially desirable, as it reduces aggregate demand and contributes to curbing inflation, and hence increasing prosperity.

The chain of links in the economy is as follows: autonomous spending, due to the action of the multiplier, leads to an increase in national income, and hence to an increase in savings. The resulting savings in the context of the recovery of business activity serve as a source of additional investment, which is usually called derivative or induced, since they depend on increased income. Derivative investments, in turn, together with initial, i.e., autonomous, investments enhance economic growth and accelerate it.

Thus, the "paradox of thrift" shows that all attempts to increase savings lead to a decrease in investment and production, a reduction in income and, consequently, a decrease in savings. Output will decline until income falls so much that the desired amount of saving equals the desired amount of investment. However, more savings means less consumption. Accordingly, the incomes of producers decrease, because the expenses of some economic entities are the incomes of others. If someone managed to save more, it is only because someone else was forced to borrow or part with their savings. Attempts by a significant part of the population to reduce consumption (in order to increase savings) will lead to a reduction in national income.

CHAPTER 5. THE CLASSICAL MODEL OF MACROECONOMIC EQUILIBRIUM

In modern economic science, there are two theoretical approaches to characterizing the equilibrium between aggregate demand and aggregate supply. The first was presented by representatives of the classical political economy in the first half of the 19th century. and developed by their followers - neoclassical economists in the second half of the XIX - the first decades of the XX century. The second approach was put forward by J. Keynes and his followers at the beginning of this year. In this chapter, we have to find out the characteristic features of the classical model of macroeconomic equilibrium and show what value it represents for the optimal organization of the economy at the present time.

Before proceeding to consider this issue, it is necessary to clarify the very concept of the classical school. The term "classical economists" was introduced into scientific circulation by K. Marx, referring mainly to the English economists A. Smith and D. Ricardo. However, later Western scholars began to interpret this term much more broadly, including the French economist J.-B. Say, as well as English economists - followers of A. Smith and D. Ricardo, T. Malthus, N. Senior, J. St. Mill, A. Marshall, F. Edgeworth, A. Pigou.

Economic theory, which used the approaches, methods and tools of marginal analysis (the concept of marginal utility and marginal productivity), was later called neoclassical. J. Clark, A. Marshall, F. Edgeworth, I. Fischer, V. Pareto, L. Walras, K. Wicksell, A. Pigou are considered to be the creators of the neoclassical theory. Many modern writers, however, for simplicity, combine these two schools, based on their ideological similarity in the fundamental issues of economic analysis: the microeconomic approach to describing the economy, as well as the assumption that there are market forces that tend to maintain full employment of economic resources.

Starting to consider the macroeconomic model of the classical school, one must bear in mind that its initial postulate is the position that production determines costs. In the most simple form this provision is expressed in the principle formulated by J.-B. Saym: Products are exchanged for products. This principle was explicitly or implicitly present in the theories of almost all classical economists. In the future, with the light hand of J. Keynes, he received the name of Say's law of markets.

The classics recognized that sometimes extraordinary circumstances, such as wars, political upheavals, droughts, stock market crashes, etc., can deviate an economy from a state of full employment. When this happens, however, the market automatically corrects the economy: a sharp decline in production and employment leads to lower prices, wages, and interest rates, which subsequently lead to an increase in consumer spending, employment and investment. The surplus in any of the markets - goods, labor, investment resources - soon disappears, and the economy is in equilibrium at full employment.

However, at the very first attempt at a more in-depth analysis of macroeconomic relationships, a serious vulnerability of the law of J.-B. Say. In fact, if we proceed from the fact that the exchange in the economy is carried out not according to the formula Commodity - Commodity, but with the use of money: Commodity - Money - Commodity, then the process of buying and selling is divided into two independent acts: sale (T-D) and purchase (D-T). In this case, no one can guarantee that the cash income received by the sellers will be immediately spent on the purchase of the relevant goods awaiting sale. If some part of the money is not spent on purchases, but is saved, then the economy will form inventories, which will ultimately lead to a reduction in production and the establishment of an equilibrium with underemployment.

However, such a scenario was not envisaged in the classical model of general economic equilibrium, since its authors proceeded from the fact that money is only an instrument of exchange and business entities do not seek to possess money by themselves. Indeed, in their theory since the time of A. Smith, money, in contrast to goods, was not considered as wealth. They were assigned only the role of measuring the cost of all economic benefits and intermediary in the exchange of one good for another. If economic entities sell goods or services for money, then they immediately use this money to buy other goods and services. They only hold money to secure deals, not to use it as a tool for wealth preservation. And this means that in the classical macroeconomic model, equilibrium develops only in three markets: labor, capital, and goods. In these markets, two macroeconomic entities meet: households and entrepreneurs.

As a result of this approach, macroeconomics appears as two sectors independent of each other: real and monetary. This is the essence of the classical dichotomy - the system of functioning of two parallel markets: one - real, the second - monetary, which are neutral with respect to each other.

The REAL SECTOR is a set of markets where labor, investment resources (machinery, equipment, raw materials, materials), as well as consumer goods and services are bought and sold. According to the classics, a stable equilibrium is always achieved in the labor market due to the flexibility of the money wage rate w. Thus, if the supply of labor exceeds the demand for it, the wage rate decreases to a level at which households fully implement their plans to sell labor, and entrepreneurs to buy it.

Unlike J.-B. Say, who did not take into account the possibility of saving money, his followers were forced to recognize this function as money. A. Marshall, in particular, noted that "although people have the ability to buy, they may not use it." However, this recognition did not at all mean a denial of Say's law. On the contrary, neoclassical economists came to the conclusion that Say's law will hold in this case as well, but only on the condition that the savings will be used in the form of investments (S = I). This allowed them to establish that in the capital market, the equalization of supply and demand occurs due to the flexibility of the interest rate i. If the amount of savings (the supply of capital) lags behind the amount of planned investment (the demand for additional capital), the interest rate rises, as a result of which the demand for investments decreases and the supply of savings increases. As a result, equilibrium will be established in the capital market at a certain equilibrium interest rate.

Further, the classics believed that the achievement of equilibrium in the labor and capital markets would lead, in accordance with Walras's law, to the fact that equilibrium would also be established in the goods market. The bottom line is that, on the one hand, the income received by households from production will be distributed between the goods market, where they purchase consumer goods and services, and the capital market, which will offer the part of the income not consumed by them - savings. On the other hand, entrepreneurs sell manufactured products equal to the sum of all factor incomes of households on the goods market to households, satisfying their consumer demand, and to themselves, satisfying their investment demand: Y = C + I. Equating income and expenses, we obtain equality If the volume savings is equal to the volume of investments, then equilibrium will be reached in the market of consumer goods and services.

The conditions for general economic equilibrium in the real sector are represented in the classical model by a system of three equations:

Equilibrium value of employment: L s (w)=L d (w)

Equilibrium income: Y(L,K)=Y d

Equilibrium in the capital market: S(i) =I(i)

This system allows to determine the equilibrium values ​​of employment L*, real wage rate w*, interest rate i*, national income Y*. In determining these values, the amount of money does not play any role.

The MONEY SECTOR is represented by the money market, where the demand for money is balanced with their supply. As already noted, business entities need money to carry out market transactions. If the amount of money in the economy increases, households will try to exchange the extra money for goods and services and for securities. An increase in demand in the securities market will lower the interest rate, which will reduce the supply of labor as households increase their demand for leisure time. As a result, the equilibrium level of employment and output will decrease, which will ultimately lead to an increase in the general price level in the economy. This growth will continue until the amount of money in the hands of economic entities is established at the same level. Shortly thereafter, the interest rate will return to its original value, restoring the pre-existing macroeconomic equilibrium at full employment.

Thus, in its simplest form, the classical model implies that the volume of production is a function of the employment of resources and production technology Y=f(L,K) This means that money has no effect on real production, and has the property of being neutral with respect to the real sector of the economy. They affect only nominal variables - prices, interest rates, money wages. By interacting with each other, the money and commodity markets come into an appropriate equilibrium, which is maintained through automatic stabilizers. This gave reason to classical economists, and then neoclassical economists, to conclude that it was inappropriate for the state to interfere in the operation of the market mechanism in order to influence the development of the economic situation.

In the second half of the XIX century. classical economic theory was developed and improved by representatives of several neoclassical schools. Usually there are three schools: Austrian (K. Menger, E. Böhm-Bawerk, F. Wieser), Lausanne (L. Walras, V. Pareto), Anglo-American (A. Marshall, J. Clark).

Representatives of the Austrian school introduced a subjective-psychological approach into economic analysis, which played a huge role in further development economic theory, including the development of models of macroeconomic equilibrium.

The main line of analysis of the Lausanne school is the study of general equilibrium, which covers all markets and within which all prices for goods and factors of production, all volumes of production of goods and the supply of factors of production are determined. The most prominent representative of this school, L. Walras, whom I. Schumpeter called "the greatest of all economists", formulated the law that received his name (Walras's law), according to which if for given n markets n - 1 markets are in equilibrium, then the latter market must be in equilibrium, since there can be no excess supply or demand for goods (including money).

The Anglo-American school consists of two independent schools. The most significant is, of course, the English school, represented by A. Marshall. The fundamental idea of ​​the works of A. Marshall is that supply and demand determine the equilibrium market prices. A. Marshall criticized both the classical and the Austrian schools, arguing that both of them suffer from a one-sided view of price formation. He showed that both utility, which was given paramount importance by Austrian economists, and production costs, which were the focus of classical price theory, play an important role in the mechanism of market pricing. In his model, the price of a commodity is determined by the forces of supply and demand acting like "two blades of scissors". Behind demand is marginal utility, which determines the demand price of buyers, and behind supply is marginal effort and loss, which determines the supply price of sellers. When analyzing costs, A. Marshall shared production costs "and production costs". He defined the latter as the anti-usefulness (burdensomeness) of labor and the losses or expectations associated with obtaining capital.

A. Marshall first introduced economics the concept of elasticity of demand to describe the sensitivity of demand for a product to changes in price. His merit was also the allocation of fundamentally different periods of time during which forces act, seeking to establish a balance: a) instantaneous (market), 6) short-term, c) long-term, d) "very long". The use of the time factor in economic analysis was and is of fundamental importance for subsequent generations of economists who studied the problems of macroeconomic equilibrium. Finally, A. Marshall clearly formulated the neoclassical principle of organizing economic life: the economy should develop outside of political influences, outside of government intervention. Later, his student J. Keynes criticized this principle and showed its inconsistency in the new historical conditions.

The American school is represented in the history of economic doctrines primarily by J. Clark, who is sometimes called an American marginalist for his independently developed theory of the marginal productivity of factors and its use in the study of the distribution of wealth in society. According to the concept of J. Clark, the distribution of social income is regulated by a "natural law" that gives to the representatives of each of the social groups in accordance with the "principle of justice". The company's annual income is divided into three large parts: the total amount of wages, the total amount of interest, and the total profit. Accordingly, these are labor incomes, capital incomes and incomes of the organizer of production (entrepreneur).

In general, neoclassical economic theory is characterized by the use of marginal analysis to study the pricing of goods, services and factors of production on competitive markets. She emphasizes that the market prices of goods and factors of production are related to their scarcity. In particular, neoclassical scientists have explored the possibility of the existence of such a set market prices, which would guarantee the equality of supply and demand in all markets. Central to neoclassical theory is the idea of ​​an economy of perfect competition in equilibrium, which was developed mainly by L. Walras. A distinctive feature of neoclassical theory is also a microeconomic approach to describing the economy.

From the end of the 50s. 20th century neoclassical economic theory begins to take on modern forms. The first of these was monetarism - the system of views of a group of professors at the University of Chicago headed by M. Friedman, according to which the volume of the national product and the price level change depending on changes in the money supply. The main problem What worried economists and politicians at that time was no longer unemployment and full employment, but increasing inflation.

In the 1970s In the United States, a new direction of the classical theory of supply-side economics emerged. The main representatives of this trend are A. Laffer, P. Regan and M. Feldstein. Their works fit into the framework of the ideological currents of liberalism, which, contrary to Keynesianism, not only denies the need for an active role of the state in stabilizing the macroeconomy, but also gives a clear preference to supply as a factor in economic growth. To this end, their recommendations usually boil down to measures to cut taxes and increase competition in product and labor markets.

As you can see, the main ideas of the classical school did not become a historical relic and are widely used in modern economic research. At the same time, they have been and are being seriously criticized, since they are based on hypotheses that have quite obvious limits.

First, as reality shows, the restoration of equilibrium with the full use of resources, carried out with the help of the price mechanism, is neither automatic nor instantaneous. The free mobility of factors of production is largely constrained by the structure of the modern economy, control over the markets for goods and production resources by monopoly and oligopolistic companies. Under these conditions, the regulatory function of prices and their role as an instrument of orientation, stimulation and choice are called into question.

Second, the effectiveness and reliability of the regulatory role of the price system can be too low, or even close to zero, due to incorrect estimates of demand by firms, especially in sectors dominated by long term investment. Thus, the market mechanism turns out to be too vulnerable a way of coordinating the behavior of economic entities in the face of an uncertain future.

Thirdly, the adaptation of aggregate supply, aggregate demand and the full use of resources, carried out through the price mechanism, is associated with the existence of perfect competition - an ideal state that does not exist in real life.

Fourth, the price system is an excellent engine of long-term economic growth, but in the short term, wages, interest rates, and commodity prices become stagnant and therefore unsuitable for playing a regulatory macroeconomic role.

CHAPTER 6. THE KEYNSIAN MODEL OF MACROECONOMIC EQUILIBRIUM

The first and most serious test of the classical theory of macroeconomic equilibrium was the world economic crisis of 1929-1933, usually called the Great Depression in the historical literature. He struck first the developed countries, whose economy has been gripped by catastrophic unemployment, a decline in production, and a reduction in business activity for four long years. In the United States, for example, during this period, the GNP fell by more than 30%, unemployment rose from 3 to 25%, and until 1940 it remained at an average level of 19%. Net investment from 1931 to 1935 was negative.

For a while, Western governments remained virtually inactive, relying on the assurances of traditional economic theorists that the market system would bring itself into equilibrium due to internal reserves of stability. However, the national economies of the countries affected by the crisis continued to function at low levels of employment, without showing any significant signs of recovery. Prolonged fall in prices (index consumer prices in the USA for the period from 1929 to 1933 decreased by 25%) and did not lead to the elimination of the excess supply of goods, since demand fell even faster. Thus the Great Depression overthrew the classical proposition that demand for goods was determined by their supply and led to another conclusion—that spending determines production and that a free market economy, by virtue of its inherent laws, reproduces a lack of aggregate demand relative to aggregate supply.

The first person who was able to more clearly consider and describe the new face of the economy, identify the patterns of its functioning and offer recipes for leading it out of the crisis was the English economist J. Keynes, the most striking and significant figure in the history of economic thought of the 20th century. His famous book, The General Theory of Employment, Interest and Money, published in 1936, revolutionized economic thinking.

J. Keynes not only clearly identified a range of specific macroeconomic problems, laid the foundations for the methodology and methodology for their analysis, formulated the principles of an active economic policy of the state, but also showed that studies of economic behavior can be measured and verified, and therefore be of an econometric nature.

One of the fundamental conclusions that John. Keynes came to in the course of his analysis was that the market mechanism by itself is not able to establish an equilibrium at the level of full employment. From the point of view of J. Keynes, the general equilibrium is not Pareto-optimal, since it can be achieved even in a crisis state of the economy, with significant unemployment. Moreover, capacity-level production is the exception rather than the rule in an unregulated market economy.

Differences in the views of J. Keynes and his predecessors in assessing the effectiveness of the functioning of the market mechanism are a consequence of the use of different methodologies of economic analysis. The methodology of Keynesian theory differs from the classical one in the following ways:

a) an aggregative approach to economic analysis;

b) emphasis on imperfections in the operation of the market mechanism (power of monopolies, administrative price fixing, transactions based on long-term contracts, uncertainty of the future);

c) consideration of the economic situation created by the market mechanism in a short, and not in a long (as in the classics) period;

d) special attention to the role of money in the economic system.

The Keynesian function of aggregate demand is defined as the sum of planned expenditures by households and firms on goods, services, and factors of production for each level of a country's total income.

This definition differs significantly from the one given in the first chapter of this study. There, aggregate demand was presented as a curve showing how much national output households and firms are willing to buy at different price levels. This interpretation is based on the classical understanding of the economy, in which flexible pricing prevails and the price level can take on any values. The Keynesian model, on the other hand, describes the economy in the short run, which is characterized by rigid prices, and therefore aggregate demand is interpreted differently here.

From what has been said, it follows that when describing the mechanism of interaction
supply and demand in the Keynesian model, the traditional AD-AS chart, in which the price level is plotted along the vertical axis, and national production is plotted along the horizontal axis, cannot be used.

Price rigidity in an economy means that supply and demand are balanced not by changes in the price level, but by the fact that sales volumes and changes in inventories give firms information about what and how much buyers want to have. The AD-AS model, therefore, can only indicate the equilibrium output, but cannot show how this equilibrium is reached. Therefore, to describe the equilibrium in an economy with rigid prices, it is necessary to construct a graph that reflects the dependence of supply and demand on the volume of national income. Such a chart is called the "Keynesian cross" and is an interpretation of the model of aggregate demand - aggregate supply under conditions of rigid pricing (Fig. 8).

Rice. 8 - Determining the equilibrium output

On fig. 8, the horizontal axis reflects the national income Y, which coincides in magnitude with the volume of national output, and the vertical axis shows the volume of aggregate demand.

Since aggregate demand is equal to the sum of demand for consumer goods and investment goods, it can be represented graphically by summing consumption and investment curves at each level of income.

Aggregate supply on a graph is much easier to reflect: the volume of national income is equal to the value of the national product, which, in turn, constitutes the entire volume of supply in the economy. This means that the aggregate supply curve starts from zero and is directed in a straight line upwards at an angle of 45 °, i.e. along the bisector. Therefore, if the national income is 1,000 units, then the aggregate supply must also be 1,000 units.

If we combine both curves on one graph, we can find the point at which the volume of aggregate demand equals the volume of aggregate supply. On fig. 8, equilibrium output is represented by point E, at which the level of income is equal to total expenditure. At this point, the national output is 1,000 units, corresponding to the same level of income. In turn, at the level of income of units, the demand for goods and services also amounts to 1000 units, as evidenced by the line AD, which so far represents only consumer spending C on the graph.

Thus, at point E, the quantity of goods offered is equal to the quantity demanded for them at the existing price level. This point characterizes the equilibrium in the Keynesian model, which is understood as such a state in the economy when there are no tendencies for further changes in it. This means that the national economy will be in equilibrium only if the aggregate demand is equal to the national income produced (aggregate supply).

At any other level of output, different from the volume of production does not coincide with the value of aggregate demand. For example, if the volume of production is 500 units, then the value of aggregate demand will exceed this volume, i.e., there will be an excess of aggregate demand (AD > AS). This pattern will be typical for any level of output below 1000 units.

In this case, there will be a phenomenon that J. Keynes called the inflation gap. The word "gap" in this term means that if the actual volume of production does not coincide with the equilibrium volume, then in such an economy there is a gap between supply and demand.

A different picture will be observed if the actual volume of production is higher than the equilibrium. In this case, the economy will have an excess supply of goods and services over aggregate demand (AS>AD). In particular, with the release of 1500 units, the total demand will be 1250 units. This phenomenon J. Keynes called the unemployment gap.

How does the economy come to a state of equilibrium in the event of its violation? In the classical model, such a tool is the flexible pricing mechanism. In the Keynesian model, output is driven by demand. If aggregate demand exceeds aggregate supply (AD>AS), firms will increase employment and output to the current level of demand. In the opposite situation (when AS> AD) there will be a reduction in output to the level of existing aggregate demand.

Thus, the analysis of the "Keynesian cross" shows that the general equilibrium in the economy, established in the manner described, does not necessarily correspond to a level of national income that allows for full employment. The equilibrium volume of national income in the Keynesian model is determined by the propensity of people to consume, save and invest. With a low propensity to consume and invest, the equilibrium output may be lower than potential (achieved with full use of resources).

The disadvantage of this state is that the economy does not have any driving forces capable of bringing it to the level of full employment. In particular, firms have no incentive to fill idle production capacity and hire the unemployed to expand production, since they will not be able to sell the volume of output produced. With a rigid price level, the expansion of output will rest against the deficit of aggregate demand.

Thus, the essence of Keynesian analysis is that the economy, left to itself and functioning on the principle of "invisible hand", is very likely to fall into a situation of either inflation or unemployment. Once in this position, it is not able to balance itself on its own, since in an economic system with fixed prices there is no internal mechanism that automatically balances aggregate demand and aggregate supply at the level of full employment. At the time of the classics, such a mechanism existed, it was a system of flexible prices, primarily flexible wages. If unemployment arose in the economy, wages fell and the demand for labor increased until all those who wanted to work found suitable jobs. However, by the 1930s the role and influence of trade unions in the labor market has significantly increased, which have managed to significantly limit the ability of entrepreneurs to lower the price of labor. Therefore, the economy of this period, having come to a state of equilibrium with underemployment, can be in it for an arbitrarily long time, without revealing the slightest tendency to involve unused resources in production, primarily free labor. Underemployment is on the rise.

Great Depression 1929-1933 was a convincing evidence of the correctness of the theoretical conclusions of J. Keynes. All hopes for the ability of a competitive economic system to cope with the global crisis that hit all highly developed countries turned out to be futile. The economy continued to function at a low level of employment, showing no signs of recovery. According to J. Keynes, only the state could lead it out of protracted stagnation. Only an increase in government spending can compensate for the shortfall in aggregate demand resulting from low consumer spending and the lack of incentives for private firms to invest, and bring about an economic equilibrium at full employment of resources.

CONCLUSION

Thus, in the course of the study, it was found that aggregate demand characterizes the desire and ability of the population, firms, the state and abroad to purchase a certain amount of goods and services at the prevailing price level. Aggregate demand, in contrast to market demand, is a more complex category and, on a societal scale, consists of four main components: demand for goods and services, investment demand of firms, government purchases, and net exports.

Aggregate supply is the second important component of the single market and represents the value of the actual product produced by all producers in the economic system at a certain price level.

The intersection of the aggregate supply and aggregate demand curves AS and AD determines the equilibrium output and price level in the economy.

The growth or decline in production, employment and income is significantly influenced by investments, which are the use of savings to create new production capacities and other physical (real) assets.

Two theoretical approaches to characterizing the equilibrium between aggregate demand and aggregate supply were investigated: classical and Keynesian. The initial postulates of the macroeconomic model of the classical school are the position that production determines costs (Say's law of markets), the principles of classical dichotomy and self-regulation of the market.

The basis of the Keynesian approach was the assertion that the market mechanism by itself is not able to establish an equilibrium at the level of full employment. To describe macroeconomic equilibrium, J. Keynes developed a model in rigid prices, which was called the “Keynes cross”.

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Say's law Under the division of labor, people produce goods in order to sell them and buy other goods. Therefore, they must buy as much as they sold: supply generates its own demand; income equals expenditure; demand balances supply at full employment of resources.

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Keynesian theory of macroeconomic equilibrium no elasticity of the ratio of prices and wages; equilibrium is achieved by reducing the volume of production, that is, equilibrium is established with incomplete employment of resources; the market mechanism itself is not able to balance aggregate demand and aggregate supply, therefore state intervention is necessary; central to this is the regulation of aggregate demand.

Elasticity of prices and wages with t.z. Keynesian Theory The modern economy is almost never perfectly competitive, so a reduction in demand does not necessarily lead to a fall in prices, and unions may not allow wage cuts

People's propensity to consume The average propensity to consume (APC) measures the willingness of people to buy consumer goods at a given price level. The marginal propensity to consume (MPC) tells us how much of the extra income goes into increasing consumption. APC = Consumed Income / Income = C / Y MPC = Change in Consumption / Change in Income = C / Y

People's propensity to save The average propensity to save (APS) is expressed as the ratio of the portion of income saved (S) to total national income (Y). The marginal propensity to save (MPS) shows what part of the additional income the population uses for additional savings when the amount of income changes. APS = Saving Part of Income / Income = S / Y MPS = Change in Saving / Change in Income = S / Y

Factors affecting consumption and saving (other than income) 1. Wealth: the greater the wealth, the greater the amount of consumption and less savings; 2. Price level: an increase (decrease) in the price level leads to a decrease (increase) in consumption of current income; 3. Household expectations related to future prices, cash income and availability of goods; 4. Consumer indebtedness: once a certain level of indebtedness is reached, consumers will be forced to reduce current consumption in order to reduce indebtedness. 5. An increase (decrease) in taxes has the opposite effect on both consumption and savings.

Model National Income - Aggregate Expenditures (Keynesian Cross) Aggregate supply is a line at an angle of 45 0, caused by the equality of income and expenditure, Aggregate demand is the total planned expenditure, consisting of consumption and investment. At the intersection point, production will be in equilibrium, i.e. provides a total cost sufficient to purchase a given volume of products.

Deflationary Gap Situation A deflationary (recessionary) gap is when point F2 is above point E, aggregate demand is lower than aggregate supply. The amount by which total spending is less than the level of national income at full employment is called a recessionary gap because this lack of spending has a contracting effect on the economy.

Inflationary Gap Situation An inflationary gap is when the level of national income corresponding to full employment (point F1) is below point E, aggregate demand exceeds aggregate supply. Consequence: an increase in the price of a constant physical volume of production in the economy.

Questions for self-examination What are partial and general equilibrium? Define aggregate demand and aggregate supply. What non-price factors influence them? What is the difference between the views of John. Keynes on the problem of macroeconomic equilibrium from the views of the classics? What is marginal propensity to consume and marginal propensity to save? Explain the meaning of investment models - savings and the Keynesian cross. What is the difference between inflationary and deflationary gaps?

Aggregate demand - total, the total number of products that can be purchased at a given price level and other things being equal.

Components:

Consumer demand for T&C

Investment demand of firms

Public procurement (medicine, army)

Net exports (difference between exports and imports)

The lower the level of prices for goods, the greater part of the real volume of national production will be able to purchase buyers, and vice versa.

The interest rate effect is if the price level in the country rises, then with the same money supply, the interest rate rises, and the level of investment and output decrease. The higher the interest rate, the lower consumer demand as consumer credit becomes expensive.

The effect of import purchases - price increases force the buyer to choose between domestic goods that have risen in price and imported goods whose prices have not changed.

Aggregate supply– the quantity of goods and services provided by all producers in the market at any given price level in the country.

· Classic cut - all factors are involved in the production process and provide the highest possible level of production. Firms no longer have room to expand production in response to an increase in aggregate demand, and they will raise prices.

· Intermediate - gradual involvement in the production of free resources.

· Keynesian cut - the totality of unused resources can be put into action without changing the price level, but up to a certain level of GDP.

Macroeconomic equilibrium - the state of the national economy, in which the equality of aggregate demand and supply is achieved.

With an increase in aggregate demand:

· Keynesian approach- an increase in output at a constant price level

· Classical to rising prices at a constant level of production.

Ratchet effect - Prices go up easily but are hard to come down. Therefore, an increase in aggregate demand raises the price level, but if it decreases, prices cannot be expected to fall in a short period of time.

Stagflation - under the influence of a decrease in aggregate supply, there is a simultaneous fall in the real volume of national production and an increase in the price level.

Consumption, savings and investment in the national economy. Investment Multiplier»

Consumption is the final stage of the reproduction cycle, it plays an important role in the national economy. Consumption- the totality of consumed goods and services, the amount of money that is spent on their consumption. Distinguish between industrial and non-industrial consumption: Non-productive consumption- the final consumption of goods by people to satisfy their needs. Industrial consumption- the use of resources in the production process. The main factor that affects consumption is the income of the population.

Saving are formed as a result of a mismatch between the time of receipt of income and the time of their use. Allocate:

Private (part of household disposable income that is not consumed)

State (positive difference (balance) between revenues and expenditures of the state budget)

National (part of national income after deducting its consumed part or the total amount of private and public savings)

Investments - capital investment for profit.

In economics parameters:

profitability (what profit an investor can expect by investing in one or another in investment project)

risk (a value that indicates not only the degree of probability of loss of profit, but also the fact that it is possible to lose invested material resources)

Investment multiplier(Keynes multiplier, accumulation multiplier, Keynes multiplier) - a coefficient equal to the reciprocal of the marginal propensity to save or the reciprocal of the difference between unity and the marginal propensity to consume.

This coefficient shows how much the national income will increase as a result of the initial investment. When a change in the component of total expenditure leads to an even greater change in the equilibrium GDP, this action is called multiplier effect.

It should be noted that prior to Keynes, economic theory did not consider general economic equilibrium as an independent macroeconomic problem. Therefore, the classical model of general economic equilibrium is a generalization of the views of classical economists using modern terminology.

The classical model of general economic equilibrium is based on the main postulates of the classical concept:

1. The economy is an economy of perfect competition and is self-regulating due to the absolute flexibility of prices, the rational behavior of subjects and as a result of the action of automatic stabilizers. In the capital market, a built-in stabilizer is a flexible interest rate; in the labor market, a flexible nominal wage rate.

The self-regulation of the economy means that the equilibrium in each of the markets is established automatically, and any deviations from the equilibrium state are caused by random factors and are temporary. The system of built-in stabilizers allows the economy to restore the disturbed equilibrium on its own, without intervention from the state.

2. Money serves as a unit of account and an intermediary in commodity transactions, but is not wealth, that is, it does not have independent value (this phenomenon is called the principle of money neutrality). As a result, the markets for money and goods are not interconnected, and in the analysis the money sector is separated from the real sector, to which the classical school refers the markets for goods, capital (securities) and labor.

The division of the economy into two sectors is called the classical dichotomy. In accordance with this, it is argued that real variables and relative prices are determined in the real sector, and nominal variables and absolute prices are determined in the monetary sector.

Real variables - variables and other quantities calculated regardless of the nominal level of current prices of goods measured by them. According to this principle, such indicators as real wages, real income, as well as real GDP, real GNP, real national income.

Relative price - the price of a good, defined as a ratio to the price of another, basic good.

A nominal variable is a qualitative variable whose values, as a rule, cannot be ordered by magnitude (race, ethnicity, gender).

Absolute prices, in contrast to relative prices, are the prices of goods and services expressed directly in the number of monetary units.

3. Employment due to self-regulation of the labor market is presented as full, and unemployment can only be natural. At the same time, the labor market plays a leading role in shaping the conditions for general economic equilibrium in the real sector of the economy.

Full employment - the presence of a sufficient number of jobs to satisfy the demands for work of the entire working-age population of the country, the practical absence of long-term unemployment, the ability to provide those who wish with jobs that correspond to their professional orientation, education, and work experience.

The natural rate of unemployment is an objectively developing, relatively stable long-term unemployment rate, due to natural causes (staff turnover, migration, demographic factors), not related to the dynamics of economic growth.

Full, or natural, unemployment occurs when labor markets are balanced, that is, when the number of job seekers is equal to the number of available jobs.

Equilibrium in the labor market means that firms have realized their plans for production volumes, and households - for the level of income, determined in accordance with the concept of internal income.

The production function in the short run is a function of one variable - the amount of labor, therefore, the equilibrium level of employment determines the level of real production. And since employment is full (everyone who wanted a job at a given wage rate got one), then output is fixed at the level of natural output, and the aggregate supply curve becomes vertical.

The volume of aggregate supply is the sum of the factor incomes of households, which are allocated last to consumption and savings.

In order for the market of goods to be in equilibrium, the aggregate supply must be equal to the aggregate demand.

Since aggregate demand in the simple model is the sum of consumer and investment expenditures, if the condition that consumer and investment expenditures are equal, equilibrium will be established in the market for goods. That is, according to Say's law, any supply generates a corresponding demand.

If planned investment does not correspond to planned savings, then an imbalance may arise in the market for goods. However, in the classical model, any such imbalance is eliminated in the capital market. The parameter that ensures equilibrium in the capital market is a flexible interest rate.

If, for some reason, the planned volumes of savings and investments do not coincide at a given interest rate, then the economy begins a multiple process of changing the current interest rate to its value, which ensures the balance of savings and investment.

Graphically, the relationship between the rate of interest, investment and savings according to the "classics" is as follows:

The graph shows an illustration of the equilibrium between savings and investment: curve I - investment, curve S - savings; on the y-axis of the value of the rate of interest (r); on the x-axis - savings and investments.

It is obvious that investment is a function of the rate of interest I = I(r), and this function is decreasing: the higher the level of the interest rate, the lower the level of investment.

Savings is also a function (but already increasing) of the rate of interest: S = S(r). The level of interest, equal to r 0 , ensures the equality of savings and investments on the scale of the entire economy, the levels r 1 and r 2 - a deviation from this state.

If we assume that the volume of planned savings turned out to be less than the volume of planned investments, then investors will start competing in the capital market for free credit resources, which will cause an increase in the interest rate.

An increase in the interest rate will lead to an upward revision of planned savings and a downward revision of investment, until such an interest rate is established that will ensure equilibrium.

If the volume of savings exceeds the volume of investment, free credit resources are formed in the capital market, which will cause a decrease in the interest rate to its equilibrium value.

That is, if an imbalance occurs in the goods market, then it is reflected in the capital market, and since the latter has a built-in stabilizer that allows it to restore equilibrium, restoring equilibrium in the capital market leads to restoring equilibrium in the goods market.

Thus, the Walrasian law is confirmed, according to which, if equilibrium is established in two of the three interconnected markets (the labor market and the capital market), then it is also established in the third market - the goods market.

Price flexibility extends not only to goods but also to factors of production. Therefore, a change in the price level of goods causes a corresponding change in the price level of factors. This is how nominal wages change, while real wages remain unchanged.

It follows that the prices of goods, factors, and the general price level change in the same proportion.

It should be noted that the classics considered macroeconomic equilibrium only in the short run under conditions of perfect competition. Jean-Baptiste Say was the first to formulate the so-called "law of markets", the essence of which boiled down to the following statement: the supply of goods creates its own demand, in other words, the volume of production automatically provides income equal to the cost of all created goods.

This means that, firstly, the goal of an individual receiving income is not to receive money as such, but to acquire various material goods, that is, the income received is spent entirely. Money in this approach plays a purely technical function that simplifies the process of exchanging goods. Secondly, only own funds are spent.

Representatives of the classical direction have developed a fairly coherent theory of general economic equilibrium, which automatically ensures the equality of income and expenses at full employment, which does not conflict with Say's law.

The starting point of this theory is the analysis of such categories as the interest rate, wages, the price level in the country. These key variables, which in the view of the classics, are flexible values, provide equilibrium in the capital market, labor market and money market.

Interest balances the demand and supply of investment funds. Flexible wages balance supply and demand in the labor market, so that any long-term existence of involuntary unemployment is simply impossible. Flexible prices ensure that the market is “cleared” of products, so that long-term overproduction is also impossible. An increase in the money supply in circulation does not change anything in the real flow of goods and services, only affecting nominal values.

Thus, the market mechanism in the theory of the classics is itself capable of correcting imbalances that arise on the scale of the national economy, and state intervention is unnecessary.

The principle of non-intervention of the state is the macroeconomic policy of the classics.

So, summarizing all that has been said above about the classical concept of general economic equilibrium, we can say that the formation of conditions for general economic equilibrium in the classical model occurs according to the principle of self-regulation, without state intervention, which is ensured by three built-in stabilizers: flexible prices, a flexible nominal wage rate and a flexible rate percent. At the same time, monetary and real sector independent from each other.