1.subject and method of macroeconomics
2. main problems studied at the macro level
3.model of macroeconomic circulation
Subject and method of macroeconomics
The subject of modern economic theory is economics. The term originated in the 19th century
Economics is the science of optimal use of limited natural resources.
The branch of economic theory is:
1. microeconomics
2.macroeconomics
3.world economy
Macroeconomics is a part of economic theory that studies the patterns of functioning and development trends of the country’s economy as a whole.
Object research in macroeconomics is an integral national economy, which is a system with direct and feedback connections between its elements.
Therefore, in macroeconomics, an objective property of systems is manifested - emergence (the irreducibility of the properties of a system to a simple arithmetic sum of the properties of its elements). The consequence of this property is the synergy effect. This is a joint action.
The synergy effect is described by the following inequality: 2+2 is not equal to 4
By correctly connecting the elements of the system, you can obtain a significant excess of its potential over the simple arithmetic sum of the potentials of the system elements.
The subject of macroeconomics coincides with the subject of economic theory.
Macroeconomics examines the relationships between the following subjects:
firms (considered as an aggregated business sector)
households (considered as an aggregate sector)
Unit is a collection of specific economic units that are considered as a single whole.
states (considered in 2 aspects: 1) as the public sector in the economy, 2) as a regulatory body)
various institutions of society associated with market infrastructure.
foreign economic systems
Main problems studied at the macro level.
Objectives of macroeconomics:
ensuring economic growth
high level of employment
stable price level and currency stability
external economic balance
Achieving these goals is possible by using the following tools
fiscal policy, including government spending and taxes
monetary policy
Main problems of macroeconomics
determination of the volume and structure of national income
identification of factors regulating employment throughout the economy
analysis of the nature of inflation
studying the mechanisms and factors of economic growth
consideration of the causes of economic cycles and market changes in the economy.
research on external economic interaction between national economies
theoretical justification of goals. Contents and forms of implementation of the state's economic policy.
Modern macroeconomics (economics) is based on 2 provisions
1. limitlessness of needs
2. limited resources
Modern macroeconomics is represented by the following areas
neoclassical
neo-Censian
institutionalism
evolutionary macroeconomics
neo-Marxist
monetarism - problems of money circulation
Macroeconomics, its subject and object of analysis. The purpose of economic theory is to study the interaction of people in the process of finding effective ways to use limited productive resources in order to meet the needs of society. Unlike microeconomics, which studies mainly the behavior of an individual economic entity, macroeconomics studies the system as a whole and its most important components, such as total production, the general price level, goals and problems of economic policy, foreign trade, unemployment, inflation, the functioning of the state sectors, etc.
The most important feature of macroeconomics is the use of aggregate parameters. The very concept of “aggregation” is a combination, summation of homogeneous economic indicators on a certain basis in order to obtain more general values. This approach allows us to consider only four economic entities: the household, the business sector, the public sector and the foreign one. It is obvious that each of the named economic agents is a collection of real subjects.
The household sector includes all private national units whose activities are related to meeting their own needs. A distinctive feature of this economic agent is that he acts as a private owner of all factors of production. As a result of investing resources in certain activities, households receive income, which, in the process of its distribution, is divided into consumed and saved parts. Thus, three types of economic activity in this sector of the economy are realized: firstly, the supply of production factors to the relevant markets; secondly, consumption; thirdly, saving part of the income received.
The business sector is the totality of all firms registered in the state. A characteristic feature of this sector is production activity, the purpose of which is to obtain a finished product. To achieve it, firstly, all necessary resources are purchased on the factor of production market; secondly, the manufactured products are offered to the appropriate market; thirdly, to carry out the reproduction process, investment of funds is organized.
The public sector includes all government institutions and agencies. This economic entity is a producer of public goods, which include national defense capability and the defense industry, education, basic sciences, etc. To realize this kind of benefit, the state is forced to purchase goods produced by the business sector as means of production. The costs for them, together with the remuneration of employees, constitute government expenditures. Their source is taxes levied on households and businesses. Government expenditures also include payments to both households (pensions and benefits) and the business sector (subsidies). A necessary condition for the functioning of the public sector is the equality of expenses with income. If the former exceed the latter, then you will have to resort to loans to cover the existing deficit. Thus, the economic activity of the state is manifested through government purchases in the product market, net taxes (the difference between tax revenues and transfer payments) and government loans.
The foreign sector includes all economic entities located abroad together with foreign government institutions. Its accounting allows you to analyze two types of economic activity - export and import of goods and services and financial transactions.
The aggregation process extends to markets. As is known, a market economy is a system consisting of four main elements: the market for goods, factors of production, money and securities. In the goods market, the purchase and sale of goods and services takes place, the producer here is the business sector, and the consumers are households, the state and firms. The money market characterizes the supply and demand of the national currency, the seller here is the state, and the consumer is other economic agents. The labor market is a form of labor movement, supply is carried out by households, and all other entities present demand for this resource. Two groups interact in the securities market: on the one hand, the state and firms, on the other, the state, firms and households. The entire specified set of markets is aggregated into the concept of “macro-market”, the microeconomic concept of the price of a good disappears, and the subject of study becomes the absolute price level and its changes.
As one whole. It is designed to find out how the economy as a whole works, to analyze the conditions, factors and results of the development of the national economy of a particular state.
The very concept of “macroeconomics” is associated with the Greek words “macro” - large, large and “economics” - the art of economic management. Thus, macroeconomics, as an integral part of economic theory, deals with large economic quantities and problems. The main differences between macro and micro analysis can be presented in the following table.
Concentrating attention on the most significant economic factors of economic development, macroeconomics does not take into account the behavior of individual economic agents - firms, households. Macroeconomic analysis involves abstracting from differences between individual markets and identifying key points in the functioning of an entire economic system.
Macroeconomics represents one of the youngest and most promising branches of economic theory. Macroeconomics began to take shape as an independent scientific discipline in the 30s of the twentieth century. Its origin is associated with the name of the outstanding English economist John Maynard Keynes (1883-1946). His main approaches to the study of macroeconomic processes are outlined in the work "" (1936). In this work, Keynes explored the main macroeconomic categories: volume of national production, price and employment levels, consumption, savings, investment and so on.
Many aspects of macroeconomics were developed by such scientists as J. C. Galbraith, E. Domar, S. Kuznets, V. Leontiev, G. Myrdal, P. Samuelson, I. Fischer, M. Friedman, E. Hansen, R. Harrod et al.
Main macroeconomic problems
The focus of macroeconomics is on the following main issues:
- provision ;
- general economic equilibrium and the conditions for its achievement;
- macroeconomic instability, measurement and modes of regulation;
- determining the results of economic activity;
- the state of the state budget and balance of payments of the country;
- cyclical nature of economic development;
- optimization of foreign economic relations;
- social protection of the population and others.
Macroeconomic policy
Macroeconomics uses in its analysis aggregated or aggregate values that characterize the movement of the economy as a whole:
- general price level
- market interest rate
- level
- level and
The main macroeconomic indicators are: gross national product, its growth rate, inflation rate and unemployment rate.
The most important result of macroeconomic analysis is the development of macroeconomic policies.
Macroeconomic policy is a system of measures and activities aimed at solving social and economic problems. The objective goal of macroeconomic policy is to maintain the efficiency of the economy and mitigate the contradictions of the reproduction process.
Macroeconomic Policy Objectives are determined by the development requirements posed by changing reality in a given period of time. Therefore, depending on the state of economic development, not only the objectives of macroeconomic policy change, but also its types (economic growth, stabilization). Currently, the macroeconomic policy of countries with developed market economies is aimed at achieving the following objectives:
- security sustainable economic growth allowing to achieve a higher quality and standard of living of the population;
- security high employment(with small involuntary unemployment), which provides the opportunity for all individuals to realize their productive abilities and receive income depending on the quality and quantity of labor expended;
- security social security guaranteeing a decent existence for the unemployed, disabled, elderly and children;
- ensuring economic freedom, giving economic entities the opportunity to choose their field of activity and model of economic behavior;
- ensuring general economic security;
- achieving optimal, ensuring the establishment of balance in international commodity and cash flows, stabilization of the national currency exchange rate.
Objectives of macroeconomic policy (macroeconomics):
- Maintaining a high level of national production and constant economic growth rates, without recessions.
- High level of employment and low level of involuntary unemployment
- Implementation of rational market pricing to maintain price stability
- Equilibrium of exports and imports
- Exchange rate stability
Problems that make up the subject of macroeconomics:
- National production— measuring national output and implementing the necessary measures to maintain constant rates of economic growth.
- Employment— macroeconomic instability, cyclical development, unemployment
- Price level— state intervention in economic development to reduce inflation and improve the well-being of citizens
- Foreign economic development— cooperation with other countries
Macroeconomic Policy Instruments
The macroeconomic policy of the state is carried out by the Government and the Central Bank. The following instruments are distinguished: fiscal, monetary, social and foreign economic.
The first macroeconomic concepts were already present among economists of the early stages of the development of economic science. It is generally accepted that the foundations of macroanalysis were developed in the 1930s. twentieth century, that the foundations of macroeconomics and macroanalysis were developed by the outstanding English economist of the last century, John Maynard Keynes (1883 - 1946). It was then that the conventional division of economic theory into micro- and macroeconomics took place. In 1936, Keynes published his main work, The General Theory of Employment, Interest and Money, which laid the foundation for modern macroanalysis. J. Keynes substantiated a theory that explains the patterns of economic movement as a macromarket. He studied the quantitative functional dependencies of the reproduction process, the relationships between such phenomena as capital investment and national income, investment and employment, consumption and savings, price levels, wages, profits and interest. Three main ideas of J. Keynes can be distinguished.
- 1. Stimulating aggregate demand (AD). To have a fully developing economy, it is necessary to constantly maintain a certain level of AD. Keynes believed that AD is determined by three factors: household consumption, business investment, and government spending.
- 2. The decisive role of investments (J) in the country’s economy, they play a big role in achieving economic growth.
- 3. State regulation of a market economy or interventionism.
Thanks to the teachings of J. Keynes, the inability of the neoclassical school to answer the question of the causes of the Great Depression (1929-1933) and ways to stabilize the economy was revealed. It was one of the deepest global economic crises of the twentieth century. Keynesian recipes were used as the basis for economic policy and helped the world economy emerge from the crisis. Since then, two main economic schools have been competing in economic science - neoclassical and Keynesian with their numerous branches.
Macroeconomics as a branch of economic theory represents a body of knowledge, concepts and ideas that explain the behavior of the economy within the framework of all social reproduction. In macroeconomics, the study of the role of the state and methods of state regulation of the economy (GRE) is of particular importance. The object of macroeconomics research is extremely mobile and subject to the influence of scientific progress, internal and external factors. It is presented aggregated, i.e. aggregate indicators. Identification of patterns and dependencies between these indicators is the subject of interconnected markets in which various economic agents - households, firms and the state - interact. The role of the latter is greatly increasing and changing. Relying on state property and the corresponding sector of the economy, the state essentially turns into a collective entrepreneur, while at the same time carrying out one of the main functions - state regulation of social reproduction. The subject of macroeconomics can be represented by the following problems: employment, the value of gross domestic income, the dynamics of the business cycle, the price level, inflation, unemployment, economic growth, the world economy. In macroeconomics, a number of concepts are widely used that also define its subject: flows and stocks, investments, savings and wealth, budget deficit and public debt, interest rates, expectations of economic agents, international economic relations. Flows are economic variables that can only be measured as turnover over a period. This is income on securities, the state budget deficit and other reserves, i.e. economic variables measured at a specific point in time. For example: a country’s public debt, its gold and foreign exchange reserves, etc.
Macroeconomics is of an applied nature, responding to the economic problems of our time. The main method of macroeconomic research is economic and mathematical modeling. Macroeconomic models are formalized descriptions of various socio-economic phenomena and processes in order to identify relationships and dependencies between them. Since real economic relations in the economy are extremely complex and diverse, contradictory and constantly evolving, modeling is designed to clarify, sometimes in a simplified form, the essence of these phenomena under the influence of endogenous (internal) and exogenous (external) factors.
Macroeconomic analysis is based on the simplest model of circular flows or a model of the circulation of gross national product (GNP), income and expenses of society. It is considered in a closed economy, where only two economic agents operate - households and firms, and in an open economy, where all economic agents operate. Real and cash flows occur unhindered, provided that the total expenses of economic agents are equal to the total volume of production. Aggregate spending boosts employment, output, and income. From the income received, the expenses of economic agents are formed, which are returned as income to the owners of the factors of production. Cause and effect change places, and the model takes the form of a circuit. It, in turn, shows that each business participant simultaneously acts as a seller and a buyer.
Rice. 1.
Characterizing the model, it should be noted that if the total expenses that determine the aggregate demand (AD) of economic agents decrease, this leads to a decrease in employment and output. Therefore, an important task of macroeconomic policy in a market economy is to achieve stabilization of aggregate demand (AD). The circular flow model in an open economy takes on a more complicated form, since here all economic agents take part in economic activity. The movement of income and expenses is expanding.
Macroeconomic models. Relationships between macroeconomic entities.
Macroeconomic models are formalized (logical, graphical and algebraic) descriptions of various economic phenomena and processes in order to identify functional relationships between them. Any model (theory, equation, graph, etc.) is a simplified, abstract reflection of reality, since all the variety of specific details cannot be simultaneously taken into account when conducting research. Therefore, no macroeconomic model is absolute, exhaustive, or comprehensive. It does not give the only correct answers addressed to specific countries in a specific period of time. However, with the help of such generalized models, a set of alternative ways to control the dynamics of employment levels, output, inflation, investment, consumption, interest rates, exchange rates and other internal (endogenous) economic variables is determined, the probabilistic values of which are established as a result of solving the model. External (exogenous) variables, the value of which is determined outside the model, often act as the main instruments of the government’s fiscal policy and the monetary policy of the Central Bank - changes in the amounts of government spending, taxes and money supply. The multivariance of ways to resolve economic problems provided by the models allows us to achieve the necessary alternativeness and flexibility of macroeconomic policy. The use of macroeconomic models makes it possible to optimize combinations of fiscal, monetary, exchange rate and foreign trade policy instruments, and to successfully coordinate government and Central Bank measures to manage cyclical fluctuations in the economy. The most promising from this point of view are models that take into account the dynamics of inflationary expectations of economic agents. Their use in macroeconomic forecasting makes it possible to reduce the risk of unexpected inflation, which has the most destructive impact on the economy, as well as to mitigate the problem of distrust in the policies of the government and the Central Bank, which is one of the most difficult in macroeconomics. Generalized macroeconomic models such as the circular flow model, AD-AS, Keynes cross, IS-LM, Phillips curves, Laffer curves, Solow model, etc. They represent a general toolkit for macroeconomic analysis and do not have any national specifics. The values of empirical coefficients and specific forms of functional dependencies between economic variables in different countries may be specific. Any macroeconomic model should be assessed not by the criterion of its momentary “suitability” or “unsuitability” for the economy of a particular country, including Russia, but by the criterion of its usefulness in the process of understanding economic dynamics and managing its indicators. The objective difficulty is to ensure that the preconditions for constructing the model are sufficient from the point of view of the stated goal and to avoid erroneous conclusions for macroeconomic policy. At the same time, the model can be quite realistic, but too complex, while the simplicity of the model is one of the most important requirements for it in terms of the possibilities of its use in the research process. However, excessive simplification of the model can lead to the exclusion of significant factors from the analysis, as a result of which the conclusions will be incorrect. Therefore, the most difficult aspect of building any model is determining the range of factors that are essential for the macroeconomic analysis of a specific problem. Along with the classification of economic variables, both endogenous and exogenous, another grouping is also important, related to the way they are measured over time. Stock variables can be measured only at a certain point in time and characterize the state of the research object at a certain date - the beginning or end of the year, etc. Examples of stock include government debt, the amount of capital in the economy, the total number of unemployed, etc.
Flow variables are measured per unit of time (per month, per quarter, per year, etc.) and characterize the actual “flow” of economic processes over time: the amount of consumer spending for the year, the volume of investment for the year, the number of people who lost their jobs during the quarter, and etc. Flows cause changes in stocks: the accumulation of budget deficits over a number of years leads to an increase in public debt; changes in the capital stock at the end of the current year compared to its value at the end of last year can be presented as a flow of net investment for the year, etc. The relationship between stocks and flows forms the basis of the original macroeconomic model of circular flows.
Macroeconomics as a branch of economic theory. The connection between macroeconomics and microeconomics.
Macroeconomics is a branch of economic science that studies the behavior of the economy as a whole with specifications. ensuring conditions for sustainable economic growth, full employment of resources, minimizing inflation and balancing the balance of payments.
Macroeconomics began to emerge as an independent scientific field in the early 1930s. XX century, while the formation of microeconomics dates back to the last third of the 19th century. The foundations of macroeconomics were laid by John Maynard Keynes.
The subject of macroeconomic theory is the study of macroeconomic phenomena that are not associated with any one sector of the economy, but are relevant to all sectors of the economy and should receive a general (macroeconomic) explanation. Macroeconomics examines the behavior of the economy considered as a whole: its ups and downs, problems of inflation, unemployment. It should be noted that some macroeconomic issues relate to the economy of a country, and some may have consequences for a number of countries (for example, global oil or financial crises). In this case, we are dealing with global macroeconomic analysis. Macroeconomics examines both changes in production and employment in the long term (economic growth) and their short-term fluctuations, which form business cycles.
Macroeconomics deals with the measurement and analysis of aggregate indicators of the economy, such as gross domestic product, price level, interest rate, unemployment rate, money supply, etc. Using these aggregate indicators, macroeconomics studies market equilibrium and economic dynamics, putting forward various hypotheses about the behavior of participants economy (economic agents). These behavioral hypotheses, which play a fundamental role in macroeconomic theory, are justified in modern models by a specially conducted analysis of microeconomic foundations.
Thus, macroeconomics is closely related to microeconomics.
