macroeconomic equilibrium. The concept of macroeconomic equilibrium Macroeconomic equilibrium in the country's economy

Life market economy can be characterized as a simultaneous stay in two mutually exclusive states: equilibrium and disequilibrium (dynamics).

In a market economy, all products produced (total production) must become commodities (total supply) and all income (total income) must be spent ( aggregate demand) and sold (total consumption). Only in this case, the aggregate values of effective demand and product offer match. Such an ideal, but practically unattainable state of the market economy is its “economic equilibrium”.

On the other hand, the market economy is in in constant motion, which causes a violation of the equality of aggregate demand and aggregate supply. And although each such deviation is accompanied by many negative consequences, only through such deviations does “ economic dynamics” – the development of a market economy. Let's look at these states in more detail.

Macroeconomic balance– achievement in the national economy of balance and proportionality of economic processes: production and consumption, supply and demand, production costs and results, material and financial flows.

The main condition for achieving macroeconomic equilibrium is the equality between aggregate demand and aggregate supply (AD = AS).

Macroeconomic equilibrium is the only price level, at which the value of the total output (goods and services) offered on the market is equal to the value of the total demand.

Various areas of economic science have assessed the problem of achieving macroeconomic equilibrium in different ways. Let's briefly look at the most important of them.

Classical theory of macroeconomic equilibrium. Classical economists (A. Smith, D. Ricardo, J. B. Say, A. Marshall and others) believed that the market economy independently copes with the efficient distribution of resources and their full use. The main tenet of this theory is Say's law, according to which the process of production itself creates income, exactly equal to the cost manufactured goods, i.e. supply generates its own demand (AD = AS).

The ability of the market economy to self-regulate automatically provides the desired level of production and employment (although sometimes there may be disruptions in the economy associated with wars, droughts, political upheavals). Therefore, full employment is the norm of a market economy, and the best economic policy of the state is non-intervention in the economy. These views dominated economic science until the 1930s.

Keynesian theory of macroeconomic equilibrium. The economic crises of the 1930s disproved the classical theory. The English economist John Maynard Keynes and his followers proved that a monopolistic economy is characterized by disequilibrium, it does not guarantee full time, therefore, does not have an automatic self-regulation mechanism.

Keynes considered aggregate demand to be volatile and prices to be inelastic (not tending to fall as sales increased), so unemployment could persist for a long time. Hence the need for a macroeconomic policy to regulate aggregate demand, which is very volatile. Keynes believed that in order for the economy to balance, to achieve equilibrium, demand must be "efficient". The state, by supporting private investment through taxation, monetary policy and carrying out government spending, compensates for the lack of "effective demand" with additional government demand and thereby helps the economy to approach the level of full employment.

neoconservative theory. In the mid-1970s, industrial production growth rates fell in Western countries. This phenomenon has led to:

a) another crisis of overproduction;

b) the onset (about 50 years after the end of the Great Depression) of the “downward” wave of the big cycle;

c) an increase in oil prices by OPEC member countries by more than 4 times, which contributed to high cost inflation with a simultaneous decline in production, the so-called stagflation (combination of production stagnation with inflation).

A powerful blow fell on Keynesian theory. It became obvious that the active intervention of the state in the economy is not able to prevent the decline in production. This theory was replaced by the neo-conservative direction, which again advocated non-interference of the state in the economic activities of firms. A model of macroeconomic regulation was developed, based on the revival of market self-regulation and the promotion of private enterprise. In accordance with the recommendations of the neo-conservatives, the economic policy of the United States, Great Britain, Germany and a number of other states was based on the principle of “efficient supply” - encouraging private business. To make free enterprise more profitable, they significantly reduced taxes on profits and on labor income. The state significantly reduced its interference in economic affairs, partial privatization of state enterprises began - they were sold to private individuals, transformed into joint-stock companies. In many countries, economic planning has been noticeably curtailed, funding has been reduced social programs. The measures taken made it possible to significantly reduce the state budget deficit, reduce the amount of money in circulation, while the inflation rate fell by 3-4 times, and the pace of economic development increased.

But the model of neo-conservative regulation of the economy did not save the West from recessions in production and inflation. In 1979–1981 a new economic crisis broke out. The search for a new macroeconomic regulator began.

Mixed management. A critical comparison of state (Keynesian) and market (neo-conservative) regulators convincingly proved the inferiority of both exclusively market and only state regulators. economic mechanisms. Mixed control type national economy suggested the laureate Nobel Prize Paul Samuelson (USA). This macroeconomic regulator has the following specific features.

1. it organically combines the sustainability of public administration necessary to satisfy public needs(social sphere, non-market sector), and the flexibility of market self-regulation, which is required to meet rapidly changing personal demands.

2. mixed management makes it possible to optimally combine macroeconomic goals: economic efficiency, social justice and economic growth stability.

3. The new regulator is able to balance aggregate demand and aggregate supply and thereby overcome the asymmetry of the Keynesian concepts of effective demand and neoconservatives' effective supply.

This type of macroeconomic regulation today prevails in all developed countries with a market economy, although there are various options:

With minimal participation of the state in the regulation of the economy (USA);

With the maximum allowable state regulation (Sweden, Austria, Germany, Japan, etc.).

Types of macroeconomic equilibrium:

1. General and partial equilibrium. The general equilibrium is understood as the interconnected equilibrium of all national markets, i.e. the balance of each market separately and the maximum possible coincidence and implementation of the plans of economic entities. When a state of general economic equilibrium is reached, economic entities are completely satisfied and do not change the level of supply or demand to improve their economic situation.

Partial equilibrium is the equilibrium in individual markets that are part of the national economy.

2. Equilibrium can be short-term (current) and long-term.

3. Equilibrium can be ideal (theoretically desirable) and real. The prerequisites for achieving perfect equilibrium are the presence of perfect competition and the absence of side effects. It can be achieved provided that all participants economic activity find consumer goods on the market, all entrepreneurs are factors of production, the entire annual product is fully realized. In practice, these conditions are violated. In reality, the task is to achieve a real equilibrium that exists with imperfect competition and the presence of external effects and is established when the goals of economic activity participants are not fully realized.

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

The imbalance means that various fields and sectors of the economy are not balanced. This leads to losses in the gross product, a decrease in the income of the population, the emergence of inflation and unemployment. In order to achieve an equilibrium state of the economy, to prevent undesirable phenomena, experts use macroeconomic equilibrium models, the conclusions from which serve to substantiate the macroeconomic policy of the state.

Macroeconomic balance - it is such a state of the national economy when the use of limited economic resources for the creation of goods and services and their distribution among different members of society are balanced, i.e. there is an overall proportionality between resources and their use; factors of production and the results of their use; production and consumption; supply and demand; tangible and financial flows. Achieving full equilibrium is an economic ideal, since economic crises, incomplete or inefficient use of resources are inevitable in real life. In economic theory, the macroeconomic ideal is the construction of general equilibrium models economic system.

Macroeconomic Models are formalized (logically, graphically) descriptions of various economic phenomena and processes in order to identify functional relationships between them. Despite the fact that in practice there are various violations of the requirements of such a model, knowledge of theoretical models of macroeconomic equilibrium allows us to determine the specific factors of deviations of real processes from ideal ones, to find ways to implement the most optimal state of the economy. In economics, there are quite a few models of macroeconomic equilibrium that reflect the views of different areas of economic thought on this problem:

the model of simple reproduction by F. Quesnay on the example of the economy of France in the 18th century;
classical model of macroeconomic equilibrium;
the model of general economic equilibrium under conditions of perfect competition by L. Walras;
schemes of capitalist social reproduction (model of K. Marx);
J. Keynes' short-term economic equilibrium model;
the cost-output model of VV Leontiev.

Aggregate demand and aggregate supply

When developing models of macroeconomic equilibrium, a significant development along with the construction of market-structured models (L. Walras model) was received by an approach that analyzes the conditions for ensuring equality between aggregate demand and aggregate supply in the national economy. To reveal the patterns of macroeconomic equilibrium, it is necessary first of all to formulate the concepts of aggregate demand and aggregate supply, since all changes in the national economy are associated with their changes.

Aggregate demand

Under aggregate demand is understood as the sum of all individual demands for final goods and services offered in the commodity market. Aggregate demand consists of consumer spending(aggregate household demand), investment spending by businesses, government spending, and spending on net exports. Some elements of aggregate demand are relatively stable, such as consumer spending; others are more dynamic, in particular investment spending. The aggregate demand curve (Fig. 12.1) shows the amount of goods and services that consumers are willing to purchase at the appropriate price level. It will give such options for combining the volume of production of goods and services and the general level of prices in the economy,

Rice. 12.1.

which the commodity and money markets are in equilibrium.

In macroeconomics, the level of aggregate demand as an aggregate money demand pas elements of GNP are influenced by two main factors: the amount of money in the economy (M) and the speed of their turnover (V). The influence of all other factors of demand on a particular commodity is ultimately reduced to changes in these factors. The negative slope of the aggregate demand curve can be explained by in the following way: the higher the level of flail (P), the lower the real reserves Money (M/R), and consequently, the quantity of goods and services for which demand is presented (Q) is also less. The inverse relationship between the magnitude of aggregate demand and the price level is also associated with the effect interest rate, the wealth effect and the effect of import purchases. Thus, when prices rise, the demand for money and the interest rate increase. The appreciation of credit leads to a decrease in consumer and investment spending and, accordingly, to a decrease in the volume of aggregate demand. Rising prices also reduce the real purchasing power of accumulated fixed-value financial assets (bonds, term accounts) and encourage their owners to cut costs. Rising domestic prices with unchanged import prices shift part of the demand from domestic goods to imported goods and reduce exports, which also leads to a fall in aggregate demand in the economy.

When analyzing general economic equilibrium, an important role is played by consideration of the relationship between the national product and the main components of aggregate demand. As the money income of the population, which is a factor in aggregate demand, grows, there appear and grow saving. They can be represented as the difference between income and consumption (consumer spending). In economic theory, to analyze the role of consumption and savings in ensuring macroeconomic equilibrium, the concepts of consumption and savings functions were introduced. consumption function shows the ratio of consumer spending to income in their dynamics. Similarly considered and the savings function, which shows the ratio of family savings to its income in their dynamics. The trend in the change in the amount of consumption of the population as incomes grow is characterized by the marginal propensity to consume: it shows what part additional income goes to increase consumption. By analogy, the marginal propensity to save shows what part of the additional income the population uses for additional savings when the amount of income changes. Obviously, the main factor influencing levels of consumption and savings is income. In addition, consumption and savings are affected by taxes, prices for goods and services, and the volume of supply in the market.

Aggregate supply

This is the sum of all individual offers. Aggregate supply represents the monetary value of the total amount of all final goods and services offered for sale. It consists of wages, rent, interest and profit. The aggregate supply curve shows how much aggregate output can be offered to the market by producers at certain values of the general price level in the economy (Fig. 12.2). The shape of the aggregate supply curve is interpreted differently by classical and Keynesian schools.

Rice. 12.2.

Segment I characterizes supply under conditions of part-time employment, segment III determines the aggregate supply in a state of full employment, and segment II is characteristic of supply in conditions approaching full employment.

The aggregate supply is affected by the same factors (technical and technological base of production, production costs) that cause a change in the market of a particular product.

Macroeconomic equilibrium assumes the equality of the volume of aggregate demand and aggregate supply. In reality, there are quite a few options for changes in aggregate demand and aggregate supply. Thus, with an increase in aggregate demand, there is an increase in prices, output, national income. The decline in aggregate demand is accompanied by a decline in prices, output and national income. A growing aggregate supply leads to an increase in output and a decrease in prices. The reduction in supply, as well as in the volume of production, is accompanied by an increase in prices. Thus, as a result of constant fluctuations in aggregate demand and aggregate supply, equilibrium at the macro level is achieved very rarely. The problem of achieving macroeconomic balance by the national economy is considered by representatives of various areas of economic science, as already noted, in different ways.

3.3.1. The essence of general macroeconomic equilibrium

Macroeconomic balance is the main problem of macroeconomic analysis, the balanced state of the economic system as a single integral organism. The form of manifestation of the equilibrium of the economic system as a whole is the balance and proportionality of economic processes. Correspondence must be achieved between the following parameters of economic systems:

production and consumption;

Aggregate demand and aggregate supply;

Commodity weight and its monetary equivalent;

Savings and investments;

Labor, capital and consumer goods markets.

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

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

partial balance- balance in the individual commodity markets included in the system of the national economy. The foundations are laid in the works of A. Marshall.

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

Real macroeconomic equilibrium- is established in fact with imperfect competition and external factors influencing the market.

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

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

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

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

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

Introduction

Chapter 1. Theoretical basis macroeconomic equilibrium

Chapter 2. Models of economic equilibrium D. Keynes

Conclusion

List of used literature

INTRODUCTION

Macroeconomic equilibrium - the state of the economic system, in which there is equality between the volume of production and the volume of consumer demand.

In a market economy, the problem of macroeconomic balance is of fundamental importance. Achieving macroeconomic equilibrium is closely linked to achieving full employment, price stability and economic growth.

Various economic schools have different views to this problem. The Keynesian theory of economic equilibrium originated in the 30s. XX century. Its founder is the English economist John Maynard Keynes. Keynesian theory began to spread after the Great Depression - a severe economic crisis, which swept the capitalist world in 1929-33. Keynes outlined his theory in the book "The General Theory of Employment, Interest and Money", which came into conflict with the then dominant classical views on the economy. It was, according to generally accepted opinion, truly revolutionary for its time. In his work, he substantiates important role government intervention in economic life.

In his book, Keynes presented a fundamentally new economic model and apparatus for economic analysis. Over time, his teaching developed and was supplemented by the achievements of world economic thought. It is now an integral part of Keynesian theory.

The relevance and practical significance of the problem of macroeconomic equilibrium is determined by the possibility of practical application of the economic policy instruments proposed by the supporters of the Keynesian approach. Many recommendations of the Keynesian school served as the basis for the economic policy of the governments of many states for several decades. There is no doubt that the experience of implementing the Keynesian recipes for regulating the economy should be taken into account when conducting economic reforms in our country.

In economic science, a fairly large amount of literature is devoted to this problem. Research on this topic was carried out both within the framework of the Keynesian school itself and in other areas.

The purpose of this work is to consider the position of the Keynesian school on macroeconomic equilibrium. Based on the goal, the following tasks are defined in the work:

Consider economic and mathematical models of macroeconomic equilibrium of Keynesian theory.
Show the point of view of Keynesian theory on economic policy.

The paper uses the terms and methods of analysis used in economics. The method of equilibrium analysis, based on the circulation of income and expenses, is the basic one in the study of economic models of macroeconomic equilibrium. Keynes introduced into scientific circulation aggregated macroeconomic quantities describing objects at the level National economy. With the help of establishing quantitative links between them, economic and mathematical models are being built - simplified descriptions of economic reality. Despite a certain amount of abstractness, models reflect all the essential factors of a particular problem and help to understand the functioning of economic mechanisms.

CHAPTER 1. THEORETICAL FOUNDATIONS OF MACROECONOMIC EQUILIBRIUM

1.1. The concept of macroeconomic equilibrium

The problem of macroeconomic equilibrium is understood as the search for such a choice (suitable for all), in which the way in which limited production resources (capital, land, labor) are used to create various goods and their distribution among different members of society is balanced. This balance means that an overall proportionality is achieved:

a) production and consumption;

b) resources and their use;

c) supply and demand;

d) factors of production and its results;

e) material and financial flows.

Thus, macroeconomic equilibrium is a key problem of economic theory and economic policy of any state.

This conclusion is based on the fact that the ideal (theoretically desired) equilibrium is the stable use of the economic “energy” of individuals with the full optimal realization of their interests in all structural elements, sectors, and spheres of the national economy.

It is obvious that equilibrium thus understood is an economic ideal, a system of abstractions of real life, albeit essential. However, without this there is no science, because it studies not only the reasons for the discrepancy between essence and phenomenon, but also between practice and the ideal.

1) empirical discovery and fixation of economic relations;

2) identification of significant links within them;

3) an exact quantitative determination of the conditions for the equilibrium of the elements that make up the world of economic phenomena in accordance with the law of free competition.

Ideally (optimally), the achievement of the third stage expresses the goal of economic scientific knowledge. Moreover, following the logic of V. Pareto, the actual macroeconomic ideal is:

a) in theory - building a model of the general equilibrium of the economic system;

b) in practice - bringing the behavior of all consumers (buyers) and producers (sellers) in line with the requirements of the law of free competition.

In economic theory, the macroeconomic ideal is the construction of models of the general equilibrium of the economic system.

In real life, various violations of the requirements of such a model occur.

But the significance of theoretical models of macroeconomic equilibrium makes it possible to determine the specific factors of deviations of real processes from ideal ones, to find ways to implement the optimal state of the economy.

In economics, there are many models of macroeconomic equilibrium that reflect the views of different areas of economic thought on this problem:

F. Quesnay model of simple reproduction on the example of the French economy of the XVIII century;

K. Marx schemes of simple and extended capitalist social reproduction;

L. Walras model of general economic equilibrium under the conditions of the law of free competition;

V. Leontiev "costs of output" model;

J. Keynes model of short-term economic equilibrium.

Macroeconomic balance is the central problem of social reproduction.

Distinguish between ideal and real equilibrium. (Figure 1.1)

The ideal is achieved in the economic behavior of individuals with the full optimal realization of their interests in all structural elements, sectors, and spheres of the national economy.

Achieving such an equilibrium presupposes the observance of the following conditions of reproduction:

All individuals must find commodities on the market;

All entrepreneurs must find factors of production on the market;

The entire product of last year must be sold.

Rice. 1.1 Types of economic equilibrium

The ideal balance comes from the prerequisites of perfect competition and the absence of side effects, which is in principle unrealistic, since in real economy there is no such thing as perfect competition and a pure market. Crises and inflation bring the economy out of balance.

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

Distinguish between partial and complete equilibrium:

Partial equilibrium is called equilibrium in a single market for goods, services, factors of production;

Complete (general) equilibrium is the simultaneous equilibrium in all markets, the equilibrium of the entire economic system, or macroeconomic equilibrium.

Complete economic equilibrium is the structural optimum of the economic system, to which society strives, but never fully achieves it due to the constant change in the optimum itself, the ideal of proportionality.

1.2. Classical theory of macroeconomic equilibrium

It should be noted that prior to Keynes, economic theory did not consider general economic equilibrium as an independent macroeconomic problem. Therefore, the classical model of general economic equilibrium (GES) is a synthesized presentation of the views of economists of the classical school using modern terminological apparatus.

The classical model of the EER is based on the main postulates of the classical concept, namely:

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

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

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

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

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

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

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

The generated volume of aggregate supply is the sum of factor incomes of households, which are distributed last for consumption and savings: y = C + S .

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

Since aggregate demand in a simple model is the sum of consumer and investment spending: y = C + I, then if the condition I = S is met, equilibrium will be established in the goods market. That is, according to Say's law, any supply generates a corresponding demand.

If planned investment does not correspond to planned savings, then an imbalance may arise in the market for goods. However, in the classical model, any such imbalance is eliminated in the capital market.

The equilibrium conditions in the capital market are reflected in the fourth equation. The parameter that ensures equilibrium in the capital market is a flexible interest rate.

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

Graphically, the relationship between the rate of interest, investment and savings according to the "classics" is as follows (Fig. 1.2).

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

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

Rice. 1.2 The classical model of the interaction between investment and savings

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

For example, suppose that planned savings are less than planned investments.

Then, investors will compete for free credit resources in the capital market, which will cause an increase in the interest rate.

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

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

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

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

The fifth equation stands alone and is needed only to determine the current price level.

Given the parameters of the money supply and the velocity of money, the price level depends only on the parameter of real national income: Р = (Mv)/y.

On the other hand, given the equilibrium value of real national income, the change in money market parameters due to the neutrality of money is reflected only in changes in the price level.

If we represent the quantitative equation of exchange with respect to y and thereby express the aggregate demand function: y = (Mv)/P, then it is obvious that to ensure the condition y = const, it is necessary to change the money supply and the price level in the same proportion.

The neutrality of money is most fully illustrated by the mechanism known as the "Cambridge effect".

The fact is that each subject plans for himself some optimal level of cash (real cash). Any change in the amount of money is perceived by economic entities as a deviation of the value of real cash balances from optimal value and take action to restore its optimal value.

In the case of an increase in the real cash register, the subjects begin to exchange excess cash for goods, increasing consumer spending and aggregate demand; in the event of a decrease in the real cash desk, aggregate demand decreases.

And since, under conditions of full employment, aggregate supply is rigidly fixed relative to the level of natural output, its only possible reaction to a change in aggregate demand will be a corresponding change in the price level.

Prices in the classical concept are absolutely flexible, and therefore such a reaction of aggregate supply to fluctuations in demand occurs instantly.

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

Consequently, the prices of goods, factors, and the general price level change in the same proportion.

Representatives of the classical school were characterized by microeconomic analysis, but their views and conclusions fairly accurately reflect the functioning of the market system.

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

This means that, firstly, the goal of the owner of income is not to receive money as such, but to acquire various material goods, i.e. income earned is spent in its entirety. Money in this approach plays a purely technical function that simplifies the process of exchanging goods. Secondly, only own funds are spent.

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

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

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

In this way, market mechanism in the theory of the classics, he himself is able to correct the imbalances that arise on the scale of the national economy and state intervention turns out to be unnecessary.

The principle of non-intervention of the state is macroeconomic policy classics, and the recommendations of modern economists - supporters of the neoclassical direction are based on the findings of the classical school. A graphical interpretation of the general economic equilibrium in the classical concept is shown in Figure 1.3.

In the third quadrant of the lower part of the figure, the process of formation of equilibrium in the labor market is displayed, where the equilibrium values of the rate are set real wages w" and employment N". In the fourth quadrant, the equilibrium value of national income y" is determined by projecting the equilibrium value N* onto the production function.

Rice. 1.3 General economic equilibrium in the classical concept

The equilibrium value y "determines the aggregate supply function. The aggregate demand function is derived from the quantitative equation of exchange: y = (Mv) / P. A change in the amount of money affects only nominal variables, changing the current price level P. Accordingly, the graphs AD and W shift from the origin of coordinates with an increase in the money supply and vice versa with its decrease.The upper part of the figure shows the process of formation of equilibrium conditions in the capital market, where an equilibrium interest rate is established.So, the formation of conditions for general economic equilibrium in the classical model occurs according to the principle of self-regulation, without state intervention, which is provided by three built-in stabilizers: flexible prices, a flexible nominal wage rate, and a flexible interest rate. real sector are independent from each other.

CHAPTER 2. MODELS OF ECONOMIC EQUILIBRIUM D. KEYNS

2.1. Total cost model

The key point in Keynesian theory is the concept of total spending. Aggregate expenditures - the sum of all expenditures of economic entities on goods and services produced in the economy. The components of total costs are:

consumer demand.
business sector demand.
State demand.
Rest of the world demand.

consumer demand. Represents household consumption expenditure. Including spending on durable goods, non-durable goods, spending on services.

According to Keynesian theory, the consumption function has the form:

Where C f - autonomous consumption, independent of income,

Y d - disposable income, income after taxes Y-T,

b is the marginal propensity to consume; a coefficient that shows how much of the additional income goes to consumption.

The graph of the consumption function is shown in Figure 2.1.

Fig.2.1. Consumption function graph

Savings is the portion of income that is not currently consumed. The consumption function looks like:

where S f - autonomous saving, independent of income,

Y d - disposable income,

s is the marginal propensity to save; a coefficient that shows how much of the additional income goes to savings.

The main factor determining the amount of consumption and savings is disposable income. In addition, consumption and saving are affected by taxes, accumulated wealth, expectations, consumer debt. It is assumed that the graphs of the consumption and saving functions are stable. This is because consumption and savings are strongly influenced by habits and traditions.

The demand of the business sector is the investment costs of firms. These include: productive investment, housing construction, inventory changes.

Investment demand is the most volatile part of aggregate demand. The reasons for this are cyclical fluctuations in output, the volatility of the economic situation, the irregularity of innovations, and the long periods of use of fixed assets.

The investment function has the form:

where I f - autonomous investments determined by external economic factors and independent of income,

d is the coefficient of sensitivity of investments to changes in the interest rate,

i - real interest rate.

The volume of investments and the interest rate in Fig.2.2. are inversely related. The higher the interest rate - the fee for the loan provided, the less investment projects will be implemented.

Autonomous investments can be supplemented by stimulated (induced) ones, which increase with the growth of GNP. Taking into account the dependence of investment on income, the function takes the form:

where g is the marginal propensity to invest - the part of the additional income that goes to investment.

Fig.2.2. Investment schedule

Factors influencing the size of investments - the expected rate net profit, real interest rate, taxes, changes in production technologies, the size of the fixed capital of enterprises, economic expectations, income, etc.

State demand (government purchases) - all expenses of federal, regional and local authorities for the purchase of final products and services. These are expenditures on defense, security, social and cultural events, promotion of scientific and technical progress, public administration etc. However, this excludes transfer payments - gratuitous payments by the state, as not directly related to production.

To finance its activities, the state levies taxes by law.

The tax function looks like:

where T f - taxes independent of income,

t is the tax rate.

The state budget is approved by the parliament for the current financial year in advance, and the main items of government spending remain unchanged. The change in the amount of expenses is associated with a lengthy procedure of discussion in Parliament. Thus, the amount of government spending in the model of total spending is assumed to be constant.

Rest of the world demand is net exports; the amount by which foreign expenses for exports exceeds domestic spending on imports. The pure export function is:

where v is the marginal propensity to import; part of the additional income that is spent on imports,

X f - offline net export.

The relationship between a given country's income and its net exports is negative, because as income increases, imports increase, while exports do not depend on income and remain unchanged.

Total cost model. Planned expenditures (E) - the amount that macroeconomic entities plan to spend on goods and services. Real costs differ from projected costs when firms make unplanned investments.

Fig.2.3. Equilibrium in the total expenditure model

On the line Y=E, the level of production is equal to the planned costs. If the schedule of planned expenditures is shifted up or down by a certain amount, the change in output will be somewhat greater. This is due to the multiplier effect.

The equilibrium volume of production in the model of total expenditure is determined by the intersection point of the bisector Y=E and the graph of aggregate demand in Figure 2.3. The total cost model is applied in the case of fixed prices.

Method of inflows and outflows allows you to identify the causes of inequality in total spending and GDP. Inflows are understood to be any addition to consumer spending - investments, government purchases, export earnings. Outflows - expenses not directed at the purchase of products produced in the country - savings, taxes, import costs.

The method is as follows. Part of disposable income is not spent on consumption, but can go to savings, taxes, imports. Therefore, consumer spending alone is not enough to purchase the entire volume of production. But consumption is supplemented by government spending, firms and exports, which make up for the lack of consumer spending. Therefore, achieving equilibrium requires equality of outflows and inflows (I+G+EX = S+T+IM).

2.2. Model of Aggregate Demand - Aggregate Supply

The model of aggregate demand - aggregate supply is a model of macroeconomic equilibrium. Macroeconomic equilibrium is achieved when aggregate demand and aggregate supply are equal.

aggregate demand. Aggregate demand - the costs of households, firms, the state and the rest of the world for the purchase of products produced in the country. The value of each component of aggregate demand varies over time to varying degrees. Thus, government purchases are the most stable part, their size changes relatively slowly.

The graphical representation of the model is a curve with a negative slope (Fig. 2.4). The aggregate demand curve AD=C+I+G+X n shows the quantity of goods and services that consumers are willing to purchase at each possible price level. At each of its points, the commodity and money markets are in a state of equilibrium.

Rice. 2.4. Aggregate demand curve.

The negative slope of the curve reflects an inverse relationship between the general price level and aggregate demand. This is due to the following price factors.

Wealth effect - decreases as prices rise purchasing power financial assets and economic entities reduce costs. Interest rate effect - a high price level with a fixed money supply causes an increase in the demand for money and an increase in the interest rate. An increase in the interest rate reduces the amount of investment. The effect of import purchases - with an increase in prices for domestic goods, consumers switch to their foreign counterparts. The change in price factors is graphically reflected by the movement along the aggregate demand curve.

Non-price factors affecting aggregate demand - consumer welfare, consumer expectations, taxes, interest rates, subsidies, political environment, technology development, etc. A change in these factors will be reflected in the graph by a shift in the aggregate demand curve to the right or to the left.

Aggregate offer. Aggregate supply - the amount of final goods and services produced in the economy for a certain period in monetary terms. The aggregate supply curve shows how much goods and services can be supplied by producers at each possible price level.

Non-price factors of aggregate supply: production technologies, consumer welfare, taxes, resource prices, etc.

Regarding the shape of the aggregate supply curve in economics, there are different points of view. The classical school of economists believes that the curve is vertical at the level of full employment of factors of production. At the same time, prices and nominal wages, according to classical economists, are flexible. This ensures a quick restoration of equilibrium in the economic system. The classical model is more in line with the behavior of the economy in long term.

Keynesian theory, in addition to the vertical segment of the aggregate supply curve, considers the horizontal and ascending segments (Figure 2.5). The fundamental difference from the classical model is that the economy operates under conditions of part-time employment; prices, nominal wages and other nominal values are "hard".

Rice. 2.5. The aggregate supply curve.

Causes of "rigidity" of wages and prices - action employment contracts, statutory minimum wages, “menu” effect, duration of supply contracts, union intervention. When demand increases, firms increase output without changing the price level or changing it slightly.

The horizontal segment of the aggregate supply curve characterizes the state of the economy in recession - a high level of unemployment and a significant underutilization of production capacities. When aggregate demand increases, firms are able to increase output without raising prices.

On the upward segment, the increase in real output is accompanied by an increase in prices. The positive slope of the curve shows the direct dependence of output on the price level. An increase in aggregate demand will cause both an increase in prices and an increase in output.

On the uptrend, the economy is close to full employment. To increase output in response to an increase in aggregate demand, firms raise additional resources. Factor prices rise, costs rise, and firms are forced to raise product prices.

The shape of the aggregate supply curve allows you to observe the change in production costs per unit of output with a change in output. On the horizontal line, firms have access to inputs at constant prices and increase production without raising prices. In the uptrend, production costs rise and the general price level rises in the economy. On the vertical segment, the possibilities for increasing output have been exhausted, since all resources are occupied. The expansion of aggregate demand will only lead to higher prices. Firms can repurchase already employed resources, increasing their production costs and increasing output. But in general, real output in the economy will not increase.

Macroeconomic equilibrium - equality of aggregate demand and aggregate supply. A graphical illustration of this equality is the point Y r of the intersection of the curves of aggregate demand and aggregate supply in Figure 2.6. At this point, all national product produced will be purchased.

Fig.2.6. Equilibrium in the AD-AS model

Keynesian theory suggests that macroeconomic equilibrium can be reached at any point on the aggregate supply curve. On the horizontal segment, equilibrium is achieved without inflation, on the ascending one - with a slight increase in prices, on the vertical - in conditions of inflation.

The equilibrium volume of output changes when the aggregate demand and aggregate supply curves shift. The result of an increase in aggregate demand depends on the state of the economy. The multiplier effect on different segments of the aggregate supply curve operates in different strengths.

On the horizontal segment, the action of the multiplier is manifested in full. An increase in total expenditure causes a significant increase in output at a constant price level. However, on the upward and vertical segments, the change in aggregate demand will be absorbed by inflation to one degree or another.

Due to the inflexibility of prices in the short run, a reduction in aggregate demand in the ascending and vertical segments will lead to their fall only after a certain time.

Contraction in Aggregate Supply - A shift in the aggregate supply curve to the left will reduce output and cause prices to rise. In this situation, cost-push inflation occurs. An increase in aggregate supply indicates economic growth output increases and prices fall.

2.3. Macroeconomic equilibrium in the money market

Demand for money. Demand for money - the desire of economic entities to have a certain amount of means of payment at a certain point in time. Keynesian theory of the demand for money is different from the classical theory. If in the classical theory the demand for money depends on income, then in the Keynesian theory the demand is mainly related to the interest rate.

In his book The General Theory of Employment, Interest and Money, Keynes considered three motives that make people hold financial assets in the form of money: the transactional, the precautionary motive, and the speculative motive.

The transactional motive L t is associated with the need for money for planned purchases and payments. In this case, the demand for money is directly proportional to the amount of income and does not depend on the interest rate.

Precautionary motive L p - explains the keeping of money in case of unforeseen circumstances. The demand for money also depends on the amount of income, but the influence of the interest rate is felt.

As can be seen, both of these motives in the Keynesian theory of the demand for money determine its certain similarity with the classical theory.

The speculative motive differs significantly from the two previous ones. The Keynesian model assumes that an economic entity has assets in two forms - money and bonds. Speculative demand is based on the inverse relationship between the interest rate and the bond price.

Money, unlike bonds, does not generate income, but can be quickly exchanged for other types of assets. If the interest rate falls, then the bond rate rises and economic entities begin to exchange bonds at a high cost for money, counting in the future on the return of the interest rate and the bond rate to the initial level.

Consequently, during periods of lower interest rates, the demand for money increases. Conversely, if the interest rate increases, then the demand for money decreases.

Thus, the speculative motive determines the inverse relationship between the demand for money and the level of the interest rate (Figure 2.7).

Fig.2.7. speculative demand.

The money demand function looks like this:

where k is a coefficient showing the sensitivity of money demand to income

Y - real income

l - coefficient showing the sensitivity of the demand for money to the interest rate

i - interest rate

So, Keynesian theory assumes that the demand for money depends on income and interest rates. The transactional motive, with an increase in income, causes an increase in demand, and the speculative motive, with an increase in the interest rate, causes it to decrease.

It should be noted that modern theories demand for money differ in many ways from the Keynesian model. Thus, it is assumed that demand depends on the amount of wealth, expected inflation and other factors. In addition, economic entities may have a wider range of assets than cash and bonds.

Money offer. Money supply (M s) includes cash outside banking system(C) and demand deposits (D): M-- s =C+D. The value of the money supply is influenced by the Central Bank, the system of commercial banks and the population.

The money supply model looks like this:

where M s - money supply

m - money multiplier

H is the monetary base.

Monetary base - cash outside the banking system and required reserves banks:

where C is cash,

R - bank reserves.

The money multiplier is

m=M s /H=(C+D)/(C+R)

or m=(cr+1)/(cr+rr),

where cr=C/D, rr=R/D.

At the same time, cr is determined by the behavior of the population, rr depends on the established norm of required reserves.

The central bank can control the money supply by influencing either the multiplier or the monetary base. Equilibrium in the money market occurs when the demand and supply of money are equal. The money market model assumes that the money supply is controlled by Central Bank and is fixed at the level M. The price level is stable and equal to P.

Fig.2.8. Equilibrium in the money market.

The interest rate brings the money market into equilibrium. This is due to the fact that economic agents change the structure of their assets depending on the interest rate. If the interest rate is high, the money supply exceeds the demand. Households are trying to get rid of accumulated cash. If the interest rate is high, the bond price will be low. Therefore, economic agents will start buying cheap bonds, increasing the demand for them.

The demand for bonds will raise their price and thus cause the interest rate to fall. Lowering the interest rate will restore equilibrium. If the interest rate is high, the demand exceeds the money supply.

The Central Bank can control the money supply by regulating the monetary base. The main instruments of the monetary policy of the Central Bank:

change in discount rate.
Change in the required reserve ratio.

CONCLUSION

In the course of writing term paper It was concluded that the main principle of Keynesian theory is the need for government intervention in establishing macroeconomic equilibrium. According to Keynesians, the market system is accompanied by instability and cyclicity, it is not capable of self-regulation. In the short run, prices and wage rates are difficult to change and therefore cannot balance aggregate demand and aggregate supply. The equilibrium level of output does not always coincide with the level of full employment.

The tools of economic analysis of the macroeconomic equilibrium of the Keynesian school are the model of aggregate costs, the model of aggregate demand - aggregate supply, the IS - LM model.

The aggregate expenditure model is able to show the mechanism for achieving equilibrium and the emergence of imbalances in the economy, depending on changes in aggregate demand. An increase in total expenditure causes a larger increase in the equilibrium level of production. This phenomenon underlies the multiplier effect. However, it is of limited use, since it does not take into account price changes.

In the aggregate demand model - aggregate supply, where individual markets are aggregated into single market, reflects changes in the level of production and the level of prices. Macroeconomic equilibrium in the model is achieved at the intersection point on the graph of the curves of aggregate demand and aggregate supply.

The aggregate supply curve in the Keynesian interpretation consists of three parts: horizontal, ascending and vertical.

Each part of the aggregate supply curve corresponds to a certain state of the economy. The model of aggregate demand - aggregate supply is able to illustrate the impact of the state's economic policy on the equilibrium output.

The IS-LM model, being a specification of the aggregate demand-aggregate supply model, combines the commodity market and the money market. The IS curve shows equilibrium in the commodity market, the LM curve - in the money market. The point of their intersection determines the combination of the interest rate and the level of output at which the commodity market and the money market are in equilibrium. The model can show the effect fiscal policy and monetary policy on total expenditure and equilibrium output.

The economy of capitalism, according to Keynesian theory and historical events, is subject to recessions and depressions. The very nature of the market presupposes the cyclical and uneven development of the economic system. The "invisible hand" of the market is not able to prevent crises and their consequences such as a decline in production and unemployment.

In order to counteract these processes and contribute to the achievement of macroeconomic balance, the state must take special measures to regulate the economy. Fiscal policy involves manipulation public spending and taxes, and monetary policy regulates the money supply. These measures influence the change in the levels of aggregate expenditures and equilibrium output.

Keynesian theory emphasizes the priority of fiscal policy in establishing macroeconomic equilibrium. The secondary and auxiliary role of monetary policy is associated with its indirect and uncertain impact on the equilibrium level of production.

LIST OF USED LITERATURE

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http://loskutov.info/ - Keynesian theory state regulation macroeconomic equilibrium

The concept of macroeconomic equilibrium

As you know, in any market economic system, all produced products must become commodities, and all income must be spent on these commodities. Only in this case, all these aggregate values (effective demand and aggregate supply) will coincide. This balanced state is called “macroeconomic equilibrium”.

Any economy can be in two mutually exclusive states: equilibrium and disequilibrium (dynamics). In other words, it is in constant motion, and therefore the equality of aggregate demand and aggregate supply is often violated. This is the reason for the emergence of macroeconomic disproportions: inflation, unemployment, a decline in production and a violation of the balance of payments. And although this may be accompanied by very negative social consequences– through this kind of deviation from equilibrium, the economy is in dynamics, and therefore develops.

Definition 1

Macroeconomic balance- a balanced state of the economic system as a single holistic organism and, at the same time, a fundamental problem of macroeconomic analysis.

In macroeconomic equilibrium, a correspondence must be achieved between the following basic economic parameters:

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

The main condition for achieving macroeconomic equilibrium is equality between aggregate demand ($AD$) and aggregate supply ($AS$). That is, the equality $AD = AS$ must be satisfied (Fig. 1):

Figure 1. Classical macroeconomic equilibrium model. Author24 - online exchange of student papers

As can be seen from fig. 1, macroeconomic equilibrium is the “place” where demand ($AD$) and supply ($AS$) “meet”, intersecting at the point $M$. This point means the equilibrium output, and, at the same time, the equilibrium price level. Thus, the economic system is in an equilibrium state at such values of the real national product and such a price level at which the volume of aggregate demand will correspond to the volume of aggregate supply.

Types of macroeconomic equilibrium

Macroeconomic equilibrium is different types: partial, at the same time general and real.

Partial equilibrium is understood as the equilibrium in individual commodity markets of the national economy. This type macroeconomic equilibrium was studied in detail in his works by the well-known economist A. Marshall.

At the same time, the general equilibrium is the equilibrium as a single interconnected system, which is formed by all market processes occurring in the economy.

Real macroeconomic equilibrium, as the name implies, takes place under conditions of imperfect competition, as well as under the influence of external factors on the market.

Remark 1

The general macroeconomic equilibrium is considered stable if, after its disturbance, it is able to be restored with the help of market forces. If active state intervention is required to restore the balance, then the balance will be considered unstable. L. Walras is considered the founder of the theory of general economic equilibrium. According to Walras, with a general equilibrium, balance is achieved simultaneously in all markets: consumer goods, money market, labor market, etc. A necessary condition is the flexibility of the relative price system.

In an economic system, general equilibrium can be achieved both in the short run (crossing of $AD$ and $SRAS$ lines) and in the long run (crossing of $AD$ and $LRAS$) (Fig. 2). In the short run, equilibrium is achieved by the economy with underemployment of resources. The long run implies equilibrium at full employment of resources (that is, in the presence of only the natural rate of unemployment). General macroeconomic equilibrium assumes that total spending equals total national output and investment (I) equals savings ($S$). In addition, the value of the demand for money must correspond to the value of the money supply in the economic system.

If the equilibrium is disturbed in the economy, which is close to the state of full employment of resources (point $A$ in Fig. 2), caused by a change in aggregate demand from the position $AD_1$ to $AD_2$, the economy will initially reach its short-term equilibrium (point $B$) , and then reaches the long-term (point $C$). Such a desire of the economy to a state of stable equilibrium (to the point $C$) occurs sequentially, through a change in prices.

Figure 2. General macroeconomic equilibrium. Author24 - online exchange of student papers

A change in aggregate demand from $AD_1$ to $AD_2$ can occur, for example, due to an increase in the money supply in the economy. When a short-term equilibrium (point $B$) is reached, the price level remains unchanged for some time, since producers can increase supply at the expense of stocks, as well as involving additional reserve capacities in production. However, continued pressure from aggregate demand will continue to drive output growth. This will inevitably lead to an increase in average costs, since the growth in demand for resources in conditions of their full employment will contribute to an increase in the price of labor (wages).

Further, increased average costs will begin to hold back the growth of output, which will reduce aggregate supply. In turn, this will drive up the price of goods and services. This rise in prices will hold back the growth of aggregate demand (in Fig. 2, the aggregate demand decreases, shifting along the $AD_2$ curve from point $B$ to point $C$). The final result of the adaptation of the economic system to the change in aggregate demand from $AD_1$ to $AD_2$ will be the achievement by it of a state of long-term equilibrium (at point $C$) with the same volume of national production, but with more high level prices.

Economic practice confirms that, regardless of the reasons that cause a change in aggregate demand and a violation of the initial long-term equilibrium, in the long run, the economy, through self-organization, self-regulation, returns to the level of potential GNP, given by the amount of resources and technology available.

In conditions of underemployment of resources, the growth of aggregate demand for a long time can stimulate the growth of aggregate supply, up to potential GNP. However, further growth in aggregate demand will cause the reaction described above (Figure 2).

In the case of a decrease in aggregate demand, caused, for example, by a decrease in the money supply or an increase in taxes, the $AD$ curve will shift to the left, which will indicate a decrease in GNP in the short term at a constant price level. In the future, a downward price change, due to rising unemployment, a decrease in wage rates (a decrease in average costs), will gradually return the economy to the level of potential GNP (movement along the $AD_3$ curve to the $D$ point). However, in a real economy, the prices of goods and the price of labor, due to imperfect competition, tend to increase rather than decrease, i.e. they are not "flexible" downwards, so national output can recover at potential levels, but at a higher price level.