Marginal propensity to consume and save. The sum of the marginal propensity to consume and

Consumption stands out. Under consumption usually understand the expenditures of the population on final consumption goods and services. There are many factors that influence the level consumer spending, however, the main one is income level. The functional relationship between these indicators is expressed by the consumer function , where is consumption; - income.

Cartoonist— coefficient showing the dependence of changes in gross product on changes in investment.

With increased investment, the gross product will grow to a much greater extent than the original cash investment. In addition to the primary effect, secondary and subsequent effects occur. This multiplying effect is called.

Investment (government) expenditure multiplier = Δ Gross product/ Δ Investment

Keynes introduced indicators such as the marginal propensity to save and the marginal propensity to consume, which reflect how people dispose of an increase in income.

The relationship between total consumption and total income () is called average propensity to consume. This propensity shows what proportion of its income a society consumes. In the development of the consumer function, John Maynard Keynes identified the following pattern, which is now known as the basic psychological law: when real income society increases or decreases, its consumption also increases or decreases, but with less intensity, i.e. consumption is a very conservative category and is a declining function of income.

Closely related to the concept of “consumption” is the concept of “saving,” which is usually understood as that part of income that is not consumed. The main factor influencing the amount of savings is also income. The functional relationship between them is called the savings function

where are savings; - income.

The ratio of total savings to total income () is called the average propensity to save. It's no secret that the rich save more than the poor, not only absolutely, but also relatively. It follows that saving is not a decreasing, but an increasing function of income.

To analyze the functions of consumption and savings, appropriate graphs are used.

Propensity to consume chart represents the ratio of consumption to income depicted in the form of a curve
(Fig. 3.1). This graph is plotted using an additional line drawn at an angle of 45 degrees. Each point on this line indicates equality of income and expenses.

Curve C shows the population's propensity to consume at various income levels. The point of intersection of this curve with a line drawn at an angle of 45° shows the equilibrium of consumer income and expenses (point). In the event that the curve lies over a length of 45 o, expenses exceed income and there is net negative saving (for example, point ). If the curve passes under the 45° line, then there is an excess of income over expenses, or net positive savings (point).

3.1 Propensity to consume chart

Propensity to save chart is the ratio of savings to income presented in the form of a curve (Fig. 3.2). Each point on this curve shows how much society is willing to save at each this level income.

3.2 Propensity to save chart

Marginal propensity to consume and save. That households consume a certain share of a given total income, for example 45/47 of the income after taxes are paid in
470 billion rubles does not guarantee that they will consume the same share when the amount of income changes. The share, or part of the increase (decrease), in income that is consumed is called the marginal propensity to consume (). Or, in other words, it is the ratio of any change in consumption to the change in income that led to the change in consumption:

MPC = Change in Consumption / Change in Income

Similarly, the proportion of any increase (decrease) in income that goes to savings is called the marginal propensity to save (). is the ratio of any change in savings to the change in income that caused it:

MPS = Change in Saving / Change in Income

So, if current after-tax income and household income, which amounted to 470 billion rubles, increased by 20 billion rubles. and reached 490 billion rubles, it is clear that they will consume 15/20, or 3/4, and save 5/20, or 1/4 of this increase in income. In other words, it is 3/4, or 0.75, and is 1/4 or 0.25. The amount and for any change in after-tax income must always be equal to one, i.e. the increase in income can go either to consumption or to savings; That portion of any change in income that is not consumed essentially goes to savings. Therefore, the consumed share and the saved share must absorb the entire increase in income:

In our example, 0.75 + 0.25 = 1. Mathematically MRS is the numerical value of the angle of inclination of the consumption line, and MPS— the numerical value of the slope of the savings line.

Factors of consumption and savings not related to income

The level of after-tax income is the main determinant of the amount of consumption and saving in , just as price is the main determinant of an individual product. Recall that changes in factors other than price, such as consumer tastes, income, etc., lead to a shift in the demand curve for a given product. Likewise, there are other factors besides income that encourage households to consume more or less at each possible level. At the same time, the position of consumption and savings schedules changes. We already know these factors; we mentioned them during the analysis. There we focused on the negative slope of the demand curve and the factors that cause the curve to move. Here we are interested in how these factors affect the relationship between consumption and after-tax income, and between saving and after-tax income.

1. Wealth. Generally speaking, the more accumulated wealth a household has, the greater the amount of consumption and the less the amount of savings at any level of current income. By wealth we mean how real estate(house, cars, televisions and other durable items) and financial assets (cash, savings accounts, stocks, bonds, insurance policies, pensions) that the household has. Households save by abstaining from consumption to accumulate wealth. Other than that equal conditions, the more wealth households have accumulated, the weaker their incentive to save to accumulate additional wealth. In other words, an increase in wealth shifts the saving schedule down and the consumption schedule up.

2. Price level. An increase in the price level leads to a downward shift in the consumption schedule, and a decrease in the price level leads to an upward shift. This finding has direct implications for our analysis of wealth as a factor of consumption, since changes in the price level alter the real value, or purchasing power, of some types of wealth. More precisely, the real cost financial resources, the nominal value of which is expressed in money, will be inversely proportional to changes in the price level. That's what it is wealth effect, or real cash balance effect.

Example: Let's say you have $10,000 worth of government bonds. If the price level rises, say, by 10%, then the real value of your financial assets will decrease by about 10%. Because your real financial wealth has decreased, you are less likely to consume your current income. On the contrary, a decrease in the price level will increase your real financial wealth and encourage you to consume more of your current income.

3. Expectations. Household expectations related to future prices, cash income, and the availability of goods can have a significant impact on current spending and savings. Expectations of higher prices and shortages of goods lead to an increase in current expenses and a decrease in savings, i.e. to shift the consumption schedule upward, and the savings schedule downward. Why? Because it's natural for consumers to avoid paying higher prices or live by the "I'll do without it" mentality. Expected inflation and expected shortages encourage people to "buy ahead" to avoid higher prices and empty shelves. Expectation of growth cash income in the future, in turn, leads to the fact that consumers act more freely with their current expenses. On the contrary, the expected fall in prices, the anticipation of a decrease in income, and the feeling that goods will be in abundance can induce consumers to reduce consumption and increase savings.

4. Consumer debt. It can be expected that the level of consumer debt will make households want to direct current income either to consumption or to savings. If household debt has reached such a level that, say, 20 or 25% of their current income is set aside to pay the next installment on previous purchases, then consumers will be forced to reduce current consumption to reduce debt. Conversely, if consumer debt is relatively low, household savings may rise unusually, causing their debt to rise.

5. Taxation. Changes in taxes will lead to shifts in consumption and savings schedules. Taxes are paid partly from consumption and partly from savings. Therefore, increasing taxes will move both the consumption and saving schedules downward. Instead, the share of income generated by tax cuts will be partly consumed and partly going to household savings. Thus, a tax cut will cause both the consumption and saving schedules to shift upward.

Investments

Now let's look at the second component of total expenses - which is usually understood as investments in the growth of real capital of society. The level of net investment expenses is determined by two main factors: 1) the expected rate net profit, which entrepreneurs expect to receive from investment expenses, and 2) the rate.

Expected rate of net profit

The incentive to spend on investments is profit. Entrepreneurs purchase capital goods only when such purchases are expected to be profitable. Let's look at a simple example. Let's say the owner of a small sideboard manufacturing workshop is trying to make an investment decision on a new grinding machine costing RUB 1,000. and a service life of one year. New car, is likely to increase the firm's output and revenue. So, let's assume that the net expected income (i.e. income without operating costs such as energy, wood, labor, taxes, etc.) is 1100 rubles. In other words, after accounting, operating income will cover the cost of the machine of 100 rubles. and will bring an income of 100 rubles. Comparing this income, or profit of 100 rubles. and the cost of the machine is 1000 rubles, we find that the expected rate of net profit from using the machine is 10% (100 rubles/1000 rubles).

Real interest rate

There is another component of the costs associated with investing that is not included in our example. And, of course, this is the interest rate - the price that the firm must pay to borrow the money capital needed to acquire real capital (the grinding machine). Our conclusion: if the expected net return rate (10%) exceeds the interest rate (say 7%), then the investment will be profitable. But if the interest rate (say 12%) exceeds the expected net return rate (10%), then the investment will be unprofitable.

It should be emphasized that it is the real interest rate, and not the nominal one, that plays a significant role in making investment decisions. Recall that the nominal interest rate is expressed in current prices, and the real interest rate is expressed in constant or inflation-adjusted prices. In other words, the real interest rate is the nominal rate minus the inflation rate. In the grinding machine example, we deliberately assumed a constant price level.

But what if there is inflation? Let's assume an investment of 1000 rubles. should earn a real (inflation-adjusted) expected net return of 10% and a nominal interest rate of, say, 15%. At first glance, it may seem that the investment is unprofitable and should not be made. Let us assume that the current inflation rate is 10% per year. This means that the investor will pay in dollars, purchasing power which decreased by 10%. If the nominal interest rate is 15%, then the real interest rate will be only 5% (= 15% - 10%). By comparing this 5% real interest rate with the 10% expected net return rate, we can see that the investment is profitable and should be made.

Investment demand curve

The investment curve shows the dependence of investment on real interest rate. This dependence, as we have already found out,

negative, so the investment curve has a downward shape (Fig. 3.3).

3.3. Investment curve

Shifts in investment demand

1. Costs of purchasing, operating and maintaining equipment. As the example of the grinding machine showed, the initial cost of fixed capital, together with the cost of its maintenance, Maintenance and exploitation are very important in calculating the expected rate of profit from any given investment project.

To the extent that these costs increase, to the same extent the expected rate of net profit from the proposed investment project will decrease, and the demand curve for investment will shift to the left. Conversely, if these expenses fall, then the expected rate of net profit increases and the demand curve for investment shifts to the right. Note that union wage policies can affect the investment demand curve because wages are a major cost of production for large firms.

2. Taxes on entrepreneurs. When making investment decisions, business owners rely on expected after-tax profits. This means that an increase in taxes on entrepreneurs leads to a decrease in profitability, to a shift of the demand curve for investment to the left; tax cuts shift it to the right.

3. Technological changes. Technological progress - development of new and improvement of existing products, creation new technology and new production processes is the main incentive for investment. The development of more productive equipment, for example, reduces production costs or improves product quality, thereby increasing the expected net return on investment for that equipment. Profitable new products - such as mountain bikes, personal computers, new types of drugs, etc. —cause a surge in investment as firms seek to expand production. In short, faster technological progress shifts the demand curve for investment to the right, and vice versa.

4. Cash fixed capital. Exactly the same as in stock consumer goods have an impact on household decisions regarding consumption and savings, and available fixed capital affects the expected rate of return from additional investment in any sector of production. If the industry is well supplied with production capacity and reserves finished products, then investment in this industry will be constrained. The reason is clear: such an industry is sufficiently equipped to meet current and future demand at prices that provide an average profit. If there is sufficient or even excess capacity in an industry, then the expected rate of return on the increase in investment will be low, and therefore little or no investment is expected. Excess production capacity shifts the demand curve for investment to the left; the relative lack of fixed capital leads to its shift to the right.

5. Expectations. We noted earlier that the basis of the project is the expected profit. Fixed capital is in long-term use, its service life may be 10 or 20 years, and therefore the profitability of any investment will depend on forecasts of future sales and the future profitability of the products produced with the help of this fixed capital. Entrepreneurs' expectations will be based on developed forecasts of future business conditions, which include a number of "entrepreneurship indicators".

Investments and income

As we have already noted, income or NNP has a significant influence on the investment decisions of firms. In order to show this dependence, an investment graph is used (Fig. 3.4).

The relationship between NNP and investments is direct, since, firstly, investments are associated with profits; they are financed largely from the profits of firms. Therefore, with an increase in NNP, the level of investment, other things being equal, will also increase. And secondly, at low levels of income and output, firms will have unused production capacity, i.e. there will be little incentive to purchase new equipment. But as NNP increases, this excess capacity will disappear and firms will have an incentive to invest. However, investment expenditures are not strictly consistent with the NNP; they are the most volatile component of total expenditures.

3.4. Investment schedule

The reasons for the instability of investments are the following:

1. Long service life. Investment goods, by their nature, have a rather indefinite lifespan. To some extent, purchases of capital goods are discrete in nature and therefore may be delayed. Old equipment or buildings can either be completely eliminated and replaced, or repaired and used for several more years. Optimistic forecasts may prompt plant planners to decide to replace obsolete equipment, e.g. modernize production, which will increase the level of investment. A slightly less optimistic view, however, could result in very little investment.

2. Irregularity of innovation. We have already noted that technological progress is the main driver of investment. New products and new technologies are the main incentive to invest. However, history shows that major innovations - railways, electricity, cars, computers, etc. — do not appear so regularly. But when this happens, investment costs increase and decrease over time.

3. Earnings volatility. It is known that expectations of future profitability are significantly influenced by the size of current profits. In addition, business owners and managers invest only when they feel it will be profitable. Current profit, however, is itself very fickle. Consequently, the volatility of profits makes investment incentives volatile. Moreover, the instability of profits can cause investment fluctuations, since profits act as the main source of funds for entrepreneurial investment.

4. Variability of expectations. We have already explained that since fixed capital has long term services, investment decisions are made on the basis of expected net profit. However, firms tend to predict business conditions taking into account realities today. Therefore, it is legitimate to assume that any events or combination of events can lead to significant changes in the conditions of entrepreneurship in the future, expectations are subject to radical revision.

One of the most important components of society's total expenses is consumption.

Consumption- individual and joint use of benefits aimed at meeting the material and spiritual needs of people. There are many factors that influence the level of consumer spending, but the main one is income level. The functional relationship between these indicators is expressed by the consumer function, where - consumption; -- income.

Keynes introduced such indicators as: marginal propensity to save And marginal propensity to consume, which reflect how people manage their income gains.

The relationship between total consumption and total income is called average propensity to consume. This propensity shows what proportion of its income a society consumes. In the development of the consumer function, Keynes identified the following pattern, which is now known as the basic psychological law: when the real income of society increases or decreases, its consumption also increases or decreases, but with less intensity, i.e. consumption is a very conservative category and is a declining function of income.

where are savings; -- income.

To analyze the functions of consumption and savings, appropriate graphs are used.

Propensity to consume chart represents the ratio of consumption to income depicted in the form of a curve

(Fig. 1.1). This graph is plotted using an additional line drawn at an angle of 45 degrees. Each point on this line indicates equality of income and expenses.

Curve WITH shows the population's propensity to consume at different income levels. The point of intersection of this curve with a line drawn at an angle of 45° shows the equilibrium of consumer income and expenses (point). In the event that the curve lies above the 45 o line, expenses exceed income and there is net negative saving (for example, a point). If the curve passes under the 45° line, then there is an excess of income over expenses, or net positive savings (dot).

1.1. Propensity to consume chart

Propensity to save chart-- this is the ratio of savings to income presented in the form of a curve (Fig. 1.2). Each point on this curve shows how much society is willing to save at any given level of income.

1.2 Propensity to save chart

The share, or part of the increase (decrease), in income that is consumed is called the marginal propensity to consume ( MPC). Or, in other words, it is the ratio of any change in consumption to the change in income that led to the change in consumption:

MPC = Change in Consumption / Change in Income

Similarly, the proportion of any increase (decrease) in income that goes to savings is called the marginal propensity to save ( MPS).

MPS is the ratio of any change in savings to the change in income that caused it:

MPS = Change in Saving / Change in Income

Sum MPC And MPS for any change in after-tax income must always be equal to one, i.e. the increase in income can go either to consumption or to savings; That portion of any change in income that is not consumed essentially goes to savings. Therefore the consumed share MPC and saved share MPS must absorb the entire increase in income: MPC +MPS=1

Mathematically MRS is the numerical value of the angle of inclination of the consumption line, and MPS-- the numerical value of the slope of the savings line.

It is obvious that an increase in family income allows them to purchase a larger number of different goods and, on the contrary, a lower income forces people to reduce consumption. However, the relationship between consumption growth and income growth is quite complex.

Autonomous and induced consumption

Households have a certain minimum consumption limit. Such a boundary can be considered the subsistence minimum, i.e. the cost of a set of goods and services that satisfy the most basic needs of a person. In most cases, if income is lower living wage and continues to decline, then consumption remains at the same level (recall that in macroeconomics we consider the behavior of all households, not just one of them). In this case, households cover their consumer expenses through previously accumulated savings, purchasing goods on credit, etc.

Thus, a certain part of consumer spending does not depend on the amount of income.

That part of the population's consumer expenditures or that part of its consumption that does not depend on the amount of national income is called AUTONOMOUS CONSUMPTION.

Another part of the population's consumer spending is directly dependent on income. An increase in income leads to households purchasing more goods and using a wider range of services.

That part of the population's consumption that depends on the size of national income and changes with changes in national income is called BY INDUCED CONSUMPTION .

Marginal propensity to consume

But not all income received by households is spent on consumption. If the economy is in a normal state and the situation of the majority of households is prosperous, then households save a certain part of their income. This is necessary, for example, to ensure an acceptable standard of living during periods when current income is insufficient, or in order to obtain interest income, when the saved part of the income is sent to a bank deposit. This means that family income is divided into two parts: consumed and saved. This division of income into consumption and savings occurs regardless of what type of income the household receives - wages, dividends or rent.

Consequently, national income also breaks down into consumed and saved parts. An increase in income implies, therefore, that there are corresponding increases in consumption and savings.

The ratio of the increase in consumption to the increase in income is called MARGINAL PROPENSITY TO CONSUME; the ratio of the increase in savings to the increase in income is called MARGINAL PROPENSITY TO SAVING.

All these provisions can be easily expressed in mathematical form. Let us introduce the following notation:

national income - Q;
consumption - C;
savings - S;
increase in income, increase in consumption and increase in savings, respectively DQ, DC and DS;
the marginal propensity to consume - c and the marginal propensity to save - s.

Then national income can be represented as the sum of consumption and savings:

Q = C + S.

Accordingly, the increase in national income is equal to the sum of the increases in savings and consumption:

∆Q =∆C+∆S

The marginal propensity to consume can be represented by the equality:

с = ∆C/ ∆Q

And the marginal propensity to save is equal to:

s = ∆S / ∆Q.

Dividing the left and right sides of the equality by ∆Q (by the national income), we obtain:

1 = c + s,

that is, the sum of the marginal propensity to save and the marginal propensity to consume is equal to one. This expresses the fact that the marginal propensity to consume shows the share of the consumed part of the increment in income, and the marginal propensity to save shows the saved part of it.

Consumption function

Now we can derive an equation that expresses the functional dependence of consumption on income. The total amount of consumption, as noted above, consists of autonomous and induced consumption. Induced consumption according to the above equalities can be represented as a product cQ. Then the total consumption (C) can be represented as the sum of Ca (autonomous consumption) and cQ (induced consumption), i.e. C = Ca + cQ.

This equation is called consumption function. It shows that autonomous consumption does not depend on changes in Q (national income), and initially we will assume that it is constant and, in addition, establishes that induced consumption (cQ) changes in direct proportion to the change in national income (Q). The coefficient of proportionality is the value c - the marginal propensity to consume.

Source: Economics. Basics economic theory: textbook for grades 10–11. for educational organizations. Advanced level: in 2 books. Book 2 // Edited by: Ivanov S. I., Linkov A. Ya. Publisher: Vita-Press, 2018 Non-price factors of aggregate demand AGGREGATE DEMAND is the need of economic agents to purchase a certain volume of goods and services at the prevailing price level in the economy. Government Expenditures and Macroeconomic Equilibrium We have already seen that not all goods and services are purchased by private sector. A significant portion of GDP consists of goods and services paid for by the government. General equilibrium and its institutional foundations Equilibrium in mixed strategies General equilibrium theory General theory equilibrium or Walras's universal equilibrium, is an attempt to explain the functioning economic markets as a whole, and not as individual phenomena. Classical and Keynesian models of aggregate supply AGGREGATE SUPPLY is the quantity of goods and services in the economy as a whole that entrepreneurs offer to the market at a given price level. Functions of consumer credit Loans are provided commercial banks not only private companies and government organizations. An important role in active operations banks plays and consumer loan. Productive and unproductive budget expenditures Assessing the effectiveness of budget expenditures: main indicators

Consumption (C) is the total quantity of goods purchased and consumed during a certain period.

Consumption depends on two factors: subjective and objective. The subjective factor includes people’s psychological inclination to consume, and the objective factors include income level, cash, prices, interest rates, reserves of wealth, etc.

Consumption moves in the same direction as income and also depends on the population's marginal propensity to consume.

Average propensity to consume (APC) per this moment expressed as the ratio of consumption to income:

APC = Consumption/Income.

The marginal propensity to consume (MPC) is the relationship between the change in consumption and the change in income that caused it:

MPC = Change in Consumption/Change in Income.

This reflects the following relationship: when the real income of a society increases or decreases, its consumption will also increase or decrease, but to a lesser extent than income.

Saving is that part of income that is not consumed.

The propensity to save is a psychological factor that means a person’s desire to save.

The average propensity to save (APS) is the ratio of the amount of savings made to the amount of income.

APS = Savings/Income.

The marginal propensity to save (MPS) is the ratio of any change in saving to the change in income that caused it:

MPS = Change in Savings/Changes in Income.

The indicators “marginal propensity to consume” and “marginal propensity to save” show what part of an additional unit of income households consume and what part they save.

8. Investments, factors determining the demand for investments .

Investment is the use of savings to create new production facilities and other physical assets.

Investment demand depends on a subjective factor - the decision of entrepreneurs to invest; and objective factors - interest rates, profits, capital reserves, etc.

The composition distinguishes between gross and net investments.

Gross investment represents the total amount of capital investment equal to the total demand for capital goods over a certain period of time.

Net investment is the amount of capital investment equal to the volume of gross investment minus depreciation (the amount of capital investment required to replace physically worn out or obsolete equipment).

Investments are based on savings, so it is important to find the ratio of savings and investments that will ensure stable economic development for the country.

9. Investments and income. Multiplier effect. The level of investment has a significant impact on the volume of national income. production and its growth rate. I. in a short period act as an element of the scoop. demand for goods and do not affect the scoop. sentence In the long term and will cause an increase in the capital stock, which will lead to an increase in the soviet. sentence Induced and. – generated by a steady increase in demand for goods and services. Expanding demand leads to higher prices. Rising prices create opportunities for increasing profits by expanding the supply of goods on the market. When the increase in demand is sustainable. har-r, reserves are gradually depleted and entrepreneurs become interested in increasing production volumes. Induced and. yavl. function from changes in ND. For consideration of eq. growth and the effect of national growth fulfill concept multiplier effect. It is based on the following phenomena: 1) for eq. characterized by recurring, continuous streams of income and expenses. 2) any change in income entails a change in consumption and savings in the same direction as the change in income. These phenomena lead to the fact that add. investment expenses of entrepreneurs turn into income of households, cat. part of their additional income is directed to consumption. Will consume. the expenses of some households become the income of others. The essence of the cartoon. effect in the market eq.: growth and. leads to a multiple increase in ND. Coefficient characterizing the dependence of the change in income on i. is the multiplier µ. µ=change in real. ND/change in inv. The multiplier exerts two-way air on the eq. On the one hand, growth and... leads to cartoon. Increased income. On the other hand, with a decrease in and. there is a multiple decrease in ND. The income-expenses model and multiplier analysis will bear witness. about noun-and ek. paradox, called the paradox of frugality. He comp. The point is that the community's desire to increase its wealth by increasing savings may end in nothing if autonomous expenses remain unchanged. Savings have not increased, and income levels will fall. The paradox of frugality is typical only for economics. with part-time employment.

10. Ec. height. Criteria and types. Ek. height- long-lasting cheating - I'm real. volume of national pr-va, communications with developed production. strength in the long-term temporary. interval. Essence ec. growth in resolution and reproduction at a new level of fundamentals. contradictions eq.: between the limited production. resources and limitlessness of common. needs. Under eq. growth implies such development of the national. eq., with cat. The pace has increased - I'm real. ND exceeds population growth rates. 2 goals eq. height: higher mat. welfare of the population and maintenance of national security. Factors eq. growth: direct and indirect. Straight. directly determine physical ability to eq. growth, indirect influence the possibility of turning this method into reality. Straightforward: increased quantity and improved quality of labor. resources; increase in volume and improvement in the quality composition of the base. capital; advanced technologies and production organization; increasing the number and quality of people involved in households. natural turnover resources; growth is being undertaken. way in society. Indirect: reducing the degree of monopolization of markets; reduction in production prices. resources; reduction of income taxes; expanded opportunities for obtaining loans. Theoretical There are 2 main ones. type ec. growth: extensive and intensive. With ext. expansion of mat volume goods and services are achieved by increasing the number of workers, means of labor, land, raw materials, etc. At int. expansion of production due to qualitative improvement: labor qualifications, new technologies. Int. factors eq. growth are put into effect as a result of the implementation of scientific and technological progress achievements in the production. Direct relationship eq. growth is observed with social politics (infrastructure development, increased investment in human resources, social support). Ek. growth has a close connection with equilibrium models, which can be stable. and unstable. These patterns depend on owls. demand and owls prev. In case of violation and eq. equilibrium there is an imbalance of investment. Investments, which leads to a lack of income. investing in social significant industries.

Economic cycles.

Economic cycle– these are constant, periodically repeated ups (ups) and downs (downs) in market conditions and economic activity.

In a loop business activity There are four clearly distinguishable phases: peak, decline, bottom, or lowest point, and rise.

Types of economic cycles.

· Kitchina (2-4 years)→ The value of stocks, fluctuations in GNP, inflation, employment, commodity

· Juglar cycles (7-12 years) →Investment cycle fluctuations in GNP, inflation and employment.

· Blacksmith (16-25 years old) →Income Immigration Housing construction aggregate. demand income

· Kondratieva (40-60 years old) Technical progress, structural changes

· Forrester (200 years) Energy and Materials

· Toffler (1000-2000 years) Development of civilizations

Impact of cycles on economic sectors:

The economic cycle permeates everywhere, it can be felt in almost every nook and cranny.

corners of the economy.

· Those industries that produce capital goods and consumer durables are hit the hardest by the recession.

· Production and employment in non-durable consumer goods industries tend to be less cyclical.

· Industries and workers involved in the construction of residential buildings and industrial buildings, heavy machinery, and the production of agricultural implements, automobiles, refrigerators, gas equipment and the like are experiencing a heavy blow.

· Industries that produce durable goods receive maximum incentives for development during the recovery phase.

Unemployment

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

Unemployed- this is a part of the country's population, consisting of people who have reached working age, do not have a job and are in search of work for a period of time specified by law.

Based on the definition of unemployment, you can create a formula that calculates the unemployment rate:

Unemployment rate = unemployed/labor force * 100%

Types of unemployment:

From the point of view of the nature of the displacement of a worker from production, there are:

a) voluntary unemployment, when an employee quits due to at will for one reason or another;

b) involuntary unemployment, when the company itself offers the employee to resign, citing various circumstances;

From the point of view of generating conditions and causes, they distinguish:

a) frictional (from Latin frictio - friction), associated with the search or expectation of better work in better conditions, it involves moving work force by industry, region, due to age, change of profession, etc. It is sometimes also called current unemployment:

b) structural - it is caused by a change, on the one hand, in consumer demand for goods, on the other, a change in the structure of production, which responds to changes in consumer demand. These processes are based on scientific and technical progress, the emergence of new materials, technologies, consumer goods, and services, which inevitably lead to the need to restructure production, the emergence of new and the death of some old professions, and retraining of personnel. Structural change production leads to the dismissal of workers who, by their specialty and qualifications, do not meet the new production requirements. Structural unemployment is mostly the unemployment of obsolete professions;

c) technological - the result of the influence of scientific and technical progress, when the emergence of new high-performance equipment sharply increases the productivity of workers, some of them become redundant and are “thrown out” onto the labor market;

d) cyclical - unemployment caused by the downturn phase of the economic cycle.

Phillips curve- graphical display of the inverse relationship between the inflation rate and the unemployment rate.

Π - inflation rate,

Πe - expected inflation rate,

(U − Ue) - deviation of unemployment from the natural level - cyclical unemployment,

b > 0 - coefficient,

v - Supply shocks.

Columns 4-7 of Table 12-1 contain additional characteristics of consumption and saving schedules.

Average propensity to consume and average propensity to save. The percentage of any given total income that goes toward consumption is called the average propensity to consume (APC), and the percentage of total income that goes toward saving is called the average propensity to save (APS). That is:

For example, with an income level of $470 billion. (line 6) in Table 12-1, the APC is 450/470 = 45/47, or about 96%, and the APS is obviously 20/470 = 2/47, or about 4%. By calculating APC and APS at each of the 10 DI levels shown in Table 12-1, we see that as DI increases, APC falls and APS increases. This quantitatively confirms the conclusion just made: the consumed share of total after-tax income decreases and increases as it increases. In fact, since after-tax income is either consumed or saved, the sum of the consumed and saved (non-consumed) parts must absorb the entire amount of income at any level. In short, APC + APS = 1. In columns 4 and 5 of Table 12-1, this condition is met.

Marginal propensity to consume and marginal propensity to save. Just because households consume a certain share of a given total income, say 45/47 of the after-tax income of $470 billion, does not guarantee that they will consume the same share at change amount of income. The share, or part of the increase (decrease), in income that is consumed is called the marginal propensity to consume (MPC). Or, in other words, it is the ratio of any change in consumption to the change in income that led to the change in consumption:

Figure 12-4. Graphs of consumption (a) and savings (b)

These two graphs show the relationship between income and consumption and income and saving. In Figure 12-4a, at each point on the bisector, after-tax income equals consumption. Therefore, since savings are equal to DI minus consumption, the savings schedule (Figure 12-4b) is constructed by subtracting the consumption values from the corresponding bisector values. Consumers “wholly consume income,” that is, consumption equals DI (and saving is correspondingly zero), when DI equals $390 billion. (for these hypothetical data).

Similarly, the proportion of any increase (decrease) in income that goes to saving is called the marginal propensity to save (MPS). MPS is the ratio of any change in saving to the change in income that caused it:

So, if current after-tax income and household income amounted to $470 billion. (line 6), increased by $20 billion. and reached 490 billion dollars. (line 7), then it is clear that they will consume
15/20, or 3/4, and save 5/20, or 1/4 of this increase in income (see columns 6 and 7 of Table 12-1). In other words, the MPC is 3/4, or 0.75 , a MPS - 1/4, or 0.25. The sum of MPC and MPS for any change in after-tax income must always be equal to one. That is, the increase in income can go either to consumption or to savings; That portion of any change in income that is not consumed essentially goes to savings. Therefore, the consumed share (MPS) and the saved share (MPS) must absorb the entire increase in income:

MPC + MPS = 1.

In our example: 0.75 + 0.25 = 1. Mathematically, MPC is the numerical value of the angle of inclination of the consumption line, and MPS is the numerical

the value of the slope of the savings line. As shown in the Appendix to Chapter 1, the slope of any curve can be determined by the ratio of the vertical displacement to the horizontal displacement that occurs from one point to another on a given line. So, from the data in Table 12-1 and Figure 12-4a, it is clear that consumption changes by $15 billion. (vertical shift) for every $20 billion change in after-tax income. (horizontal displacement); that is, the angle of inclination of the consumption line is 0.75 (=15:20), which is the value of the MPC. Table 12-1 and Figure 12-4b also show that savings change by $5 billion. (vertical shift) for every $20 billion change in after-tax income. (horizontal displacement). Therefore, the slope of the savings line is 0.25 (= 5:20), which is the value of MPS.

Not all economists completely agree with this dependence of changes in MPC and MPS on an increase in income. For many years it has been argued that as income increases, MPC decreases and MPS increases. That is, it was believed that a decreasing share of the increase in income would be consumed, and an increasing one would be saved. Now, many economists believe that for the economy as a whole, MPC and MPS are relatively constant. Statistics, including those shown in Figure 12-3, support this view. We take the values of MPC and MPS constant not only because of this circumstance, but also because it greatly simplifies our analysis.