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Ministry of Education and Science of the Russian Federation

Federal state budget educational institution higher professional education

"Novgorod State University named after Yaroslav the Wise"

Institute of economics and management

Department of Economic Theory

Coursework for the module

"Macroeconomics"

Macroeconomic instability: unemployment

Supervisor:

Makarevich A. N.

Sycheva O. V.

INTRODUCTION

2.1 Types and forms of unemployment

2.2 Causes of unemployment

CONCLUSION

BIBLIOGRAPHY

INTRODUCTION

Every science has its own object of knowledge. This fully applies to economic science. A characteristic feature of the latter is that it is one of the most ancient sciences. The origins of economic science go back centuries, to the place where the cradle of world civilization was born - to the countries of the Ancient East of the 5th-3rd centuries. BC. Later, economic thought was developed in Ancient Greece And Ancient Rome. Aristotle introduced the term “economy” (from the gr. Oikonomia - household management), from which the later word “economics” came. In the early Middle Ages, Christianity declared simple work to be a holy work, and the most important principle began to be established: he who does not work, does not eat.

As a science, economics arose in the 16th-17th centuries. Its first theoretical direction was mercantilism, which saw the substance of the wealth of society and the individual in money, and reduced money to gold. In the 17th century a new name for economic science appeared - political Economy, (interaction between economics and politics), which lasted for more than three centuries. A new direction to this science was given by the physiocrats (A. Turgot, F. Quesnay, etc.), who argued that the source of wealth was not exchange, but agricultural labor. The founder of classical political economy was the Scottish economist Adam Smith (1723-1790), who published his famous book “An Inquiry into the Nature and Causes of the Wealth of Nations” in 1776. The basis of his concept is the idea of \u200b\u200b“unequal equality”, which attached decisive importance to the division of labor and, as a result, laid the foundations of the labor theory of value and market economy in general (macroeconomics). Further development The teachings of A. Smith received in the works of the German philosopher and economist Karl Marx (1818-1883), who created the theory of scientific socialism in his multi-volume work “Capital”.

Modern economic science these days has received a more common name - economic theory, and in Anglo-American literature - "economics". The term "economics", which was first introduced by the English economist Alfred Marshall (1842-1924) in his book "Principles of Economics", is understood as the analytical science of using the limited resources of a family, enterprise and society as a whole for the production of various goods, their distribution and exchange between members of society for consumption purposes, i.e. in order to satisfy human needs. It is A. Marshall who is considered the “founder” of microanalysis, microeconomics - a branch of economic science that studies and analyzes the activities of individual economic entities and the system of decisions they make.

The Great Depression of 1929-1933 returned the world community to consider the functioning of the national economy as a whole, from the perspective of macroeconomics. A new understanding of the possibilities of a market economy is emerging, it has become clear: it is necessary to introduce a corrective, controlling function of the state, government, and the concept of “economic policy” is emerging. Economic policy is “...a set of measures aimed at streamlining the course of economic processes, influencing them or directly predetermining their course” - Hirsch. The fundamental task is to ensure general equilibrium, i.e. economic and social balance.

It should be noted that macroeconomic disequilibrium is a normal, common and even necessary phenomenon, since economic processes always develop with certain fluctuations and are realized according to indicators: supply and demand, price movements, unemployment, etc. This work will examine the macroeconomic indicators of economic theory, namely economic cycles, unemployment, inflation, their prerequisites, consequences, and relationships.

1. ECONOMIC INSTABILITY: BASIC POINTS

macroeconomic instability unemployment

1.1 Concept and manifestations of macroeconomic instability

One of the most important reflections of macroeconomic instability is unemployment. In a market economy, there is always a certain number of people who are unemployed. However, not every non-working person is considered unemployed. In accordance with the methodology of the International Labor Organization, unemployed persons are recognized as persons 16 years of age and older, who in the period under review: did not have a job (gainful occupation); were actively looking for work; were ready to get to work.

Macroeconomic instability is primarily fluctuations in economic activity (economic cycles), the emergence of unemployment, underutilization of production capacity, inflation, shortages state budget, foreign trade balance deficit. It is characteristic of a market economy. Macroeconomic instability reduces economic efficiency in many ways.

Unemployment is a social phenomenon that involves the lack of work among people who make up the economically active population.

Costs of unemployment:

Lost output is the deviation of actual GDP from potential as a result of underutilization of the total labor force (the higher the unemployment rate, the greater the gap in GDP);

Reduction in revenue federal budget as a result of a decrease in tax revenues and a decrease in revenue from the sale of goods;

Direct losses in personal disposable income and a decrease in the standard of living of persons who become unemployed and members of their families;

Increased costs for society to protect workers from losses caused by unemployment: payment of benefits, implementation of programs to stimulate employment growth, professional retraining and employment of the unemployed, etc.

In a market economy there is a tendency towards economic instability, which is expressed in its cyclical development, unemployment, and inflationary rise in prices. Unemployment means inability to find a job.

There are three main causes of unemployment: loss of job (dismissal); voluntary resignation from work; first appearance on the labor market

Thus, unemployment occurs when part of the active population cannot find work and becomes a reserve army of labor. Unemployment increases during economic crises and subsequent depressions as a result of a sharp reduction in demand for labor. Like any socio-economic phenomenon, unemployment has natural and random features, essential and superficial characteristics, positive and negative aspects. Their intensity depends on the scale, level, regional specifics, and form of unemployment. The essence of inflation is that the national currency depreciates in relation to goods, services and foreign currencies that maintain the stability of their purchasing power. Nowadays, technological progress does not stand still. Products and services are being improved all the time. In this regard, their value increases, and as a result, the price increases. This shows that the roots of inflation lie in the sphere of production, primarily products high technology, and are determined by their quality.

1.2 Cyclicality of economic development as a manifestation of macroeconomic instability

Any form of movement of matter, including economic, is characterized by instability, which manifests itself in the fact that changes in any system object accumulate gradually and the system perceives them calmly, since the fluctuations generated by these changes do not exceed the power of the stabilizing mechanisms of the system. As soon as the dominance of stabilizing factors is disrupted, the connections that kept the system in a calm state are destroyed, the system becomes indignant, and its fluctuations become noticeable. This state characterizes the system as unstable. The frequency of oscillations that disrupt the stability of the system depends both on the state of the system itself and on the strength of the reasons that caused these oscillations.

The economy, like any other system, develops unevenly and in waves. This form of movement is largely explained by the law of diminishing marginal productivity of all factors (resources) of production. For example, in order for the land to produce better results from each hectare, fundamental changes in the technical (technological) basis are necessary. Only then will it make sense to make new investments. Within the framework of existing technology, increasing the efficiency of investments always has a limit, overcoming which is ensured by scientific and technical progress and higher qualifications of workers. The use of scientific and technological progress innovations requires the accumulation of capital. Their introduction into production initially leads to rapid growth marginal utility factors of production, then a slowdown in this growth and, finally, a decrease in it. This is how ups and downs occur in the economy. If changes in the technological basis of infrastructure industries occur over long periods of time (structures, bridges, roads, power lines, etc. have a long service life), then we are talking about long waves. If we are talking about machines, machines, equipment, the life of which is much shorter (up to 10 years), they are updated faster. This causes average cycles. Thus, it becomes obvious that the very technological basis of production contains the foundations for wave-like (cyclical) development. But this does not exhaust the reasons for cyclical fluctuations.

The problem of detecting the periodicity of fluctuations in the economy and the reasons that determine it did not leave any of the leading economists of the 19th and 20th centuries indifferent.

Theories of the XIX--XX centuries.	Causes of cyclical fluctuations
Theories of social production	The impossibility of marketing some goods depends on the insufficient volume of production of goods in other industries; Violation of proportionality in social production.	D. Ricardo
Exchange theories	Speculative operations in commodity and money markets	M. Evans, K. Juglyar, M. Wirth
Theories of distribution	Poverty creates insufficient demand and crises. The cause of poverty is limited resources and the ability of people to reproduce excessively quickly	T. Malthus
External (external) theories	Natural phenomena; Changes in the political and social structure; Discovery of new lands, resources, gold deposits; Changes in population growth rates; Scientific and technical discoveries and innovations; Psychology (pessimistic and optimistic expectations)	Almost all scientists admit E. Hansen et al., A. Pigou et al. I. Schumpeter J.M. Keynes
Interval (internal) theories	Re-accumulation of fixed capital. Expansion and contraction of bank credit. Disproportions between the movement of savings and investments in the industries of the first division, as well as between the organization of production within a separate enterprise or syndicate and the disorganization of all national production	F. Hayek, L. Mises, etc. N. Huotri, etc. M.I. Tugan-Baranovsky

Thus, we have considered in the most general view existing theories of cyclic oscillations of the 19th - first half of the 20th centuries. Scientific interest in models of cyclic oscillations has been revived since the second half of the 20th century. IN beginning of XXI V. this interest intensified. A wide variety of factors that force the economic system to fluctuate cyclically are studied: different reactions over time aggregate demand And aggregate supply to changes in price levels; different propensity to save between entrepreneurs and employees; changes in the value of autonomous demand, etc. These models are the object of study in the Macroeconomics course.

2. UNEMPLOYMENT AS A FORM OF MACROECONOMIC INSTABILITY

2.1 Types and forms of unemployment

"Unemployment as such, whether provided or flooded with private or public subsidies, humiliates a person and makes him unhappy."

Ivan Ilyin

A socio-economic phenomenon in which those who want to work cannot find work at the usual rate wages, i.e. part of the working population is not employed in the process of producing goods.

The entire population of the country is divided into two categories: 1) the economically active population, including employed and unemployed; 2) the inactive population, consisting of children, pensioners, students, as well as people who do not want to work (housewives, tramps, idle people, etc.). The percentage of unemployed people in the entire economically active population is called the unemployment rate. It is defined as follows:

where u is the unemployment rate; U is the number of unemployed; L is the total number of labor force (employed plus unemployed).

According to the form of manifestation, unemployment is divided into open and hidden. Open unemployment occurs when a worker is officially fired with a corresponding loss of his working status. With hidden unemployment, people are not formally fired, but are transferred to part-time work, sent on forced leave, work without pay, etc.

There are three main types of unemployment:

Frictional unemployment

If a person is given freedom to choose his type of activity and place of work, in every this moment Some workers find themselves in a "between jobs" position. Some voluntarily change jobs. Others are looking new job due to dismissal. Still others temporarily lose seasonal jobs (for example, in the construction industry due to bad weather or in the automobile industry due to model changes). And there is a category of workers, especially young people, who are looking for work for the first time. When all these people find a job or return to their old one after being temporarily laid off, other "seekers" of work and temporarily laid off workers replace them in " general fund unemployed." Therefore, although specific people left without work for one reason or another replace each other from month to month, this type of unemployment remains.

Economists use the term frictional unemployment to refer to workers who are looking for work or expecting to get a job in the near future. The definition of “frictional” accurately reflects the essence of the phenomenon: the labor market functions clumsily, creakingly, without bringing the number of workers and jobs into line.

Frictional unemployment is considered inevitable and to some extent desirable. Why desirable? Because many workers who voluntarily find themselves “between jobs” move from low-paying, low-productivity jobs to higher-paying, more productive jobs. This means higher incomes for workers and a more rational distribution of labor resources, and therefore more real production. national product

Structural unemployment.

Frictional unemployment quietly moves into the second category, which is called structural unemployment. Economists use the term "structural" to mean "composite." Over time, there are changes in consumer demand patterns and technology important changes, which, in turn, change the structure of overall labor demand. Due to such changes, the demand for some types of professions decreases or ceases altogether. Demand for other professions, including new ones that previously did not exist, is increasing. Unemployment arises because the labor force is slow to respond and its structure does not fully correspond to the new job structure. The result is that some workers do not have marketable skills and their skills and experience have become obsolete and redundant due to changes in technology and consumer demand. In addition, the geographic distribution of jobs is constantly changing. This is evidenced by the migration in industry from the "snow belt" to the "sun belt" over the past decades.

Examples: 1. Many years ago, highly skilled glassblowers were left out of work due to the invention of machines used to make bottles. 2. More recently, in the southern states, unskilled and undereducated blacks were forced out of Agriculture as a result of its mechanization. Many were left without work due to insufficient qualifications. 3. An American shoemaker, left unemployed due to competition from imported products, cannot become, for example, a computer programmer without undergoing serious retraining, and perhaps without changing his place of residence.

The difference between frictional and structural unemployment is very vague. The significant difference is that the “frictional” unemployed have skills that they can sell, while the “structural” unemployed cannot immediately get a job without retraining, additional training, or even a change of place of residence; Frictional unemployment is more short-term in nature, while structural unemployment is more long-term and therefore considered more severe.

Cyclical unemployment

By cyclical unemployment we mean unemployment caused by a recession, that is, that phase of the economic cycle that is characterized by insufficient general, or aggregate, spending. When aggregate demand for goods and services decreases, employment falls and unemployment rises. For this reason, cyclical unemployment is sometimes called demand-side unemployment. For example, in the USA, during the recession of 1982. the unemployment rate rose to 9.7%. At the height of the Great Depression of 1933. cyclical unemployment reached approximately 25%. Business bankruptcies are becoming widespread various fields economic activity, and during this period many millions of people completely unexpectedly and suddenly become unemployed. The problem is aggravated by the fact that in conditions of cyclical unemployment, people are not helped either by reorientation or training for some new qualification. Changing your place of residence does not always help, because a crisis can cover the entire national economy and even reach the global level.

Cyclical unemployment is also dangerous because, in addition to social disasters, it also brings obvious losses in real GDP. This was noticed by the famous American economist Arthur Okun (1928-1979). He formulated a law according to which a country loses 2 to 3% of actual GDP relative to potential GDP when the actual unemployment rate increases by 1% above its natural rate. In economic literature, this law is known as Okun's law:

(Y - Y*) /Y* = -(U - Un),

where Y is actual GDP, Y* is potential GDP, U is the actual unemployment rate, Un is the natural unemployment rate, (in absolute terms) is the empirical coefficient of sensitivity of GDP to changes in cyclical unemployment (Ouken's coefficient).

Suppose the natural rate of unemployment is 5% and its actual rate is 8%. Let's say the Okun ratio is -2.5. Then the gap between actual GDP and potential GDP will be (8% -5%) x -2.5 = -7.5%: the country “lost” 7.5% of potential GDP.

Now let's look at the concept " full employment" of the population and start with what we call the "employment rate", namely, the percentage of employed people to the adult population not in social security, in shelters, nursing homes, etc.

Full employment does not mean absolutely no unemployment. Economists consider frictional and structural unemployment to be completely inevitable: therefore, the unemployment rate at full employment is equal to the sum of the frictional and structural unemployment rates. In other words, the full employment unemployment rate occurs when cyclical unemployment is zero. The full employment unemployment rate is also called the natural unemployment rate. The real volume of national product, which is associated with the natural rate of unemployment, is called the productive potential of the economy. This is the real volume of output that the economy is able to produce with “full use” of labor resources.

The full, or natural, rate of unemployment occurs when labor markets are balanced, that is, when the number of job seekers equals the number of available jobs. The natural rate of unemployment is to some extent a positive phenomenon. After all, the “frictional” unemployed need time to find appropriate vacancies. “Structural” unemployed people also need time to gain qualifications or move to another location when necessary to get a job. If the number of job seekers exceeds the available vacancies, then labor markets are not balanced; At the same time, there is a deficit in aggregate demand and cyclical unemployment. On the other hand, with excess aggregate demand, there is a “shortage” of labor, that is, the number of available jobs exceeds the number of workers looking for work. In such a situation, the actual unemployment rate is below the natural rate. The unusually “tense” situation in labor markets is also associated with inflation.

The concept of “natural rate of unemployment” requires clarification in two aspects.

First, this term does not mean that the economy always operates at the natural rate of unemployment and thereby realizes its productive potential. Unemployment rates often exceed the natural rate. On the other hand, in rare cases, an economy may experience a level of unemployment that is below the natural rate. For example, during the Second World War, when the natural rate was on the order of 3-4%, the demands of war production led to an almost unlimited demand for labor. Overtime and part-time work have become commonplace. Moreover, the government did not allow workers in “essential” industries to quit, artificially reducing frictional unemployment. The actual unemployment rate for the entire period from 1943 to 1945 was less than 2%, and in 1944 it fell to 1.2%. The economy was exceeding its production capacity but was putting significant inflationary pressure on output.

Secondly, the natural rate of unemployment in itself is not necessarily constant; it is subject to revision due to institutional changes (changes in the laws and customs of society). For example, in the 1960s, many believed that this inevitable minimum of frictional and structural unemployment was 4% of the labor force. In other words, it was recognized that full employment had been achieved when 96% of the labor force was employed. And currently, economists believe that the natural rate of unemployment is approximately 5-6%.

Why is the natural rate of unemployment higher today than in the 60s? First, the demographic composition of the workforce has changed. In particular, women and young workers, who have traditionally had a high proportion of unemployed, have become a relatively more important component of the labor force. Secondly, institutional changes have occurred. For example, the unemployment compensation program was expanded both in the number of workers it covered and in the amount of benefits. This is important because unemployment compensation, by weakening its impact on the economy, allows the unemployed to more easily look for work and thereby increases frictional unemployment and the overall unemployment rate.

The debate over the definition of the full employment unemployment rate is exacerbated by the fact that in practice it is difficult to determine the actual unemployment rate. The entire population is divided into three large groups. The first includes persons under 16 years of age, as well as persons in specialized institutions - i.e. persons who are not considered potential components of the labor force. The second group consists of adults who potentially have the opportunity to work, but for some reason are not working and are not looking for work. The third group is the labor force, this group includes people who can and want to work. The labor force is considered to consist of those who are employed and those who are unemployed but actively seeking work. The unemployment rate is the percentage of the labor force that is unemployed.

Unemployment rate = Number of unemployed x 100% / Labor force

The Labor Ministry's statistical office is trying to determine the number of people working and unemployed by conducting monthly sample surveys of about 60,000 families nationwide.

An accurate estimate of the unemployment rate is complicated by the following factors:

Part-time employment. In official statistics, all part-time workers are included in the category of full-time workers. By counting them as fully employed, official statistics underestimate the unemployment rate.

Workers who have lost hope of getting a job. By not including workers who have lost hope of getting a job in the category of unemployed, official statistics underestimate the unemployment rate.

Fake information. The unemployment rate may be overestimated when some unemployed people claim that they are looking for work when this is not true, and shadow economy contributes to overestimation official level unemployment.

Conclusion: Although the unemployment rate is one of the most important indicators of a country's economic situation, it cannot be considered an infallible barometer of the health of our economy.

Employment in developed countries. Unemployment rates vary widely across countries, from 3-4% in Japan to 20% in Spain. If we take the absolute value of employment in developed countries, it increased, but unemployment increased until the mid-90s. The greatest increase in unemployment was observed in Western European countries. The increase in unemployment was caused, firstly, by an increase in labor supply due to an increase in the working-age population. Which, in turn, was caused by immigration and the entry of women into the workforce. Back in the 60s and 70s, the United States and Canada had the highest unemployment rates among developed countries. At that time, unemployment in Western Europe was almost half the unemployment rate in the United States. But already in the 90s, unemployment in Europe was 1/6 higher than it. This position is confirmed by the data from Table 2.3.

Unemployment in developed countries, 1967 - 1985

		Australia		Germany

What is the reason for the unemployment rate in Western Europe to increase at such a rapid rate? The fact is that, unlike the United States, where the creation of new jobs was due to an increase in low-wage jobs in the service sector, in Europe jobs were not created at a rate corresponding to the growth rate of labor supply. The diagram shown in Fig. 2.11 is based on data from table. 2.3 and clearly shows the dynamics of changes in the unemployment rate in developed countries.

The difference in unemployment rates in different countries is explained primarily by different levels of natural unemployment and differences in labor legislation in different countries. In addition, sociocultural and historical factors play an important role. For example, low unemployment in Japan is explained by the fact that firms that hire male workers are prohibited from firing them before retirement age; women dismissed from enterprises, for the most part, are no longer looking for work, i.e., they are excluded from the labor force. In Sweden, the law requires large compensation to be paid to dismissed employees, so it is often unprofitable to fire an employee there. Germany had low unemployment until 1974 because immigrants could only get jobs if there were jobs available. However, as a result of rising oil prices in 1973, economic growth slowed and unemployment rates increased accordingly. Germany currently suffers from high unemployment. One of the main reasons for this phenomenon, in my opinion, is the too great degree of socialization of the German economy. Large unemployment benefits, in particular, contribute to the development of dependency sentiment in German society. In Great Britain, high unemployment is due to low labor mobility, which in turn is an obvious result of English conservatism.

Use of labor resources in developing countries. In developing countries in the early 90s there were 0.5 billion unemployed. The bulk of the population is concentrated in rural areas, for this reason the level of open unemployment is quite low. This is explained primarily by the fact that rural residents are not registered as unemployed. More than half of the rural population works for themselves in order to simply survive.

When assessing urban employment, the term informal sector is used, which includes self-employed, or self-employed workers. According to recent estimates, 25-50% of workers in developing countries are employed in the informal sector. Along with high hidden unemployment among the adult population in these countries, there is the exploitation of child labor. About 120 million children work to survive, but at the same time their health is irreparably harmed.

Unemployment in countries with economies in transition. As noted above, under the communist regime in the countries of the former socialist camp, there was no official unemployment. However, there was a hidden form of unemployment, which became open during the transition to a market economy. As a result of the privatization of private property and the collapse of industry in countries former USSR(now these are countries with transition economies), a high rate of unemployment was established. Suffice it to say that the number of unemployed in Eastern European countries increased from 1.6 million in 1990 to 6.3 million in 1993. The problem of unemployment in countries with transition economies, using the example of Russia, will be discussed in more detail in the section “Stabilization Policy of the State in Russia."

2.2 Causes of unemployment

A very important indicator in macroeconomics is employment. Employment refers to the number of working-age adults who have a job. But not all of the working-age population has a job; there are also unemployed. Unemployment is characterized as the number of adult working-age population who do not have a job and are actively looking for one. The total number of employed and unemployed people constitutes the labor force.

To calculate unemployment, various indicators are used, but the generally accepted one, including in the International Labor Organization, is the unemployment rate. It is defined as the ratio of the total number of unemployed to the labor force, expressed as a percentage.

Unemployment is a social phenomenon that involves the lack of work among people who make up the economically active population.

Unemployment is one of the main social problems market society, which is determined economic reasons. In conditions of unemployment, firstly, public resources are underutilized and, secondly, part of the population has very low income. Economically, unemployment can be considered a natural phenomenon, since it is associated with the normal operation of the market mechanism: an excess (as well as a shortage) of labor leads to the development of progressive and efficient types of activity and to the disappearance of bankrupt enterprises. But from a social point of view, unemployment is undoubtedly an evil: it leads to an exacerbation of social problems and social tension, including an increase in crime. Losing a job is perceived by a person as a mental trauma, which is accompanied by severe stress. A person without a job, not bringing benefit to society, lives on assistance from the state, which allows him to maintain his existence at a minimum level. Therefore, unemployment is a complex and serious problem even for economically developed countries.

Unemployment characterizes a state of society when some people who are capable and willing to work for hire cannot find work in their specialty or find employment at all.

What are the causes of unemployment? It is quite difficult to give unambiguous answers to these questions. The reasons for unemployment can be hidden both in the level of economic development and in the personal attitude of each citizen of the country to the need to go to work. IN Lately As the human workforce is increasingly replaced by computer technology, the number of unemployed people is constantly increasing. For example, printing houses have significantly reduced their staff, since texts are now typed using computer equipment. As a result, unemployment in this area increased several times. The causes of unemployment are also associated with temporary changes in the level of production of goods in various sectors of the economy, as well as economic stagnation, declines and depressions. Determination of wages also plays a significant role. In the case when it increases minimum size labor, production costs increase significantly, therefore, there is a need to reduce the workforce. As mentioned above, the causes of unemployment can be directly related to the person. For example, due to health reasons, he belongs to the labor force, but deliberately does not want to work, preferring a calm and measured life without permanent means of subsistence. It is not always possible to find a job because the options considered have low wages and require certain skills that the person does not currently possess.

Currently, the percentage of unemployment in relation to the active working population is not very large. It varies each year depending on the state of the economy and other indicators. Unemployment statistics show that in recent years there has been no significant increase in the number of unemployed people. Thus, as of June 2011, 1,487,575 people were registered with the employment services of the Russian Federation. The total number of unemployed is about 5.5 million people, a percentage of 7.2% of the total working population of the country. When compared with Europe, this figure is higher there and amounts to 9.9%. Most of the unemployed are observed in small towns and rural areas. In large cities, this problem is not acute. The number of unemployed people across the country is also heterogeneous. Thus, the least number of unemployed people are in Moscow and St. Petersburg, but the largest number are in the Caucasus and Tyva.

Unemployment is not good indicator economy. It is clear evidence that a certain number of people, for one reason or another, cannot get a job, and, accordingly, their income becomes very low. IN last years The Russian government is trying to at least slightly solve the problem of providing the population with jobs, thereby reducing unemployment rates. For example, in the near future there are plans to create all the conditions for professional training of workers in connection with the modernization of production, providing support to the unemployed in starting their own business, introducing disabled people, parents of large families and parents raising disabled children to work.

2.3 Socio-economic consequences of unemployment

In the modern economy, economic losses from mass unemployment are much greater than losses associated, for example, with the monopolization of markets. In general, the negative consequences of unemployment can be divided into economic and social. Consider the economic costs of unemployment:

1) underutilization of labor, and therefore underproduction of gross domestic product;

2) the lag of actually produced GDP from potential GDP, which could have been created in the absence of cyclical unemployment, i.e., under conditions of full employment;

3) uneven distribution of unemployment costs among different groups: higher unemployment rates among unskilled workers, among youth, national minorities and women.

The most serious consequence of unemployment is a decrease in the volume of GDP produced below its potential level. A well-known researcher of macroeconomic problems, A. Okun, mathematically expressed the relationship between the unemployment rate and the unproduced volume of output. This relationship is called Okun's law: each percentage of unemployment above the natural level leads to a lag of actual GDP from potential GDP by 2.5%. If we assume that the unemployment rate in the economy is 8%, while its natural rate is 6%, then the GDP loss will be 5%.

Social costs of unemployment:

1. Losing a job is a great personal tragedy. Psychological research shows that being fired is usually as damaging to the psyche as the death of a close friend.

2. Dequalification of people who have lost their jobs, loss of self-esteem, people cannot express themselves and realize themselves professionally.

The decline of moral principles in society. Unemployment leads to inactivity and can lead to human degradation.

4. The higher the unemployment rate, the higher the rate of divorce, suicide, and cardiovascular disease.

5. Social and political unrest. Mass unemployment can lead to rapid, sometimes violent, social and political change. The consequence of unemployment can be a social explosion if its size exceeds the permissible level.

The serious negative socio-economic consequences of unemployment increase the responsibility of the state for ensuring employment of the working population. These tasks are associated with the goal of achieving full employment in the economy. Achieving full employment is associated with ensuring a balance between the size of the working-age population and the number of jobs required for it. Implementing employment policy, the state implements programs:

To stimulate employment growth and increase the number of jobs in the public sector;

Aimed at training, retraining, and advanced training of the unemployed;

Promotion of labor recruitment, involving incentives for employers to create new jobs;

By social insurance unemployment, providing for the provision of social guarantees and compensation to unemployed and laid-off workers.

The implementation of these programs involves specific actions by the state: reducing the legally established working hours during periods of mass unemployment; creation of new jobs and organization of public works (for example, in the field of infrastructure - for the construction of roads); limiting the supply of labor by limiting the entry of foreign workers into the country, banning child labor, etc. Labor exchanges, which for the most part are government agencies who act as an intermediary between employers (enterprises and firms), on the one hand, and potential employees, on the other. These institutions keep track of the unemployed, facilitate their employment, study supply and demand in the labor market, assist those wishing to change occupations, etc.

Thus, the socio-economic consequences of unemployment are determined, first of all, by the very essence of the phenomenon. Unemployment, as already mentioned, lies in the fact that a certain part of the economically active population, who has the need and desire to work, cannot exercise their right to work due to circumstances beyond the person’s control. This is an objective factor in the economic activity of the state, an element of social reproduction, and a complex socio-economic phenomenon. Unemployment has a significant and ambiguous impact on the socio-economic situation in the country. It seems appropriate to study separately the economic and social consequences of unemployment.

CONCLUSION

Unemployment occurs when part of the active population cannot find work and becomes a reserve army of labor. Unemployment increases during economic crises and subsequent depressions as a result of a sharp reduction in labor demand. Like any socio-economic phenomenon, unemployment has natural and random features, essential and superficial characteristics, positive and negative aspects. Their intensity depends on the scale, level, regional specifics, and form of unemployment. There are three main causes of unemployment: loss of job (dismissal); voluntary resignation from work; first appearance on the labor market. The main types of unemployment are: forced and voluntary unemployment, registered unemployment, marginal unemployment, unstable unemployment, cyclical unemployment, seasonal unemployment, structural unemployment, technological unemployment, institutional unemployment, frictional unemployment. The socio-economic consequences of unemployment are determined, first of all, by the very essence of the phenomenon. Unemployment has a significant and ambiguous impact on the socio-economic situation in the country. It seems appropriate to study separately the economic and social consequences of unemployment.

BIBLIOGRAPHY

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·6. Economy. Textbook (edited by A.S. Bulatov). M., 1997

· 7.Economic theory (political economy). Tutorial. M., 1997 ( Financial Academy under the Government of the Russian Federation).

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1. Cyclical nature of economic development

A market economy is characterized by macroeconomic instability, expressed in periodic ups and downs in economic activity, which shapes the economic cycle. Macroeconomic equilibrium acts as a desired state, as a trend, an ideal towards which the real economy strives. The functional forms of instability are cyclical declines in production, unemployment and inflation.

An economic cycle is a time interval between two qualitatively identical states of economic conditions.

Reasons for cyclicity:
External or external:
wars, revolutions, major social, political, demographic natural shocks).
Internal or internal:
physical contribution of fixed capital,
changes in consumer and investment spending,
change in government policy.
Synthesis of external and internal causes
External causes produce the initial impulses to start the economy, and internal factors turn them into a cycle of fluctuation.

The cycle and its phases.

The graph shows a 4-phase business cycle model. It distinguishes the following phases:
I - economic recovery.
The national product, the volume of investment, the capital stock of the economy are growing, inventories of unsold products are decreasing, unemployment is decreasing and inflation is increasing.
The phase ends with point A (peak, boom point), at which full employment is observed, and the price level, interest rate and wages are at their maximum.
II - recession (crisis) of the economy.
Fall in production growth, rising unemployment, reduction in investment, prices and wages).
III - depression.
National income and GDP continue to decline. At point B (economic bottom), the unemployment rate reaches a maximum, the price level, wages and interest rates are minimal, and the volume of investment approaches zero.
IV - revival.
Production volume and GDP begin to grow. Unemployment decreases, investment volumes, interest rates and price levels increase.

Types of cycle (classification according to certain characteristics).
By duration
a) short-term (3.4 years)
b) medium-term (up to 20 years)
c) long-term (40-60 years).

By activity environment
a) industrial
b) agricultural

According to the specifics of manifestation
a) oil
b) food
c) energy
d) raw materials
e) economic
e) currency

By spatial ghost
a) national
b) international.

2. Unemployment and its types. Consequences of unemployment

From the point of view of employment and unemployment, the country's population can be classified according to the following scheme:

The institutional population is people who have not reached working age, have retired, are in hospitals, etc.
The non-institutionalized population is the working-age population.
The economically inactive population is the working-age part of the population that is not employed and is not looking for hired work.
The economically active population is the employed and the unemployed.
Busy people have a job.
A person is considered unemployed if he does not work anywhere, but is actively looking for work.

The unemployed do not include:
people of retirement age;
carers at home for children;
stopped looking for work;
not working for any reason not stated above.

Types of unemployment:
By duration of existence:
Short term;
Long-term;

Depending on the nature of the manifestation:
Open;
Closed (hidden).

Ratio of unemployed to employment:
Valid;
Fictitious.

Types of unemployment:
Frictional - associated with searching for or waiting for work.
Structural - associated with the need to change a specialty or preparation, with additional training.
Natural is the sum of structural and frictional (as a rule, it is 5 - 6%, present in any market economy)
Cyclical - associated with short-term economic cycles, arises due to the fact that a reduction in aggregate demand for goods and services causes a decrease in employment and unemployment demand.

The unemployment rate is the share of unemployed people in total number economically active population (labor force).

Where:
Z - busy;
B - unemployed;
RS - labor force, RS=Z+B

Consequences of unemployment
Economic.
Part of the potential volume of production of goods and services is lost without compensation; the production capabilities of the economy are not fully realized.
There is a certain economic relationship between the unemployment rate and the volume of GDP produced, known as Okun's law. This law states that an excess of the actual unemployment rate by 1% above its natural level leads to a decrease in actual GDP from 2x to 3x%.
Okun's law reflects the following equality:

Where:
Y* - potential GDP;
Y - actual GDP (at the moment);
β - Okun's coefficient or empirical coefficient of sensitivity of GDP to the dynamics of cyclical unemployment (can be from 2x to 3x%, usually 2.5% is accepted);
u is the actual unemployment rate (at the moment);
u* is the natural rate of unemployment.

Social:
1.loss of qualifications or self-esteem
2. complete and partial loss of income
3.decrease in living standards.

Moral and ethical.

Regulation of unemployment.
in social policy.
It is intended to provide assistance to the unemployed in order to maintain their standard of living.
in macroeconomic policy.
Providing assistance to the unemployed involves the implementation of monetary and fiscal measures to reduce unemployment.
employment policy.
It involves the creation of new jobs, a personnel retraining system, and employment centers.

3. Inflation: definition, principles, types, consequences

Inflation is a situation in the economy in which there is an increase in the price level and (or) depreciation money supply in economics.

Types of inflation:
Hidden (suppressed).
This inflation is associated with a shortage of goods and services, or with a deterioration in their quality, or with the establishment of upper price limits by the state.
Open inflation.
It is characterized by an increase in the price level and does not destroy the market mechanism.

Open inflation comes in the following forms:
- inflation on the demand side (buyer inflation). It is characterized by an excess of aggregate demand compared to aggregate supply, i.e. the economy wants to consume more than it produces.
-inflation on the supply side (seller inflation). Characterizes an increase in the price level due to an increase in production costs, i.e. raw material costs, energy costs.

Inflation classification:

1. depending on the tempo:
1.moderate or creeping (~10%)
2.galloping (~200%)
3.hyperinflation (from several hundred to several thousand or more than 200%).
2. according to the degree of synchronicity:
1. balanced
Accompanied by a uniform, moderate rise in prices.
unbalanced
Accompanied by an uneven, abrupt rise in prices.
3. by degree of predictability:
1.expected
2.unexpected.

Causes of inflation:
Central bank policy.
Budget deficit.
Militarization of the economy
Market monopolization:
Monopolization of the market by the manufacturer
Monopolization by the trade union
High tax penalties
Public Policy Uncertainty
External economic factors

Consequences of inflation:
Deformation of the market pricing mechanism
Redistribution of income and wealth
Decline in real income of the population
Depreciation of household savings
Deterioration of living conditions of some social groups
Destabilization of the economy

In conditions of inflation, not all prices change equally, since the rate of increase in prices for consumer goods always differs from the rate of increase in prices for industrial goods.
The inflation rate is defined as the ratio:

Where:
Рit - price level in the current period;
Pi0 is the price level in the base period.

The rate of inflation varies depending on the change of phases in economic development. Inflation is replaced in the depression stage and at the lowest point. Inflation accelerates during the economic recovery phase.
Inflation begins in the money market, and then gradually everything else occurs ( commodity market, labor market, etc.)

The relationship between inflation and unemployment. Phillips curve.

In the short term, there is an inverse relationship between inflation and unemployment. Point 1 is characterized by a high unemployment rate, low level inflation.
Point 2 is characterized by high inflation and low unemployment.
In the long term, with high level unemployment prices also begin to rise.

In the previous topic we established that for a developed market economy characterized by short-term, medium-term and long-term economic fluctuations. During these fluctuations, unevenness in the use of factors of production occurs. If there is a decrease in output, then the utilization of means of production and labor decreases. On the contrary, with an increase in the volume of manufactured goods, the load on production capacity increases.
It is obvious that a quick response to any unexpected rise in market demand is possible only if a certain reserve of material working conditions in production is ensured.
The loss of mobility, dynamism and flexibility of the economic system, the inability to timely and fully adapt to changes in the internal conditions of its functioning in the surrounding environment is called macroeconomic instability.
Violation of macroeconomic equilibrium, the basis of which is the equilibrium interaction of aggregate demand and supply, leads to the destruction of the economic system and its economic relations.
The most important forms of macroeconomic instability are high unemployment and high inflation rates.
According to the International Labor Organization, an unemployed person is a person who wants to work, can work, but does not have a job.
Let's consider modern forms of unemployment.
Frictional unemployment is associated with professional, age, and regional movements of workers. These are employees who, having left their previous place of work, are in the process of moving to a new place.
Structural unemployment is the result of changes in technology, equipment and the structure of production, the structure of consumer demand, causing a discrepancy between the structure of jobs and the professional structure of workers. This type of unemployment, as a rule, is long-term in nature and requires additional costs and workers to retrain and change their place of residence.
Cyclical unemployment is due to the cyclical nature of the reproduction process in a market economy. It increases during a crisis and decreases during economic growth. Unemployment especially increases during the transition to new technological methods of production based on new equipment, technology, and production organization.
Regional unemployment arises as a result of a disproportion between the demand and supply of labor in a given territory. It is influenced by demographic, historical, cultural and other specific factors.
There are current and hidden forms of unemployment. The current form of unemployment is characterized by the dismissal of workers from enterprises at their own request and on the initiative of the administration. The hidden form of unemployment is associated mainly with rural population and the seasonality of their work.
The most important condition for macroeconomic equilibrium is price stability, which depends on the sustainability monetary system. Inflation is a factor in these processes.
Inflation refers to an imbalance of supply and demand, manifested in a general rise in prices. Inflation is the depreciation of money as a result of violation of laws money circulation and the emergence of a mass of money not backed by a commodity mass. In textbooks on economic theory, types of inflation are classified according to various criteria. We will highlight the most common ones.
Based on the pace of the inflation process, they are divided into:
natural, or current, rate of price growth per year is 5-10 percent;
galloping, with an annual rate of price growth ranging from 20 to 200 percent;
hyperinflation, when prices rise daily by 1 to 20 percent.
Demand-pull inflation and supply-side inflation are caused by changes in demand as well as production factors.
A distinction is made between internal and external inflation, balanced and unbalanced, as a condition for the equilibrium of the money and commodity supply.
You should pay attention to credit inflation, tax inflation, structural inflation and inflation caused by increases in wages, scholarships, etc.
In macroeconomics, indices for measuring prices for consumer goods and cost of living indices are widely used.
To measure the general price level, the price index of the gross national product is used - the GDP deflator. His basket includes all final goods and services produced in society. The GDP deflator more fully reflects changes in prices in society and covers all groups of goods and services.
Deflator =‚
where nominal GDPn is expenses this year at current prices; real GDPr – expenditures in the current year at base year prices.
The consequences of inflation are terrible because it destroys the economic, social and political life of the country.

More on the topic Question No. 33. Macroeconomic instability: unemployment, inflation and their measurement:

Question No. 33. Macroeconomic instability: unemployment, inflation and their measurement

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Every country with a market economy faces unemployment. Unemployment can be described as a phenomenon in which the supply of labor exceeds the demand for it. The degree of unemployment is reflected by the “unemployment rate” indicator. First of all, it is necessary to answer the question: who is considered unemployed?

The entire population can be divided into the following groups:

population under 16 years of age;
employed population (this group includes working people,

as well as persons employed part-time or part-time

working week);

unemployed (this group includes people who do not have a job, but are actively looking for it);
economically inactive population (this group includes people who can work, but for certain reasons do not work, for example, students, pensioners, housewives);
population in institutional settings, i.e. correctional colonies, psychiatric hospitals.

From the above grouping it is clear that an unemployed person is not necessarily someone who does not work. The unemployed do not include the economically inactive population, persons in institutional institutions, and children under 16 years of age. The employed population and the unemployed together make up the country's labor force.

Unemployment rate is determined by the ratio of the number of unemployed to the number of labor force, expressed as a percentage. In other words, the unemployment rate is the rate of unemployed people in the labor force.

In economics, there are three types (three types) of unemployment: frictional, structural and cyclical. Let's take a closer look at each of them.

Friction Unemployment occurs when individuals need a certain amount of time to find a job that meets their needs and their qualifications. As a rule, frictional unemployment is voluntary, since it affects categories of the population that are temporarily unemployed due to a transition from one place of work to another, for example, due to a change in professional desires and opportunities or a change of place of residence. This part of the population cannot immediately find a new job, since it takes a certain time to transmit information about available jobs; in addition, the necessary information may not be available. Frictional unemployment is short-term: as a rule, it involves people with good professional skills who cannot remain unemployed for long. It is clear that frictional unemployment is inevitable, since at any given time a certain part of the population will be looking for a new job.

Structural unemployment is associated with changes in the structure of demand for labor, which are caused by technological shifts in production. In other words, this type of unemployment affects persons whose qualifications, abilities and skills are not in demand due to the implementation of the results of scientific research. technical revolution V social production. The population subject to structural unemployment is forced to undergo retraining in order to meet the requirements of new technologies and find a job. Therefore, structural unemployment, unlike frictional unemployment, is forced and long-term in nature

(the duration of structural unemployment is determined by the period of retraining).

Cyclic Unemployment is linked to economic cycles and occurs during periods of downturn in economic activity. In the previous topic, we noted that during a recession, when there is a decline in output, the unemployment rate increases significantly. Moreover, if frictional unemployment is voluntary, and structural unemployment can be reduced in the process of retraining the unemployed population, then in order to combat cyclical unemployment, a state stabilization policy that regulates the development of economic cycles is necessary.

Scientists identify the natural rate of unemployment, i.e. the full-employment unemployment rate, which is defined as the sum of frictional and structural unemployment rates. In other words, an economy experiences a natural rate of unemployment if there is no cyclical unemployment. The natural rate of unemployment determines the volume of potential GDP.

In general, the entire working population of the country can be divided into two groups: employed and unemployed. The unemployed population can also be divided into two groups: those actively looking for work (unemployed) and those not looking for work. In other words, the working-age population can be represented as the following three groups:

employed population;
population not employed but actively looking for work;
the population is not employed and not looking for work.

The natural level of unemployment always exists, since there is a constant movement of the working-age population from one group to another. For example, part of the population wants to change jobs, but because they cannot do this right away, they move from the first group (working-age population) to the second group (unemployed but actively looking for work). At the same time, part of the unemployed population finds employment and the reverse movement occurs - from the second group to the first. In addition, a certain part of the working-age population, not wanting to work anymore, can move from the first group to the third, or a part of the unemployed population, having voluntarily stopped looking for work, can move from the second group to the third. The following picture is also sometimes observed: the unemployed and not looking for work population, having changed their plans and decided to work, moves from the third group to the first (if looking for work does not require time) or to the second (if searching for work requires a certain time). All considered options for the movement of the working-age population from one group to another affect the value of the natural level of unemployment, and the continuous nature of these movements makes the natural level of unemployment inevitable.

Note that economists are now increasingly replacing the term “natural rate of unemployment” with the term “unemployment rate that does not increase inflation” (abbreviation NAIRU). It is clear that exceeding the natural rate of unemployment is undesirable, since this creates cyclical unemployment due to recession business activity. On the other hand, if unemployment is below full employment, the economy will inevitably face inflationary processes. Natural rate of unemployment ( NAIRU) is calculated as the average value of the actual unemployment rate in the state over 20 years: for the previous 10 years and the next 10 years. In the coming period, the unemployment rate is projected taking into account the expected level of inflation.

Determining the actual and, accordingly, natural level of unemployment is not without statistical errors. For example, in public surveys (despite the careful sampling and reliability of survey methods), many give false information. A portion of the population, without actually actively seeking work, may claim the opposite in order to receive unemployment benefits; as a result, this category of the population will be classified as unemployed. Many people employed in the informal economy may also classify themselves as unemployed, again inflating the actual unemployment rate. Scientists have even identified a pattern: in countries with high share shadow business has a very high unemployment rate. A number of economists believe that the actual picture of unemployment can be distorted by the fact that part of the population, despairing of finding the desired job, stops actively looking for work and falls not into the category of the unemployed, but into the category of the economically inactive population. As a rule, this phenomenon is observed during periods of economic downturn.

The natural rate of unemployment is quite stable in the long term. Two factors can be identified that explain this stability. First, the unemployment insurance system currently in place. The amount of insurance payments allows the unemployed, without strictly limiting themselves in time, to look for a job that meets their requirements, which ensures the stability of the unemployment rate. Another factor is the “rigidity” of wages, which entails the emergence of involuntary unemployment.

It should be noted that unemployment rates vary both between population groups and between countries. For example, among the population employed in sectors of the economy that are less susceptible to cyclical fluctuations, the unemployment rate is lower. The unemployment rate also differs by gender and age groups: the unemployment rate is higher among young people, and the unemployment rate is different among men and women. As for the differences in the level of unemployment between individual countries, there are two main reasons: states may differ in the phase of the economic cycle or directly in the level of natural unemployment.

Now let's look at the costs associated with unemployment. It is possible to distinguish the economic and social costs of unemployment. Economic costs are associated with a pattern identified by A. Okun: each increase in the unemployment rate by 1% compared to the natural level corresponds to a decrease in production volumes by 2 - 3% relative to the natural level. We discussed this pattern in detail earlier in the previous section. Social costs are associated with the fact that unemployment entails deskilling of the population, reducing incentives to labor activity, the decline of the moral principles of individuals, the reduction of the country's scientific potential, the growth of social tension and, ultimately, threatens a social explosion. The socio-economic costs of unemployment prove the need for active government intervention during periods of strong unemployment.

In addition to unemployment, one of the aspects of macroeconomic instability is inflation. Inflation is an increase in the general price level, accompanied by a decrease in the purchasing power of money. The opposite process is deflation, which is characterized by a decrease in the general price level. Note that as a result of inflation, not all types of prices change equally: some prices rise more than others, and some prices may remain unchanged.

To measure the degree of inflation, determine the inflation rate, which is calculated as follows:

Where P- inflation rate; R x- average price level of the current year; P 0- average price level of last year.

It should be noted that the inflation rate is measured as a percentage, so this expression should be multiplied by 100%.

If a country's economy experiences a slowdown in inflation, it is referred to as disinflation.

Let's look at the types of inflation. There are open and suppressed inflation. Open inflation consists of an increase in the price level, and hidden (suppressed) inflation consists of an increase in the shortage of goods. Unlike open inflation, suppressed inflation is characterized by more or less stable level prices in the economy, but its immediate manifestation is a commodity shortage. The latter also essentially means the depreciation of money: citizens and firms cannot buy the goods and factors of production they need, and as a result, the value of the money they have falls. Suppressed inflation occurs when the state fights not the cause, but its consequences - rising prices. It seeks to freeze prices and incomes. An extreme option is administrative control over prices and incomes, as was the case, for example, in the planned system, as well as in a number of European countries and the United States during the Second World War.

There are also balanced and unbalanced inflation. As noted earlier, different kinds prices can rise at different rates. With balanced inflation, the rate of change in all prices is approximately the same; with unbalanced inflation, the rate of change in prices varies greatly. It is clear that it is easier to manage balanced inflation. We can also distinguish between expected and unexpected inflation. If inflation is expected, certain measures can be taken to reduce the negative effects of inflation.

Inflation is also classified depending on its level. The following types are distinguished:

creeping inflation;
galloping inflation;
hyperinflation.

Creeping inflation characterized by a slight rate of price growth, the inflation rate does not exceed 10% per year. Galloping inflation is accompanied by fairly high rates (from 10 to 100% per year) and, accordingly, a significant depreciation of cash. Hyperinflation, the level of which exceeds 100% per year, poses a serious threat to the country. Hyperinflation generates a crisis of the entire monetary system.

Speaking about inflation, we should focus on Effect League(the effect of real cash balances). A. Pigou introduced the volume of property in the consumer sector (and in particular, real cash balances) among the arguments of the Keynesian consumption function. At the same time, Pigou argued that an increase in real cash balances leads to an increase in consumption and a decrease in savings. If the indicated relationships take place, then an increase in the money supply (or, what is the same, a decrease in prices) will cause not only a decrease interest rate, but also the growth of off-grid consumption. As a result, even if the economy is in a liquidity or investment trap, an increase in the money supply or a decrease in prices will have an impact on national income.

What causes inflation? What are the reasons for its occurrence? Modern economists distinguish two main factors that generate inflation, therefore they distinguish between demand inflation and cost inflation.

Demand inflation caused by excess aggregate demand. At a certain period, production reaches its limit due to limited resources, and aggregate demand continues to increase since needs are unlimited. As a result, the volume of GNP no longer corresponds to the amount of demand, and excess demand arises, which generates an increase in prices.

Let us consider in more detail the “unwinding” of demand inflation. When economic system characterized by underemployment, characterized by high unemployment and a significant proportion of idle production capacity, production volume is very low. If aggregate demand increases, unemployment and the amount of unused production capacity are reduced, GDP increases, but prices remain unchanged. Constancy of prices in in this case explained by a large number of unused resources, the use of which is profitable even at established (and not increased) prices. With further growth in aggregate demand, individual sectors of the economy, increasing the volume of goods and services produced, reach a state of full employment. As a result, prices for their goods and services rise, since these industries can no longer increase supply to meet increasing demand. Thus, there is an “accelerating” rise in prices, since the economic system as a whole has not yet reached a state of full employment. At the next stage of growth in aggregate demand, the country will reach the condition of full employment, production volume will no longer satisfy the increasing demand and this excess demand will contribute to rising prices, spinning demand-side inflation.

One of the reasons ensuring the growth of aggregate demand is the issue of money. Excessive emission of cash leads to an unjustified increase in the solvency of the population, which, in turn, causes an increase in aggregate demand, generating inflation.

Another type of inflation is cost inflation- is associated with an increase in costs per unit of production. As a result of an increase in average costs, firms are forced to reduce production volumes, i.e. there is a decrease in aggregate supply. In turn, a reduction in supply at the same level of demand causes an increase in prices, i.e. generates inflation. Cost-push inflation leads to stagflation - rising prices while simultaneously increasing the unemployment rate and reducing GDP.

There are a number of reasons behind the increase in costs per unit of production:

increase in costs per unit of labor resources (increase in nominal wages, which is not compensated by growth in labor productivity);
increasing costs per unit of material resources (increasing prices for raw materials);
increase in tax payments.

Note that cost-push inflation is “self-limiting” - as a result of an increase in average costs, supply decreases, which prevents further increases in costs and limits inflation.

In reality, it is difficult to distinguish between the types of inflation we have considered - demand inflation and cost-push inflation. Often the factors causing these two types of inflation exist simultaneously and reinforce each other.

In the economic literature, there are also monetary and non-monetary concepts of inflation that explain its occurrence.

Supporters monetary concepts believe that inflation is caused by growth in the money supply. And an increase in the money supply may be associated with indexation of citizens’ incomes or an increase in the population’s debt obligations (an increase in the size of loans taken by citizens, which also ensures an increase in the population’s cash).

Followers non-monetary concepts believe that inflation does not arise only as a result of growth in the money supply. The cause of inflation may be an increase in production costs associated with the excess of the growth rate of wages over the growth rate of labor productivity or due to the lag of the growth rate of real incomes from the growth rate of taxes. Non-monetary concepts also highlight changes in the structure of demand as a cause of inflation. For example, when new, more modern goods appear, the demand for them increases and, accordingly, the price increases. Decreased demand for non-modern goods would have reduced their price, leaving the general price level unchanged. However, in reality, as a rule, the supply of such goods decreases, as a result the general price level increases.

It should be noted that most often inflation is caused not only by monetary factors. Along with the growth of the total volume of money supply, there are also non-monetary factors that ensure its appearance. At the same time, in some cases, inflation can be caused only by purely monetary reasons.

Economic entities, being in conditions of inflation, adapt to it thanks to the mechanism of inflation expectations. Inflation expectations are economic agents’ assessment of changes in inflation rates in the coming period. Market entities, in order to avoid depreciation of revenue as a result of inflation, increase the price of goods and services produced by the amount of inflation expectations. As a result, the mechanism of inflation expectations dictates the price level to a certain extent.

Now let's look at the socio-economic consequences of inflation. First of all, we note that inflation affects the process of income distribution.

Inflation redistributes income between the population and the state in favor of the state. Possessing a monopoly right to issue money, the state issues cash in order to eliminate the existing budget deficit. Demand inflation occurs, as a result of which prices depreciate. cash population. In other words, the purchasing power of the population decreases, and individuals “underconsume” a certain part of the produced national product. Since the economic system is characterized by balance sheet equilibrium, state revenues increase by the amount of the “underconsumed” national product or by the amount of decrease in the purchasing power of the population. Let us also note that economists distinguish such a concept as “inflation tax”. As a result of the issue of money, the state, promoting inflation, taxes the population with it. The inflation tax is determined by the amount of losses incurred by the population as a result of the depreciation of their funds.

Inflation also redistributes income between production participants and recipients of transfers (pensions, benefits) in favor of production participants. For example, cost-push inflation can be caused by an increase in nominal wages of production participants. In this case, along with the inflationary rise in prices, wages will also increase. At the same time, changes in the income of recipients of transfer payments are not related to the rate of change in inflation. If the state does not index income, then the amount of pensions and benefits will remain completely unchanged. Therefore, as a result of inflation, the income of transfer recipients will depreciate faster than the wages of production participants, and the share of transfer payments will decrease in the total income of the population.

Inflation determines and functional distribution income: it redistributes income between labor and capital in favor of capital. The higher the inflation rate, the more wages depreciate. At high rates of inflation, the share of income from labor in total income decreases. As a result, income from labor provides a smaller part of the national product compared to income from capital.

In addition, inflation redistributes income between creditors and debtors in favor of the latter. It is clear that debtors benefit from inflation, since they repay their debts with depreciated cash. Purchasing power money decreases as a result of inflation, so creditors, after returning the loan (including interest on borrowed capital) can purchase a smaller part of the national product than debtors at the time of receipt.

With a significant budget deficit covered by additional emissions, inflation can acquire rapid rates and the form of hyperinflation. With such inflation, there is a sharp depreciation of all income, including tax revenues, which further aggravates the problem of the budget deficit. Thus, hyperinflation, on the one hand, arises as a result of a budget deficit, on the other hand, it aggravates it even more. This phenomenon is called Tanzi-Oliver effect.

We should also dwell on the negative consequences of suppressed inflation for the economy. The first is the deformation of the market mechanism, since the price system is no longer capable of managing economic activity. The second consequence of suppressed inflation is the gap between administratively set prices and those prices that align supply with inflationary demand. These are the prices of the “shadow” market, where goods are transferred from the official sector of the economy. As a result, there is a commodity shortage in the official sector and that part of the economy that resells goods at equilibrium prices flourishes. The third consequence is that with suppressed inflation, product manufacturers are deprived of price signals, which impedes the development of the investment process, expansion of production and supply of goods. Thus, by destroying the market mechanism, suppressed inflation has a detrimental effect primarily on production.

How do consumers behave in conditions of suppressed inflation? With open inflation, they form adaptive inflation expectations. When inflation is suppressed, another type of expectation arises, which can be called deficit expectations. They manifest themselves in powerful rush demand, dictated not by rising prices, but by the disappearance of goods and shortages. This deficit tends to unwind: the stronger the scarcity expectations, the more powerful the rush demand and the more acute the deficit. The paradox is that the deficit cannot be eliminated by quantitatively increasing production or expanding the output of goods.

Scarcity is a price problem. Only a transition from suppressed inflation to open inflation and the introduction of free prices can solve the problem of commodity shortages.

In general, inflation negatively affects all fixed income recipients. Savings owners also suffer greatly as a result of inflation, since their accumulated funds depreciate. However, despite all the negative consequences of inflation, its suppression entails an increase in unemployment. Let's look at this in more detail.

Considering the “unwinding” of demand inflation, we found that in conditions of full employment, excess demand arises, causing inflation. At the same time, we determined that with high unemployment and large quantities free production capacity, an increase in aggregate demand does not cause an increase in prices. Thus, there is a relationship between the level of inflation and unemployment, and this relationship is inverse: the higher the inflation rate, the lower the unemployment rate and vice versa. From this we can also conclude that a decrease in inflation will entail an increase in unemployment. The relationship between inflation and unemployment was discovered by O. Phillips. Thus, it is impossible to reduce the inflation rate while maintaining the same level of employment. However, this does not mean that inflation does not need to be suppressed: its high rates, generating mistrust and fear among the population, increase economic instability in society. Therefore, anti-inflationary government policy is necessary. Let's look at it in more detail.

Anti-inflationary policy in the short term should ensure that the growth rate of the money supply matches the growth rate of GDP; in the long term, it is aimed at achieving compliance between the volume of aggregate supply and the volume of aggregate demand. There is only one way to suppress inflation - reducing the growth rate of the money supply; and only methods of reducing the money supply will determine anti-inflationary policy states.

The government can choose to reduce the money supply in one of the following ways:

shock therapy (a sharp decrease in the money supply);
gradation (gradual, smooth decrease in the volume of money supply).

Dignity shock therapy is to increase the population's confidence in the state's anti-inflationary policy. The main disadvantage of this method is a sharp decrease in production volumes and an increase in unemployment. A type of shock therapy is confiscation monetary reform, which is the seizure of old banknotes and exchanging them for new ones in a certain ratio. Note that the nominal value of income and the previous price level are maintained. Purpose of confiscation monetary reform lies in the fact that it adjusts the nominal volume of the money supply and brings it into line with the real level of income of the population.

Another method of anti-inflationary policy - grading - is recommended to be used at low inflation rates. A gradual decline in the money supply, accompanied by income indexation, contributes to the development of a new round of inflation. Therefore, in conditions of hyperinflation, suppressing price increases using the grading method will not bring positive results.

Economists also identify such a way to combat inflation as “price and wage policy.” This method is as follows. It is necessary to closely link the growth of nominal wages with the growth of labor productivity and limit price changes to changes in the value of nominal wages. There are a number of disagreements regarding this method; opponents argue that it is ineffective. However, proponents argue that "price and wage policy" eliminates inflationary expectations and therefore suppresses price increases.

Successful implementation of anti-inflationary policies requires thoughtful and targeted government actions. Anti-inflationary policy, depending on the methods of its implementation, affects the functioning of certain sectors of the economy. For example, reducing the budget deficit by increasing income taxes will affect the interests of private enterprises, while reducing the budget deficit by reducing government spending will affect the activities of state-owned enterprises. Therefore, the government must consider and implement a clear strategy to suppress inflation without succumbing to pressure from various sectors of the economy; only in this case will anti-inflationary policy bring positive results.

Key Concepts

Unemployment

Types of unemployment

Unemployment rate

Natural rate of unemployment

A. Okun's Law

Inflation

Inflation rates: creeping inflation, galloping inflation, hyperinflation

Causes of inflation: demand inflation and cost inflation

Open and suppressed inflation Balanced and unbalanced inflation Ligu effect

Inflation and unemployment: Phillips curve Socio-economic consequences of inflation Tanzi-Oliver effect Anti-inflationary policy of the state

Questions for discussion during the seminar session

1. Define unemployment.
2. What types of unemployment do you know?
3. Describe the unemployment rate.
4. What characterizes the natural rate of unemployment?
5. Describe A. Okun’s law.
6. Define inflation.
7. What types of inflation do you know?
8. What are the signs of open and suppressed inflation?
9. What are the causes of inflation?
10. Define inflation tax.
11. What characterizes the League effect?
12. Describe the relationship between inflation and unemployment.
13. What are the socio-economic consequences of inflation?
14. What is the Tanzi-Oliver effect?
15. Describe the state’s anti-inflationary policy.

Literature

1. Ignatova T.V., Vasiliev P.P., Nekrasov V.N. Economic theory. Fundamentals of economic theory, microeconomics. - M.: Phoenix, 2010.
2. Borisov E.F. Economic theory in questions and answers. - M.: Prospekt, 2009.
3. Kaznachevskaya G.B. Economic theory. - M.: Phoenix, 2010.
4. Gukasyan G.M., Makhovikova G.L., Amosova V.V. Economic theory. - St. Petersburg: Peter, 2003.
5. Introduction to economic theory: Textbook/E.B. Bedrina, O.A. Kozlova, T.A. Salamatova, A.V. Tolpegin. - Ekaterinburg: Publishing house USTU-UPI, 2009.
6. Economics: Textbook / I.V. Lipsitz. - M.: Omega-L, 2006.
7. Course of economic theory: Textbook / Chepurin M.N. [and etc.]; edited by M.N. Chepurina, E.A. Kiseleva. - Kirov: ASA, 2009.
8. Economic theory: Textbook / Ed. A.I. Dobrynina, L.S. Tarasevich; St. Petersburg state University of Economics and Finance. - St. Petersburg: Peter, 2008.

DEPARTMENT OF SCIENTIFIC AND TECHNICAL POLICY AND EDUCATION

Federal State Educational Institution of Higher Professional Education Kostroma State

AGRICULTURAL ACADEMY

DEPARTMENT OF ECONOMICS

COURSE WORK

MACROECONOMIC INSTABILITY:

ECONOMIC CYCLES, UNEMPLOYMENT

AND INFLATION

Performed:

2nd year student, 1st group

Faculty of Economics

Korzheva Nadezhda Alexandrovna

Scientific adviser:

K.E.N. assistant professor

Pavlov Mikhail Nikolaevich

Kostroma 2010

Introduction

1. Theoretical aspect of the study of economic cycles:

1.1. Theory of economic cycles……………………………………………………………..page 4-6

1.2. Causes of economic cycles……………………………………………………….page 6-7

1.3. Various theories of business cycles……………………………pages 7-9

2. Unemployment:

2.1. Forms of unemployment and its natural level…………………..pages 10-13

2.2. Okun's Law……………………………………………………………………………………….pages 13-14

3. Inflation………………………………………………………………………………………..pages 14-16

4. The relationship between inflation and unemployment, general statement of the problem…………………………………………………………………………………………………………………pages 17-18

5. Problems of macroeconomic instability in Russia and ways to solve them……………………………………………………………………………………………………………………page 19- 20

6. Conclusion

Bibliography

Introduction

In connection with the transition to a market economy, the study of the problem of macroeconomic instability in Russia is becoming increasingly relevant. The greatest contribution to the development of this problem was made by: L.S. Tarasevich, G.S. Vechkanov, T.A. Agapova.

The purpose of this course work is an analysis of the problem of macroeconomic instability in Russia at the present stage of economic development.

Based on the goal, it is necessary to solve the following problems: analyze the concept and factors of economic cycles, unemployment and inflation. Explore models of economic cycles, consider and identify problems of macroeconomic instability in Russia and ways to solve them. The object of the study is macroeconomic instability in Russia. The subject of the study is a set of economic relationships arising in the process of macroeconomic instability. Theoretical basis are classics of economic thought, works of Russian and foreign economists legislative acts in the Russian Federation, statistical collections of all levels, etc. Methodological basis is formal logic, dialectics and systems approach.

1.1. The theory of business cycles:

The theory of economic cycles, along with the theory of economic growth, explains the nature of economic development over time. Statistical data indicate that changes in indicators characterizing the results of national economies do not change monotonically, but oscillatingly (cyclically).

The direction and degree of change in indicators or a set of indicators characterizing the development of the national economy are defined as economic conditions. Therefore, the theory of economic cycles is also called the theory of market conditions.

The economic cycle refers to the period of economic development between two identical states of the market. Cycle theory is intended to explain the reasons for fluctuations in the economic activity of society over time (a wavy curve), and growth theory examines the factors and conditions for sustainable growth as a long-term trend in economic development (trend line). In the structure of the cycle, the highest and lowest points of activity and the phases of decline and volume lying between them are distinguished. The total duration of a cycle is measured by the time between two adjacent highest or two adjacent lowest points of activity. Accordingly, the duration of the decline is considered to be the time between the lowest and subsequent lowest points of activity, and the rise - vice versa.

In more detailed analysis, the economic cycle is divided into four phases.

Expansion. National income is growing despite full employment. The demand for investment increases, unemployment decreases below the natural level. The price level, wage rate and interest rate rise. The inevitable consequence of this development is the transition from growth to recession.

Recession (crisis). At this stage, production declines (growth rates become negative), unemployment rises and aggregate demand declines.

Depression. National income continues to decline, but the rate of decline is slowing; therefore, the growth rate curve “turns” upward.

Revival. The transition from a decrease in production to its increase; gradual return of the economy to a state corresponding to equilibrium growth.

The problems of the theory of business cycles determine the use of complex dynamic models using differential equations. /5,С 254-257/

Economic cycle

The main phases of economic cycles are boom and bust, during which deviations from the average occur economic dynamics. (Fig.1)

Picture 1

Depending on how the value fluctuates economic indicators during the economic cycle, these indicators are divided into:

Procyclical(total output, capacity utilization, monetary aggregates, velocity of money, short-term interest rates, general price level, corporate profits). The listed parameters increase in the rise phase and decrease in the decline phase;

Countercyclical(unemployment rate, number of bankruptcies, size inventories annual production). When the named parameters are the other way around. During a rise they contract, and during a decline they increase;

Acyclic(export volume). When their dynamics are not associated with any phases of the economic cycle.

There are three types of economic parameters:

Leading or leading - these are parameters that reach a maximum (minimum) before reaching a rise (decline). These include: average duration working week in industry; average number of overtime hours, number of newly created business enterprises; number of new construction contracts; changes in stocks, indices stock market; corporate profits; change in the money supply.

Lagging or lagging which reach a maximum (minimum) after reaching a rise (decline). These include: the number of people unemployed for more than 15 weeks; expenses for new plants and equipment; specific wage costs; average interest rate of commercial banks;

Matching, or corresponding, which change simultaneously and in accordance with changes in economic activity. These include GDP (GNP); unemployment rate; industrial products, personal income; producer prices; central bank interest rates; applications for advertising./2, C 248-249/

1.2.Causes of economic cycles:

From the point of view of determining the factors of economic cycles, three methodological approaches are distinguished.

The first assumes that cycles are associated with external (exogenous) factors. The second approach explains cycles by internal (endogenous) factors. The third approach defines cycles by synthesizing external and internal factors.

External factors – These are factors outside the boundaries of a given economic system. These include: population dynamics, population migration, discoveries of science and technology. Wars and other political events, changes in oil prices, discoveries of gold deposits, discoveries of new lands and natural resources, even sunspots and weather.

Internal factors – factors inherent in a given economic system. These include consumption and investment. Therefore, this approach puts the multiplier mechanism—the accelerator—and the theory of demand at the center of the problems of economic cycles.

According to many economists, external factors- these are the producers of the initial pulses of the cycles, and the internal ones convert these pulses into phase oscillations. This approach is the most promising. Consumer and investment demands play a decisive role in the emergence of economic cycles. Moreover, if consumer demand influences changes in cyclical fluctuations relatively sluggishly, then investment demand is the main driving force of the cycles. /2, C 252-253/

1.3.Various theories of business cycles:

Neoclassical business cycle theory

Since the beginning of the 70s. 20th century Neoclassical models predominate in business cycle analysis. In their theoretical views, they proceed from the assumption of the perfection of the market mechanism and the flexibility of prices and wages. In such conditions of economic functioning, the cause of cyclical fluctuations in output and employment are shocks that lead to changes in aggregate supply.

The neoclassical business cycle theory presents two approaches to explain cyclical fluctuations in the economy:

Imperfect information theory;

The theory of the real business cycle.

Imperfect information theory

The impulse to change aggregate demand can be monetary expansion carried out by the government. The result of such a policy will be an increase in nominal aggregate demand, the price level and nominal wages.

Manufacturers in the current economic situation, in the absence of sufficient information, cannot reliably determine whether the relative price of their products has increased or the general price level has increased. The volume of production depends on the correct answer to this question: in the first case, firms are interested in increasing production volume, but in the second they are not. Given imperfect information, producers may make the mistake of believing that prices have increased only for their products. In reality, the general price level has increased. Uncertainty is a feature of all decisions made by entrepreneurs in the absence of reliable information. This circumstance made it possible for R. Lucas to compare the market of each individual product with an island whose inhabitants can only know what is happening on it.

Market participants, like the islanders, have no idea what is happening in other markets - the islands. In the end, market participants (“islanders”) find out what is happening outside it, but with a delay (lag).

Workers may be aware of current wages but not the general price level in the country, making it difficult to determine real wages. If workers accept an increase in nominal wages as an increase in real wages, then they are willing to increase the supply of labor, which stimulates firms to increase production, but in real life relative prices and real wages have not changed.

If the behavior of economic entities is formed according to the scheme of rational expectations, then, according to R. Lucas, they evaluate changes in a particular market partly as an increase in the general price level, partly as an increase in the relative price of a product. An aggregate demand shock leads to an increase in aggregate supply by economic entities. According to the sentence function:

Where Y* is the potential production volume; - expected prices.

If P>, then each individual producer believes that the relative price of the product has increased. If all agents understand the functioning mechanism of the economy and their expectations are rational, then economic agents’ forecasts for the future emerge as the optimal option for processing all information available to them, including information about the government’s economic policy. /2, C 256-258/

Real business cycle theory

This theory explains fluctuations in business activity by supply-side shocks (John Dong, Charles Plosser, Edward Prescott).

The foundation of the theory is the following:

Flexibility of prices and salaries in the short term;

For a short period, the principle of classical dichotomy is transferred. Consequently, changes in real indicators (real GNP, employment level) do not depend on changes in nominal values (money supply, price level), but are explained by shifts occurring in the economy;

Model IS – LM with flexible prices.

Based on the Keynesian IS – LM model, the creators of the real business cycle came to the conclusion that maintaining production at the potential level corresponding to full employment in the economy is possible provided that effective demand and potential GNP are equal. This equality ensures flexible prices.

In the figure, the LM curve passes through the intersection point IS of the long-term curve AS(). In this case, the interest rate is set at r*, which ensures equilibrium at the point.

If changes occur in the money market, prices will react in such a way that equilibrium in the market of goods and money will be maintained, since real parameters will not change, ensuring the stability of economic dynamics.

Since the real volume of aggregate supply shows the relationship between output and the supply of labor, capital and current technology production, then imbalance may be caused by changes in these three components.

An increase in labor supply depends on two motives: wages (W) and the level of the real interest rate (r). According to proponents of the real business cycle theory, even small changes in wages can cause large fluctuations in the level of output and employment. These fluctuations cause:

High elasticity of labor supply in relation to wage dynamics;

Understanding by employees that wage increases during the business cycle are a temporary phenomenon.

Since the volume of production increases as the supply of labor increases, the aggregate supply curve becomes upward sloping.

Abrupt changes in technology have an impact in two ways, depending on whether they are permanent or temporary. The former primarily affect demand, while the latter affect supply. /2, C 260-262/

2.1.Forms of unemployment and its natural level.

The main types of unemployment are frictional, structural and cyclical.

Frictional unemployment

Information about vacancies and job applicants is imperfect, and its dissemination takes a certain amount of time. The territorial movement of labor also cannot be instantaneous. Some employees resign of their own free will due to changes in professional interests, place of residence, etc. Therefore, frictional unemployment is predominantly voluntary and short-term in nature: this category of unemployed people has “ready” skills for work that can be sold on the labor market.

Structural unemployment

The combination of frictional and structural unemployment forms the natural rate of unemployment (or the rate of unemployment at full employment) corresponding to potential GDP.

Cyclical unemployment

Calculations of actual and natural unemployment rates are complicated by the fact that the criteria for classifying individuals as employed or unemployed are quite flexible. Typically, the unemployed are those who do not have a job at the time of the statistical survey, but are actively looking for one and are ready to start work immediately. People who have a job, as well as anyone who works part-time or part-time, are classified as employed.

The totality of employed and unemployed people forms the labor force. Persons who are unemployed and not actively looking for work are considered to have dropped out of the labor force. These include people of working age who potentially have the opportunity to work, but for some reason are not working: students, pensioners, the homeless, housewives, those who are desperate to find a job and have stopped looking for it, etc. The labor force also does not include persons who spend a long time in institutional institutions (psychiatric hospitals, prisons, etc.).

Unemployment rate is defined as the ratio of the number of unemployed to the size of the labor force or as the ratio of the share of employed people who lose their jobs every month and the sum of this share with the share of unemployed people who find work every month.

Natural rate of unemployment is determined by averaging the actual level of unemployment in the country over the previous 10 years (or a longer period) and the next 10 years (forecast estimates are used taking into account the probabilities of the dynamics of the expected level of inflation). /1, From 49-50/

The main reasons for the existence of a natural (sustainable) level of unemployment are the following.

Increased job search time under the unemployment insurance system.

Payment of unemployment benefits relatively reduces incentives for quick employment - the time for searching for a suitable job, retraining, etc. increases. In the long term, this helps to achieve greater balance in the structure of jobs and the structure of the labor force. At the same time, an increase in unemployment benefits and the period of their payment contributes to an increase in the number of unemployed and an increase in the unemployment rate. The tool for solving this problem is public investment in labor market infrastructure (deployment various systems retraining of personnel, increasing their professional and geographical mobility, improving information about vacancies, etc.). In the short term, financing employment regulation programs may increase the burden on the state budget, but already in medium term this will help reduce the natural rate of unemployment.

The stability (rigidity) of wages gives rise to “unemployment of expectation.” Expectation unemployment occurs as a result of the level of real wages exceeding its equilibrium value.

Figure 2

Wage rigidity leads to a relative shortage of jobs: workers become unemployed because, at a given wage level, the supply of labor exceeds the demand for labor, and people simply “wait” to get a job at a fixed rate of pay.

The “freezing” of the labor market in a disequilibrium state is associated with:

The legislative establishment of a minimum wage, which limits its free fluctuations. The limiting effect of wages is the more significant, the higher the proportion of youth, women, and low-skilled workers in the labor force, since for these categories of employees the equilibrium wage rate is lower than the legally established minimum;

Fixation of wage levels in collective agreements with trade unions and individual labor agreements;

The disinterest of firms in reducing wages due to the risk of loss of qualified labor, an increase in overall staff turnover, a decrease in labor productivity, labor discipline and profit.

Unemployment rates vary across different demographic groups. In particular, the unemployment rate among young people is significantly higher than in other age groups.

The trend towards an increase in the natural rate of unemployment in the long run is associated with:

Increasing the share of youth in the labor force;

Increasing the share of women in the labor force;

More frequent structural changes in the economy. /1,C 51-53/

2.2.Oken's Law

Okun's law relates fluctuations in the unemployment rate to fluctuations in GDP:

where Y is the actual production volume;

Potential GDP;

u – actual unemployment rate;

Natural rate of unemployment;

β is the empirical coefficient of sensitivity of GDP to the dynamics of cyclical unemployment.

If the actual unemployment rate is 1% higher than the natural rate, then actual output will be lower than potential by β%.

The coefficient β is established empirically and varies depending on different countries. Often its values fall in the range from 2 to 3, which indicates significant GDP losses caused by cyclical unemployment.

Y – actual production volume in this year;

– actual production volume last year;

u is the actual unemployment rate in the current year;

– actual unemployment rate last year.

If the actual unemployment rate has not changed relative to the indicator previous year, then the growth rate of real GDP is 3% per year. This pace is due to population growth, capital accumulation and scientific and technological progress. For every one percent increase in the unemployment rate (relative to the previous year), the growth rate of real GDP decreases by 2%.

3.Inflation:

Inflation rate. Demand inflation and cost inflation.

Inflation –

In conditions of inflation, different types of prices change unevenly: some prices increase quickly, others slowly, and others remain unchanged.

Deflation –

Inflation rate (rate of price growth) – relative change in the average (general) price level. IN macroeconomic models the inflation rate can be represented as

Where P is the average price level in the current year;

Average price level last year.

The average price level is measured by price indices. Often, the consumer price index (CPI) is used as the basis for calculating the inflation rate, and the indicator takes the following form:

Where CPI is the consumer price index for the current year;

– consumer price index in the previous year.

Disinflation –

Demand inflation arises as a consequence of excess aggregate expenditure (aggregate demand) in conditions close to full employment.

Figure 3. Model of price growth based on an increase in aggregate demand

Cost inflation arises as a consequence of excess unit costs and a decrease in aggregate supply. This type of inflation leads to stagflation, that is, to a simultaneous increase in inflation and unemployment against the backdrop of a decline in production (stagnation combined with inflation). An increase in average costs relatively reduces the profits of firms, which leads to a decrease in the output of firms and a decline in aggregate supply, leading to an increase in the average price level and an increase in the rate of inflation.

Figure 4 Model of price level growth based on rising costs

Reasons for increasing average production costs:

An increase in nominal wages that is not balanced by an increase in labor productivity;

Increase in prices for raw materials;

Increase in taxes and growth of the “tax wedge”.

Cost-push inflation is to a certain extent self-limiting: the decline in production restrains additional growth in production costs, since with an increasing level of unemployment, nominal wages gradually decrease.

The combination of demand-side inflation and cost-push inflation forms an inflationary spiral, in which the increased inflationary expectations of economic agents play a role transmission mechanism. Budgetary - tax or credit - monetary expansion, aimed at short-term stimulation of aggregate demand, causes demand inflation as the economy approaches a state of full employment of resources. An increase in nominal wage rates causes an increase in average production costs, which is the basis for the development of cost-push inflation. If the government and Central bank do not have the tools to manage inflation expectations, then hyperinflation arises based on the “wages-prices” spiral. It is uncontrollable inflation with rapidly rising prices, which has a particularly destructive effect on employment and output, since under these conditions it is economically profitable to invest in speculation rather than in investment. A situation of distrust due to inconsistent government policies and Central Bank, typical for many transition economies, is a suitable “environment” for the development of uncontrolled inflation.

The impact of inflation on real income levels is controversial. Inflation has different effects on the redistribution of income depending on whether it is expected or unexpected. In the event of expected inflation, the income recipient can take steps to prevent or reduce the negative effects of inflation, which would otherwise affect his real income.

Unforeseen inflation leads to a decrease in all types of fixed income and “subsidizes” those economic agents whose nominal income rise faster than the average price level. In conditions of unexpected inflation, loan recipients benefit at the expense of creditors, since debts are repaid in devalued money. Governments that have accumulated significant state debt, often pursue a policy of short-term inflation stimulation, which contributes to the relative depreciation of debt.

4. The relationship between inflation and unemployment: general statement of the problem

In conditions of approaching economic potential a well-known alternative arises between employment growth, on the one hand, and rising inflation, on the other. An increase in employment and a decrease in unemployment is accompanied by an increase in demand inflation, since the volume of unused resources in the economy is constantly decreasing and production must be expanded by “luring” resources from one firm to another, from one industry to another, by increasing wage rates and prices for investment goods. Reducing demand-side inflation can only be achieved by limiting employment and increasing unemployment. This means that in the short term there is an inverse relationship between inflation and unemployment rates, defined as the Phillips curve.

At any point in time, a government managing aggregate spending may be on the Phillips curve with a certain combination of inflation and unemployment rates for the short-term time interval. This choice depends on the expected rate of inflation: the higher the expected inflation, the higher the Phillips curve. The choice of economic policy in this case becomes more difficult, since the actual inflation rate will be higher for any level of unemployment.

Figure 5

The trade-off between inflation and unemployment in macroeconomic models can be presented as follows:

Where is the actual inflation rate;

Expected inflation rate;

Demand inflation;

External price shock (cost-push inflation).

Since it is determined by the dynamics of cyclical unemployment in accordance with Okun's law, the equation of the short-term Phillips curve takes the form

Where are the actual and expected inflation rates (respectively);

u and are the actual and natural unemployment rates (respectively);

External price shock; /1, C 55-61/

Empirical coefficient.

5. Problems of macroeconomic instability. Ways to solve them.

Macroeconomic instability entails a number of consequences. These consequences are diverse, contradictory and are as follows:

It leads to the redistribution of national income and wealth between different groups of society, economic and social institutions in an arbitrary and unpredictable manner.

High inflation rates and sharp changes in price structures complicate the planning of firms and households. As a result, the uncertainty and risk of doing business increases. The price for this is an increase in interest rates and profits.

The political stability of society is decreasing, social tension is increasing.

Relatively higher rates of price growth in the “open” sector of the economy lead to a decrease in the competitiveness of national goods. The result will be an increase in imports, an increase in unemployment and the ruin of commodity producers.

Demand for more stable foreign currency. The flight of capital abroad is increasing, speculation on foreign exchange market, which accelerates price increases.

The special value of savings accumulated in cash decreases, the demand for real assets. As a result, prices for these goods rise faster than the general price level changes.

The structure of the state budget is changing and real revenues are decreasing. The budget deficit and public debt are increasing.

In an economy operating under conditions of underemployment, moderate inflation, slightly reducing the real income of the population, forces them to work more and better. As a result, creeping inflation is both a “payment” for economic growth and a stimulus for it.

Significant inflation prevents employment from increasing.

There is a multidirectional movement of relative prices and production volumes of various goods.

Solutions are a set of government regulation tools.

Direct regulation was carried out within the framework of income policy. Price targets and wage and price controls are sometimes called income policy. The reason for this is that the real income of an individual - i.e. the number of goods and services that he can purchase with his nominal salary depends on the amount of nominal income and the prices of goods and services. Guidelines and controls are designed to limit both nominal income and price. Thus, they affect real incomes.

Conclusion

Based on the analysis performed, the following conclusions can be drawn: Economic cycle– fluctuations in the price level of economic activity in actual GDP, when periods of expansion are followed by periods of economic decline; the process of passing a market economy from one phase to the next, the same, for example, from crisis to crisis.

Frictional unemployment associated with searching for and waiting for work. This is unemployment among people for whom finding a job that matches their qualifications and individual preferences requires some time.

Structural unemployment associated with technological shifts in production, changing the structure of demand for labor. This is unemployment among persons whose professions turned out to be “outdated” or less necessary for the economy due to scientific and technological progress. Structural unemployment is predominantly forced and more long-term in nature, since this category of unemployed does not have “ready” marketable skills for work and obtaining jobs for them is associated with professional retraining, often accompanied by a change of place of residence.

Cyclical unemployment represents the deviation of the actual unemployment rate from the natural one. During a cyclical downturn, cyclical unemployment complements frictional and structural unemployment; During periods of cyclical expansion there is no cyclical unemployment.

Inflation – a stable tendency towards an increase in the average (general) price level.

Deflation – a steady downward trend in the average (general) price level.

Disinflation – reduction in inflation (rate of price growth).

Problem effective management inflation processes in the economy almost never leave the agenda. If we consider our country, then low inflation rates in its economy were observed, perhaps, only in Soviet times, and the entire modern economic history Russia, since the 1990s, has demonstrated inflation rates from extremely high to moderately high, practically never falling below 10% per year.

As the authoritative Russian economist, specialist in the field of monetary circulation and well-known critic of monetarist methods of regulating the economy V.M. Usoskin, “the current deterioration of the credit basis of money gives grounds to consider modern money as a kind of hybrid of credit and paper money. Undermining the credit basis of money leads to a violation of the optimal boundaries of monetary circulation and serves important factor development of inflationary processes. The formation of excess demand for means of payment is not just an element of balancing the system, but evidence of the presence of imbalances between production and social needs, manifested in the overproduction of goods and other imbalances. Equilibrium is an exception, a fleeting phase. The process of making key business decisions is not subject to prior approval. It is decentralized and initially bears the stamp of the market element. Accordingly, the prices prevailing in the markets are, as a rule, suboptimal, and the existence of monopolistic relations makes it difficult to adjust them. The price mechanism only partly takes upon itself the elimination of emerging disequilibria, and the entire burden of restructuring, as a rule, falls on real sector– the sphere of production and commodity circulation. This finds expression in the accumulation of unsalable goods, underutilization of capacity, mass unemployment and other phenomena that represent the scourge of the modern capitalist system. /3, C 55-56/

A retrospective analysis of the main milestones in the development of monetary theories of business cycles allows us to make a number of generalizations and assumptions regarding the further research program. In particular, we should point out the weak dependence between different generations of these theories. It is hardly possible to talk about a single monetary theory of fluctuations in business activity; rather, it is a conglomerate of concepts.

In this conglomerate, there is continuity between the early monetary theories of business cycles and the modern stage of their development, based on an unambiguous conclusion about the significant influence of money, credit and operating features banking sector on the dynamics of real output seems to be more pronounced than the connection of each of them with the period 1940-1980. This stage was not characterized by serious progress compared to the 1920-1930s, but provided an instrumental “breakthrough” in connection with the development of econometric methods.

Considering that the concept of a financial accelerator and its derivatives from the non-business cycle model, based on credit rationing, are based on a logically structured, practical model that is amenable to econometric testing, this direction of development of monetary cycle theories seems to be the most promising, synthesizing the results of early and intermediate stages of the formation of these theories./4, P 126-130/

Bibliography:

Agapova T.A. Seregina S.F. – Macroeconomics textbook 6th edition – M: “Business and Service” 2004

Vechkanov G.S. Vechkanova G.R. – Macroeconomics textbook 2nd edition M: 2008

Golovnin M. – Theoretical approaches to conducting monetary policy// Economic Issues - No. 4. – 2009 – S45-49

Popkova N.A. – About anti-inflationary processes in the economy // Financier - No. 9. - 2009 - P 55-60

Stolbov M. - Evolution of monetary business cycles // Economic Issues - No. 7. - 2009 - P 126-130

Tarasevich L.S. Grebennikov P.I. Mussky A.I. – Macroeconomics – textbook 6th edition M: Higher Education 2008

Macroeconomic instability: unemployment and inflation. Macroeconomic instability: inflation and unemployment Macroeconomic instability cyclicality unemployment inflation

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