GNP factors. Gross National Product
GNP is the total value of the entire volume of products and services in both spheres of the national economy, regardless of the location of national enterprises (in the country or abroad).
1. cost calculation method. It represents the summation of the expenses of all economic objects associated with the purchase of final goods and services. GNP=C+I=G=X n c-personal will consume household expenses. Expenses of companies associated with the purchase of fixed capital, working equipment, as well as expenses associated with housing construction. In addition, expenses related to the placement of capital costs (depreciation charges), expenses from the state are taken into account, expenses from the outside world represent net exports or the difference between exports and imports.
2. Calculation method based on income. This is the summation of factor income received by citizens of a given country and 2 elements that are not factor income. GNP = W + P nc + P k (T f + D in + NP k) + R + i + A m + N b R-rent, A m - depreciation, N b - indirect taxes, P nc - non-corporate profit enterprises, P-profit of corporations, NP to -non-distribution of profits of the corporation, T f -tax on corporate profits, i-interest income, D in -dividends.
3.Production method. Represents the summation of added values created at each stage of production of the final product. Value added is the difference between the cost of products produced by a firm and the cost of expenses incurred by the firm to transform factors of production and suppliers.
In economic theory and practice, a distinction is made between “nominal” and “real” GNP.
Nominal GNP is the value of production volume in each year, calculated at market prices for that year. Calculated by summing the value of production (price times quantity) of all millions of goods and services produced in an economy. The value of nominal GNP can change under the influence of both the dynamics of the physical volume of production and the dynamics of the price level.
Real GNP measures the cost of all manufactured products in base year prices and is the main indicator of the physical volume of production. When real GNP rises, it indicates that total output has increased, i.e. more goods and services are produced. Consequently, the dynamics of real GNP more accurately reflects changes in the production of goods and services than does the indicator of nominal GNP.
The ratio of nominal GNP to real GNP shows the increase in GNP due to rising prices and is called the deflator.
The GDP deflator can be used to simply compare output over different periods of time. An increase in the GNP price index in a particular year compared to the previous year indicates inflation, a decrease in the price index indicates deflation.
7. Main macroeconomic schools and directions: sources of disagreement.
The table shows how representations of ek-tov alternated over time over the last 4 centuries. Most scientific discussions are related to identifying the peculiarities of the functioning of the market economy, i.e. determining how effectively market mechanisms operate to achieve basic macroeconomic goals. There are 3 sources of disagreement: 1) the degree of flexibility of prices and wage rates, 2) the degree of flexibility of the aggregate supply, 3) the role of expectations in the decision-making process.
Members of the right bloc believe that prices and wage rates are flexible and therefore their fluctuations are capable of ensuring a balance in aggregate supply and demand. The extreme rightists believe that the aggregate supply determines the total demand and therefore in the economy there can only be an equilibrium level of unemployment (or the natural level of unemployment). This approach substantiates the thesis about the need to develop market forces in the economy in the absence of government intervention in the economy. Modern right-wing economists suggest that aggregate supply depends largely on the volume and level of factor productivity. They are based on the scientific provisions of the theory of Smith and Hayen, which propose to encourage the development of competitive forces in the economy and limit the role of the state in the national economy.
1) right-wing economists assume that over a long period of time there is absolute elasticity of wage rates and prices in the direction of their decrease. This thesis is based on the assumption of absolute variability in the use of environmental resources in the long term. According to right-wing economists, disequilibrium unemployment is a temporary phenomenon and can be observed in the short term. In the long run, equilibrium unemployment corresponds to the level of natural unemployment. Natural unemployment includes frictional and structural unemployment. Leftists believe that there is no flexibility in prices and wages in the short term, since the price level is strictly regulated by the contract for the supply of products, and the level of wages is determined by labor contracts, therefore but the market is not able to automatically change the disequilibrium unemployment rate, which necessitates government intervention in the economy.
In macroeconomics, a short period is understood as a state of underemployment of resources in the production of goods and services. When the actual level of unemployment exceeds its natural level, i.e. There may be phenomena of cyclical unemployment. The long-term period is a period of time that, in macroanalysis, is characterized by full employment of resources (natural rate of unemployment Ue) from 6% to 8% of the labor force of the national economy, and the level of production capacity is 80-90% of the total production capacity.
2) right-wing economists believe that aggregate supply (AS) does not respond to changes in aggregate demand (AD), i.e. aggregate supply does not depend on demand, but depends on the volume and level of productivity of production factors, therefore the government must influence the supply to promote competition, production and freedom of market forces. This approach can be called supply theory. Leftists believe that aggregate demand can influence Soviet supply. For example, an increase in AD leads to an increase in AS and a decrease in the level of unemployment; therefore, the state must provide an effective volume of demand to achieve the optimal level of employment of resources. The theorists of Soviet demand were the Keynesians and their followers. In their opinion, to increase employment it is necessary to increase consumer demand and investment demand. If the volume of demand from households and firms is insufficient, then the government must carry out additional government expenditures to increase the volume of GNP. Therefore, government intervention in the economy is necessary in a short period. The disagreements between neoclassical and neo-Keynesians are caused by different approaches to the analysis of aggregate supply. Monetarists reject government intervention in the economy by influencing the amount of aggregate demand. On the other hand, unlike the classics, they allow government intervention in the sphere of monetary circulation. To reduce unemployment, it is necessary to create a condition for a possible reduction in wages, and therefore they prove that there is a dependence on the price level and the level of employment. Monetorists believe that an increase in AD can only have a short-term effect on increasing employment, since an increase in government spending can be achieved by increasing taxes, which leads to a reduction in demand from the private sector. As a result, the private sector is replaced by the state sector, and private demand is replaced by state demand. The total effect in the result will be insignificant or zero. (Fig.)
P is the general price level. AS’-concept of neoclassicals, AS’’-concept of neo-Keynesians
3) right-wing activists claim that agents’ expectations quickly and adequately adapt to changing conditions, while supporting the main role of expectations in price changes. This is the position of the new macroeconomic school or representatives of the theory of rational expectations. Critics of right-wing activists note that the formation of expectations is a complex and ambiguous process; people often make mistakes and their expectations are sometimes inadequate to the changing situation. The new neoclassicism adheres to the statements of representatives of the neoclassical movement in the field of fiscal and monetary policy and takes into account the position of the theory of monetarists. New Keynesians proceed from the theory of rational expectations, trying to emulate radical Keynesianism.
8. Main macroeconomic schools and directions: comparative analysis of positions on key macroeconomic problems
The neoclassical school interprets AD based on the formula of the collich theory of money. 1) MV=PY, M-quantity of money, V-speed of turnover of the monetary unit, P-average price level, Y-volume of national production. 2) AD=C+I+G+Xn, C decrease, I decrease, 3) effect of import prices. Exports will decrease, and therefore AD will decrease. (Figure)
P-general price level, Y-real GNP
The formula of the collic theory of money is actively used by both neoclassicists and monetarists. They believe that the volume of the money supply (M) and M are constant, and the general price level and the volume of the national product are inversely related, so the AD curve is directed to the right and down, i.e. has a negative slope. For Keynesians, the volume of demand (AD) depends on the influence of many factors. Volumes of government expenditures, amounts of taxes, volumes of autonomous expenditures (volumes of autonomous consumption and autonomous investments, in an open system the volume of autonomous net exports). Keynesians have a different point of view on fluctuations in global demand from neoclassicals; they believe that fluctuations in AD are the main reason for changes in the economic situation, and therefore recommend that the government influence global demand primarily through fiscal policy methods. Monetarists interpret the soviet supply curve in the same way as Keynesians, and the soviet demand curve as neoclassicals. Here are the main features of this school: 1) the supply of money will have a dominant impact not on the general price level, 2) in the short term, money can influence real economic variables (GNP volume and employment level). Money is the main reason for fluctuations in the price level and national income, 3) in the long term, money affects primarily nominal values, and real values are determined in the long term not by monetary, but by real factors (capital reserves, production = number of resources, number of people working), 4) in the market economy, economic agents and the private sector are characterized by stability. The situation of macroeconomic instability arises as a result of government policy calculations. (rice)
9 . Main macroeconomic schools and directions: the theory of rational expectations.
Farmers and firms are forced to make multi-period decisions in the face of uncertainty in the future. That. Most decisions require eco-agents to form expectations about the future. Expectations must be formed in the area of price and income levels, and the subject of dispute among investors is the question of how agents form their expectation. A simple rule for subjects when making decisions would be to act in the next year in the same way as in the previous one. This is the rule of statistical expectations, which can be formalized as follows: Y e t +1 =Y e t, where Y e t +1 is the expected income in the next year, Y e t is the real income in the current year. If the value of the expected income this year does not coincide with the actual income, then the forecast error can be defined as the difference in the value of the expected income. Operating agents who take into account errors in their activities based on past experience will be guided by the rule of adaptive expectations: Y e t +1 = Y e t +g(Yt-Y e t), where Yt is real income, g is the share of the magnitude of the forecast error. If g=0, then the expectations do not change; if g=1, then the expectations turn into static ones, i.e. agents correct their perceptions to the full extent of past mistakes. Adaptive expectations are associated exclusively with the past and have no connection with the future, therefore representatives of the theory of rational expectations rejected the theory of adaptive expectations, stating that when making decisions, acting agents use modeling of probabilistic situations in the future. These theorists proceed from the premise that subjects use comprehensive information, act prospectively and do not make systematic errors in their activities. Pre-theories of rational expectations actively use simplified models that show the dependence of environmental processes on the action of external factors. Q Dt =a-bPt+Ut, Q=d+cPt+Vt, P e t =P e t (x i), x i - set of pricing factors, P e t - expected price of the product, Q Dt =Qst. In the case of rational expectations, the Soviet supply curve, both in the short and long term, is a fixed vertical coinciding with the production line at the natural level of unemployment. That. new classics prove that money is neutral for them not only in the short term, but also in the long term, i.e. are superneutral.
The new classics take an extreme position regarding the need for government intervention in the economy and even reject monetary levers of influence. In their opinion, the real value of GNP may deviate from the equilibrium value for two reasons: 1) due to the influence of random external factors that cannot be foreseen, 2) as a result of unexpected government measures, and therefore the government must act adequately to changes in the market situation and inform your agents in a timely manner.
The main objections of neoclassicals: 2) doubts arise regarding the ability of agents to adequately predict their activities, i.e. keep track of all changes in economic policy. 2) concerns the absolute elasticity of prices downwards. 3) some activists believe that shifts in economic policy will have a deeper impact on practice. These shifts affect not only the general price level, but also production volumes. 4) the interests of agents do not always coincide, so the expectations of different social groups may be opposite. 5) this theory does not take into account the time delay, i.e. It is doubtful that the agents' reaction instantly and immediately corresponds to the change in the real situation.
10. AD-AS model: aggregate demand. Price and non-price factors of aggregate demand.
Aggregate demand is the aggregated monetary demand for elements of the real gross national product (GNP) at the corresponding level of inflation.
Aggregate demand, in contrast to market demand, is a more complex category and, on a societal scale, consists of four components: C+I+G+X n, where
C – consumer demand, I – investment demand,
G – government purchases, X n – net exports
(Rice)
The AD curve illustrates the change in the aggregate level of all expenditures by households, businesses, government, and foreign countries as a function of changes in the price level. The nature of this curve suggests that when the price level rises, the volume of real output will be less and when the price level decreases, the volume of real GNP will be greater. The negative slope of the AD curve is explained by three most important effects in a market economy: 1.) the interest rate effect (Keynes effect), 2.) the real wealth effect (Pigou effect), 3.) the effect of import purchases. In the first case, if the price level rises, then, with a constant volume of money supply, the interest rate increases. The higher the interest rate, the lower the investment demand, and the consumer demand also falls due to the rise in cost of credit. In the second case, when prices for goods and services fall, the real value of money increases, consumers feel that their wealth is increasing. This encourages them to increase spending and demand increases. In the third case, when prices for domestic goods increase, buyers prefer lower-priced imported goods. Aggregate demand for domestic goods will decrease.
There are several non-price factors that influence consumer demand:
1.) Changes in consumer spending (consumer wealth, consumer debt, taxes, consumer expectations), 2.) Changes in investment spending (interest rate, investment returns, business taxes), 3.) Changes in government spending, 4. ) Changes in net export expenditures.
There are factors that lead to a shift in the AD curve. Shift to the right: an increase in the money supply, inflation expectations of the population, an increase in government spending. Shift to the left: higher taxes.
As noted, income and wage policies are linked to macroeconomic issues. This chapter examines the formation and distribution of gross domestic product and national income to the extent and from such angles as are necessary for the subsequent presentation of more specific income and wage policies.
Gross domestic product(GDP) is the volume of products and services at market value created over a certain period as a result of the production activities of economic units that are residents of the country. Residents are understood as economic units (enterprises and households) with the center of economic activity in the economic territory of a given country. GDP is defined as the value of final goods and services produced in a country, i.e. goods and services used for final consumption. The value of intermediate goods and services purchased and used in production is not included in GDP.
Since final products are mostly consumed by the population, and accumulation ensures economic development, GDP is used as an indicator characterizing the level of well-being.
GDP can also be defined as gross value added. Added value characterizes the contribution to the cost of products made at enterprises. Added value, calculated for an individual enterprise, characterizes its contribution to the production of a product or service in conditions where their creation, due to the division of labor, is the result of the cooperative activities of many enterprises.
GDP is created using fixed capital, which wears out and becomes obsolete during the production process. The share of consumed fixed capital accounts for about 10% of GDP. Theoretically, depreciation of fixed capital should be excluded from GDP, since it does not represent added value, but characterizes the cost of capital consumed in production. However, determining depreciation is associated with insurmountable problems in calculating the replacement cost of fixed assets. Therefore, the cost of consumed fixed capital is usually included in the volume of GDP. This makes it more comparable when comparing data across individual countries.
Eliminating wear allows you to determine net added value, characterizing the direct increase in value in production and the amount of generated and distributed income. At the same time, the costs of production represent the income of economic entities that participated with their resources in production. From these positions, net added value corresponds to the amount of primary income.
Primary income - This is income received as a result of labor participation in production and ownership of assets used in production. They are paid from the added value created in the production process. Taxes levied by the state on production and imports are also considered primary income.
Gross domestic product is the main indicator on the basis of which the level and pace of economic development of a country is determined. An increase in GDP is accompanied by an increase in the number of people employed and an increase in living standards, which is reflected in an increase in the consumption of goods and services. The increase in GDP is determined by investments, their share in GDP and the excess of the total volume of investments over the amount of capital consumed in the production process.
Periods of economic growth can be followed by a decline in production, employment, a decrease in GDP per capita and, accordingly, living standards. However, if we consider development over long periods, it is obvious that the basis for increasing the living standards of the population is the growth in the production of goods and services, i.e. GDP in total and per capita. The main factors of GDP growth are the involvement of additional resources in production, primarily additional physical capital and labor, as well as an increase in the productivity of production factors as a result of scientific and technological progress, the use of more productive technologies and improved skills of workers.
The increase in labor resources is associated with an increase in the population in general and in working age. At the same time, the educational level, professional training and, accordingly, the quality of the workforce are increasing.
Along with the growth in the number of employees, the volume of accumulated industrial buildings, equipment and other means and working conditions increases. In connection with reclamation and irrigation works, the amount of agricultural land may increase slightly; carrying out geological exploration works leads to an increase in mineral deposits possible for use in production.
Increasing the resources used is an important factor in GDP growth. However, most of its growth is achieved through scientific and technological progress, which makes it possible to produce new types of goods, improve the quality of traditional goods and more fully use the resources used.
See also:
Quite often the terms “economic growth” and “GDP” pop up in the news. Many people have heard about them, but I think not everyone has a good idea of what it is. Meanwhile, to assess the economic condition of the country, experts use these very indicators - so let's look at this issue in more detail.
Concept of GDP
GDP stands for gross domestic product. In other words, GDP is a measure of the value of services and goods produced by any government . That is, this is absolutely all products that are produced in the country and are expressed in monetary terms. This indicator is usually expressed in US dollars, as it is a stable currency. In English, the name of the term is Gross Domestic Product with the corresponding abbreviation GDP.
Economic growth is closely related to GDP. It represents the growth of gross domestic product both per capita and in absolute terms. The main goal of economic growth is to raise the living standards of society: therefore, when measuring it, not only changes in GDP itself are taken into account, but also population growth. For example, if output increased by 5% per year, but the total population also increased by 5%, then the standard of living for each resident will remain the same.
Absolute GDP growth shows whether economic growth has occurred in a country over a certain time or not. The growth rate is accordingly used to find out whether economic growth has accelerated or slowed down. The same indicators are used per capita when taking GDP divided by population. An increase in the population with a constant GDP leads to a decrease in the standard of living - and vice versa, a decrease in the population while maintaining the volume of GDP allows us to speak of a higher standard of living.
The factors of economic growth include 2 different groups:
Factors of intensive growth. These include technological progress, growth in the level of workers, improved resource allocation, improved management of production activities, etc. Intensive growth depends on qualitative changes in production factors and technology modernization.
Factors of extensive growth. These include land, capital, labor, and natural resources. Extensive growth occurs due to the use of additional resources: increasing the number of employees, equipping with equipment, etc.
Factors of economic growth are practically never found in their pure form. As statistics from the last 30 years show, in developed industrial countries the contribution of extensive and intensive factors is almost the same, while in other countries economic growth occurs due to extensive factors. This is how nominal GDP was distributed in the world in 2015, according to the International Monetary Fund:
Quite expectedly, Africa has a red-brown color with the lowest GDP, despite the large size of the continent. Little Europe looks better, on par with Latin America. And finally, the map clearly shows two leaders in the form of the United States and the Asian region. Russian GDP (about $1.3 trillion) is at the level of Brazil or Germany and is several times inferior to the United States and China. Even small Japan has an absolute GDP almost four times larger. The chart below shows the comparative values of GDP and market capitalization of various countries at the end of 2016:
Market capitalization is the total value of all securities traded on the market. As we can see, although there is a correlation between GDP and capitalization, for individual countries the indicators may differ markedly. While the United States is comfortably in first place both in terms of GDP and market capitalization, China, which is equally confident in second place in terms of GDP, barely makes it into the TOP 10 in terms of the second indicator. Does this indicate that Chinese assets are undervalued? Time will show…
There is even less correlation between GDP and stock market returns of different countries. According to investment classicist Bernstein, “bad” economies often have good stock markets. This happens because investors demand additional payment for risk (why hold assets of a developing country, if not in order to receive a higher return than in reliable American securities). The speculative component of such expectations can push asset prices up. However, in practice, among the stock markets of developing countries, there are countries with both high and low returns relative to developed markets:
In Russia, with a negative indicator, Vanguard has a question regarding the calculation methodology - before 1995, we did not have a stock market, and in the period 1995-2012, the RTS index in dollars exceeded the return of its American counterpart.
It can be added that a country’s GDP directly affects the popularity of that country’s currency in the world, as well as its position in the world basket of currencies. Thus, China’s successes in recent years have not gone unnoticed - currently the yuan occupies a larger percentage of the world’s currency basket than the yen or pound sterling. Although back in 2010, the yuan was not there at all - which, however, is not very surprising, since the state of the currency basket is revised once every five years (source - IMF annual report 2016).
It is also not surprising that the introduction of the yuan came at the expense of a noticeable reduction in the share of the euro, since the Eurozone has been experiencing deflation in recent years, as well as problems with migrants. At the same time, since the last crisis in 2008, America has shown excellent growth in the stock market and maintained rates on its government. bonds in the positive zone - so the weight of the dollar in the currency basket has remained virtually unchanged, still dominating other currencies:
Types of GDP
GDP has several types. The following indicators of economic growth are distinguished:
Nominal GDP includes the value of all goods in the state and is determined by current market prices. It depends on changes in the price index (usually calculated in current year prices). The indicator grows with inflation, falling with deflationary processes.
Real GDP represents the total output produced over a given time. It is measured at base value, that is, at constant prices. It is calculated using the following formula: nominal GDP / general price level = real GDP.
The difference between them is that real GDP is affected only by changes in the volume of goods produced, while nominal GDP is affected by the price of the product itself.
The ratio of nominal GDP to real GDP is called the deflator. If inflation increased by 5% and nominal GDP by 3%, then real GDP will be negative.
Reflects the total value of all the goods of a country that are created by its residents, regardless of their location.
The ratio of GDP to GNP is shown by the following formula:
___________________________
GNP =GDP + ″Income″
___________________________
where ″Income″ is income received abroad by residents; however, it does not follow that GNP is always greater than GDP. If GNP is less than GDP, this means that foreigners earn more in a given country than residents of that country earn abroad.
The following factor incomes are distinguished as part of GNP:
salary and bonuses;
income from property (rental income, profit from organizations)
This is GDP divided by the population of a state. Many people think that this is an objective indicator of assessing the standard of living of each citizen of the country - but in fact, GDP per capita is not an indicator of his overall well-being. If a state has a lot of poor people, but at least a small number of very rich people, then the country's GDP can be large, although the real difference in the income of its citizens is huge.
In Russia, GDP per capita is $16,735. I think everyone will agree that there are few people in our country who earn that amount per year. In addition, the term “per capita” applies only to able-bodied citizens. And therefore, GDP per person is an even smaller figure.
How is economic growth measured?
The indicators by which economic growth is measured are GNP and GDP. It is traditionally believed that they characterize the standard of living and the dynamics of the well-being of society. However, an increase in any value does not mean that economic growth has occurred: it may be that as a result of the distribution of GNP, the rich will become richer and the poor poorer. So, without additional research, the GNP and GDP indicators are rather arbitrary.
The value of the real national product depends on the population size. For example, India's GNP is 70% greater than Switzerland's GNP. But in terms of share per capita, India is 60 times behind Switzerland. The average standard of living will increase only when production exceeds population growth, inflation is low and the distribution of benefits between different strata of society is more or less equal.
Economic growth can be measured by annual growth rates. This is easy to do: from the value of real GNP of the current year, you need to subtract the value of the previous year. The difference should be compared with the value of GNP for the previous year and the result expressed as a percentage. By constructing such indicators, it is possible to identify trends in economic development; however, research into other factors affecting living standards is less common.
Comparison of GDP of different countries
A country's GDP is usually measured in its currency. But this method will not work if you need to compare the GDP of two or more countries where different currencies are used. In this case, the GDP of each country is converted into US dollars and then compared.
Transfer to dollars is made in two ways:
Using exchange rates prevailing on the foreign exchange market.
Using exchange rates based on PPP - purchasing power parity. That is, the currency of one state must be converted into the currency of another in order to buy the same amount of goods in each country.
Example from Wikipedia: if the price of a unit of goods in Russia is 30 rubles, and in the USA - 2 dollars, then the dollar to ruble exchange rate should be 15 rubles per dollar. If the exchange rate is 25 rubles per dollar, then by buying goods in Russia (for 30 rubles), selling in the USA (for 2 dollars) and exchanging 2 dollars for 50 rubles at the current rate, on each such transaction you can receive an income of 20 rubles per unit of goods. Accordingly, prices for goods in the United States will decrease, the price of goods in Russia will rise, and the dollar/ruble exchange rate will decrease. As a result, equilibrium will be achieved at a new price level and exchange rate (for example, a product costs 1.7 dollars in the USA, 34 rubles in Russia, the dollar exchange rate is 20 rubles per dollar).
In reality, in developing countries there can be a huge gap between these methods, while in economically developed countries the difference is usually small. Data on countries' GDP is published by the International Monetary Fund (IMF) on its official website, using a method based on purchasing power. This gives an idea of how the world's GDP or the economy of a particular continent is growing.
GDP determines the state's money turnover. Like a private company, the state can incur debt by attracting loans from both its own citizens (for example, through Russia) and foreign individuals and legal entities (for example, through). Almost every country in the world has some form of government debt, which can be expressed relative to that country's GDP. Let's look at one interesting diagram:
The diagram reads like this: the greater a country's debt per capita, the larger the country's area. And the redder the color, the higher the debt to GDP ratio. The biggest debtors: Japan, Ireland, Singapore. America, which has a huge external debt, nevertheless, per capita in relation to GDP has not yet reached the 100% level. In general, a large public debt and the need for its gradual return to maintain the balance of the world economy can become an obstacle to a country's economic growth; however, this difficulty can be offset by effective monetary and economic policies.
Russian GDP
Let's take a closer look at domestic GDP:
At the same time, the dependence of Russian GDP on oil prices is very interesting:
The curves in this case are close to 1 and have remained virtually unchanged over the past 17 years. Thanks to high oil prices in the 2000s, Russian GDP growth turned out to be noticeably higher than the world average and such leading countries as China or the United States - however, after 2010, a multi-year recession began, which ultimately led to negative GDP growth rates:
Raw material dependence is a problem that concerns not only Russia. For example, a similar problem existed in the United Arab Emirates for about 20-25 years, which solved it by developing tourism infrastructure; Norway, also dependent on oil, had a giant stock fund in the fat 2000s, thanks to which its residents can feel confident in times of crisis. In Russia, I don’t see a real desire to solve this problem, confirmed by decisions from above - everything is limited to conversations and observation of oil prices. The video below clearly shows the change in GDP of countries around the world over the past 60 years:
How are GDP and human well-being related?
GDP identifies the overall economic health of a country. It lets you know about the general material condition of the nation, since along with the increase in the level of production, the well-being of the state also grows. But, as mentioned above, GDP does not reflect the social state of a nation; accordingly, it cannot be considered a universal indicator of the well-being of all citizens.
In addition, GDP does not take into account the free time of citizens - but its availability also allows us to judge the standard of living of society. Does not take into account the gross product and improvements in the quality of goods, nor any changes in the consumption and distribution of goods among people.
In addition, GDP does not include some activities that affect people's living standards. These include:
Non-market operations (car and house repairs, housekeeping, free labor of scientists, etc.).
Shadow economy (odd jobs).
By all accounts, the shadow economy in Russia is quite developed. It is understood as the provision of services and the production of goods for the population for a fee, which is not officially reflected anywhere - and from the point of view of law, these can be both permitted and prohibited types of activities. The shadow economy makes it very difficult for a country to achieve effective economic growth.
At the same time, GDP takes into account costs that increase its size, but do not lead to an increase in well-being. Among them are the fight against environmental pollution, huge landfills, noise, overpopulation, etc. These are side effects that overestimate the level of material well-being. In this regard, one can cite the statement of one American economist that “garbage is a product of economic life.”
Thus, GDP cannot be called an indicator of the well-being of the population. Behind the formal numbers there is a number of diverse and difficult to take into account sociological data that need to be brought together in some way to get a more complete picture. In addition, economic theory itself and the view of world economic processes are changing - today it is hardly possible to give a more definite answer to the question of the relationship.
P.S. In conclusion, I suggest watching a very good video, available in parts here: http://arzamas.academy/authors/279 . With the permission of the project, for ease of viewing, I merged all three videos into one and post the result below:
Topic 37. GROSS NATIONAL PRODUCT AND WAYS TO MEASURE IT
1. GNP as a general indicator of the country's development.
2. Expense method for calculating GNP.
3. Income method of calculating GNP.
4. The concept of added value.
1. GNP as a general indicator of the country's development.Gross National Product– the market value of all final goods and services produced and used in the country during the year.
A modification of the gross national product (GNP) is the gross domestic product (GDP) indicator: if the GNP indicator takes into account the activities of the country’s citizens not only on its territory, but also abroad, then the gross domestic product takes into account all people in the country, regardless of citizenship. For most developed countries, the differences in GNP and GDP are insignificant and do not exceed 2–3%, and the dynamics of the indicators are unidirectional, which makes it easier to identify them.
Analysis of the dynamics of GNP over the years allows us to characterize the economic development of the country, and calculating it per capita is the best indicator for cross-country comparisons of living standards. To ensure that the nature of economic development over a long period is not distorted by price changes, indicators of nominal and real GNP are used. Nominal GNP is calculated in current market prices, and real GNP is calculated in constant, comparable prices, taking into account the price index.
Changes in the prices of final goods and services included in GNP make it possible to take into account a special index - deflator of gross national product.
2. Expense method for calculating GNP. The circular macroeconomic model of resource circulation shows the counter-movement of production costs of firms and household income, and the main macroeconomic identity (y= WITH+ I+ G+ X) determines their equilibrium state. Moreover, the left side of the identity (y) is the total amount of income in society received from the production and sale of products on the market, i.e. GNP. Right side of the identity (WITH+ I+ G+ X)– expenses incurred in the production of GDP. Consequently, the calculation of the GNP produced by the expenditure method is carried out according to the formula:
GNP =C + I + G + X,(37.3)
Where WITH– consumer spending; I– investment costs; G– government spending; X - export.
When calculating GNP using the expenditure method from government expenditures (G) transfer payments to the population - pensions, benefits, etc. - should be excluded, since they are not a payment by the state for the current production of goods and services. Although transfers increase household income, they have no effect on GNP production.
3. Income method of calculating GNP. The inverse method of calculating expenditures for determining the value of GNP is called income method. It is based on the calculation national income indicator(ND).
National income- this is the sum of all incomes of the population received for the provision of the factors of production they have.
A comparison of the values of GNP and NI shows that the second of them is significantly less than the first, since not all goods reach final consumption by the population: the interest in the state economy remains unaccounted for. If we add to the ND, in addition to the direct tax taken into account in the ND, also indirect taxation of market agents by the state, carried out by them to more sustainably meet their own needs (value added tax, sales tax, etc.), then we can calculate pure national product, which takes into account not only the factor income of the population, but also the state:
NNP = ND + T, (37.4)
where NNP is the net national product; ND – national income; T – indirect taxes.
To the net national product, in turn, should be added that part of the value of the product that does not go to either the population or the state, but remains at the disposal of firms and is used to reimburse capital goods consumed in the production process, i.e. depreciation charges (A) . Then.
NNP + A = GNP. (37.5)
Taking into account the two listed adjustments, the income method of calculating GNP coincides with the expenditure method:
GNP = ND + T + A. (37.6)
When calculating GNP by any method, income from the resale of previously produced goods and transactions with securities are excluded from its scope, since they are not of a productive nature.
4. The concept of added value. When measuring GNP, you should avoid double counting, i.e., multiple accounting of the same products. Double counting can be avoided if only the value that firms add to a product is taken into account as part of GNP.
Added value is defined as the difference between the firm's sales and the amount of factors of production purchased from outside. Then everything else will be intermediate product– the totality of goods produced during the year that were used for further processing.
If you add up all the value added by firms during the year together, you can also determine the size of GNP. This method is called production.
Topic 38. NATIONAL INCOME
1. The concept of national income.National income is the total income from the use of all factors of production during the year in the economy. It is expressed by the amount of monetary income received by the population for participation in the economic life of society.
The purpose of national income (NI) is to create a consumption fund for the population and an accumulation fund for expanding production, therefore, on the one hand, it characterizes the level of well-being of the population at the present time, and on the other, the possibilities for economic growth in the future.
The national income indicator is the leading element of the system of national accounts, which tracks its distribution not only in the household, but also among joint-stock companies, government agencies, financial institutions and private non-profit organizations.
2. Factor composition of national income. When determining the value of ND, four elements of factor income are distinguished:
1) wage– payment for hired labor of workers and employees with social charges (insurance payments for the employee, social security, payments from private pension funds);
2) rental income– rent for land, housing, premises, equipment, property;
3) interest income– a positive result of transactions on the securities market and income from individual investments in business;
4) profit– income of the unincorporated sector of the economy (individual farms, partners, cooperatives, etc.) and corporations, the profit of which, due to its breakdown into dividends and the undistributed part used to expand production, is taxed twice - as the income of the company and as the income of the shareholder.
Topic 39. DISPOSABLE PERSONAL INCOME
1. Personal income of the population. If national income is essentially earned income, then personal income is received. They differ from each other for two reasons.
On the one hand, part of the income earned through labor is segregated in the form of: a) social insurance contributions made by the entrepreneur and the employee himself, and b) income taxes, both in terms of dividends and undistributed. As a result, these incomes do not reach households and end up in government structures.
On the other hand, part of the income received by households is not their labor income, but a transfer payment from the state in the form of social insurance benefits, unemployment benefits, as well as pensions, various subsidies and interest payments on government securities.
LD = ND – R -Tr + P, (39.1)
where LD is the personal income of the population; ND – national income; R– social insurance contributions; Tr– taxes on corporate profits; P – transfer payments to the population.
2. Disposable income. Income at the personal disposal of the population (disposable income) is even less than personal income, since it involves the preliminary payment of individual taxes:
a) income tax;
b) property tax;
c) inheritance tax.
The absolute predominant one is income tax. Disposable income is the final income, cleared of all mandatory payments to national welfare, distributed for consumption and savings.
Topic 40. PRICE INDICES
1. Price characteristics.Price– the cost of a unit of goods, expressed in money. All goods and services included in market circulation have prices that are set under the influence of the market mechanism of supply and demand.
There are various classifications of prices depending on the criterion for their evaluation. For example, according to sales volume and type of goods, they distinguish wholesale, retail prices and tariffs (rates), and in terms of the degree of freedom of formation – firm (fixed), regulated and market.
Prices, their rise and fall, affect everyone in a market economy and affect the standard of living, so it is important to monitor their dynamics. This is done using macroeconomic indicator of the general price level, which is calculated in the form of a monetary value of goods produced in society. The general price level is not the same in different periods of time, so its change is recorded using price index.
2. Consumer basket. State statistical bodies keep track of changes in the price level using a whole system of index indicators. In particular, indices differ in the coverage of the goods included in the set, i.e., the comparable “basket” against which prices are compared. Exist:
A) consumer price index(CPI), which takes into account changes in the consumption of basic goods and services by the average family. Typically, the consumer “basket” contains 300–400 of the most commonly used household goods;
b) producer price index, calculated based on a “basket” that includes over 3,000 industrial goods. This index is more dynamic compared to the CPI, as it is more sensitive to scientific and technological progress;
V) GNP deflator represents the most general of the listed price indices, since it assumes all final goods and services as a “basket”.
Topic 41. UNEMPLOYMENT AND ITS FORMS
1. Types of unemployment.
2. Natural rate of unemployment.
3. Unemployment rate.
4. Socio-economic consequences of unemployment.
5. Combating cyclical unemployment.
1. Types of unemployment. A significant part of the working-age population is outside the market - this is the unemployed population, consisting of the unemployed and the unemployed.
Unemployment– an economic situation in which part of the working-age population cannot find work.
Non-working working population– part of the adult population that is economically inactive and does not want to work for hire. This includes: housewives, students, persons of liberal professions, ministers of religious cults, prisoners, etc.
It is impossible to occupy the entire working-age population (unless, of course, society is organized like a labor camp or barracks communism).
Unemployment comes in various forms. The main ones are:
1. Frictional (voluntary) unemployment. It represents a temporary absence from work due to a transition to another job of one’s own free will, as well as a period of job search for persons seeking it for the first time.
2. Structural. It arises due to a mismatch between the structure of labor demand and labor supply.
It includes:
– persons with a formal level of qualification (no work experience but a diploma);
– specialists whose professional skills are inferior to others on the market or are not in demand as a result of technical and social changes (for example, a teacher of Marxism at a university);
– workers whose abilities are discriminated against by employers (for example, women, people combining work with study).
3. Cyclical (conjunctural) unemployment. It represents unemployment in conditions of a decline in production, when the number of applicants for jobs significantly exceeds their availability. With cyclical unemployment, there is a general contraction of economic activity in the country, so advanced training or retraining does not save people from unemployment. Since the cyclical development of the economy involves alternating recessions and rises, during the rise it is significantly reduced and may come to naught.
Cyclical unemployment, along with structural unemployment, is a form involuntary (forced) unemployment.
2. Natural rate of unemployment. In conditions where there is no cyclical unemployment, the economy is in a state of full employment, since frictional and structural unemployment are natural and unavoidable in a market economy. Introduced into scientific circulation by M. Friedman natural rate of unemployment is influenced by factors:
– demographic;
– infrastructure;
– the level of minimum wage and social benefits.
3. Unemployment rate. There are many different indicators that characterize unemployment. The most common indicator is unemployment rates, proposed by the International Labor Organization (ILO):
Comparing unemployment in different countries allows us to compare the living standards of the population of the compared states.
4. Socio-economic consequences of unemployment. Cyclical unemployment has an extremely negative impact on the market economy.
Huge losses occur in society due to underutilization of labor. The American economist Arthur Okun (1928–1980) developed a method that allows them to be assessed: to do this, it is necessary to compare GNP in terms of actual and full employment:
Where yF– the volume of GNP in terms of employment; at– actual volume of GNP; U.F.– unemployment rates under conditions of full employment (natural rate of unemployment); AND– actual unemployment rate; ? – Okun coefficient ( approximately 2.5).
In accordance with Okun's law, an excess of cyclical unemployment over natural unemployment by 1% leads to a decrease in the actual level of GNP by 2.5% compared to the potential.
The budgetary burden to smooth out the consequences of unemployment increases: payment of benefits, opening and maintenance of employment centers, social rehabilitation of the unemployed, creation of new jobs at the expense of the state, reorientation in tax policy, strengthening the protection of property, protection of the law, etc.
Family ties are weakening, marriages are breaking up due to the inability of the head of the family to ensure a decent existence. The unemployed are deteriorating; they fall out of their usual social circle, lose their qualifications and work skills.
Crime and drug addiction are on the rise, and social values are depreciating.
5. Combating cyclical unemployment. Governments of developed countries recognize their responsibility for forced mass unemployment, especially cyclical unemployment, and therefore take various measures to neutralize its negative consequences:
– finance the development and implementation of economic programs to stimulate employment growth and increase the number of jobs in the public sector;
– pay at the state expense at labor exchanges for both primary professional training of workers and advanced training;
– provide assistance to people affected by forced unemployment (payment of unemployment benefits).
Topic 42. INFLATION AND ITS TYPES
1. The concept of inflation and its form. Inflation as an economic phenomenon is caused by the existence of paper money.
Inflation– excessive overflow of monetary circulation channels with paper money in excess of the needs of trade turnover, leading to the depreciation of money, rising prices, and deterioration in the quality of manufactured goods.
Inflation manifests itself primarily in the price level; it can be recorded through the inflation index:
With a certain degree of convention, the following forms of inflation can be distinguished according to their rate of occurrence:
1. Inflationary background of the economy– characterized by a slight, within a few percent, increase in prices during the year and is associated with fluctuations in market conditions and the activity of entrepreneurs in the market seeking to maximize their profits. This level of inflation does not pose a threat to the market economy and, if necessary, can be easily eliminated with the help of government measures.
2. Inflation within two to three tens of percent– is the first symptom of a monetary disorder. It is commonly called “creeping” (regulated) inflation. In general, under these conditions, the country's economy can develop freely.
3. Galloping (rapid) inflation- indicates not only a disorder in monetary circulation, but also serious violations in the monetary sphere. Galloping inflation is measured at one to two hundred percent per year. In general, in conditions of rapid inflation, the development of the country's economy is difficult, although possible.
4. Hyperinflation characterized by astronomical price increases - from several hundred percent per year and above. Hyperinflation has no upper limit: there is a known case of annual price growth rates of 3.8x1O27 (Hungary, August 1945 - July 1946). The main sign of hyperinflation is the population’s “movement” from money, the transition to “commodity” money – alternative values. In conditions of hyperinflation, production development is impossible.
American economist Philip Kagan introduced a formal criterion for hyperinflation: it begins with the month during which prices first rose by more than 50%, and ends with the month in which prices do not reach this value plus another year.
The listed forms of inflation are varieties open inflation. An alternative to it is hidden, suppressed inflation. Under the conditions of strict government policies that set fixed, unchanging prices, inflation manifests itself only in the depreciation of money, which is reflected in the emergence of chronic shortages and constant queues for goods.
In the modern economy, inflationary processes are superimposed on the cyclical nature of business activity, and if inflation develops against the backdrop of an economic downturn, it is usually called stagflation, and if against the backdrop of rising taxation (the state’s reaction to the depreciation of money) – taxflation.
If the rate of inflation growth in a country slows down, then this process is called disinflation. Moreover, inflation may stop altogether, and will be replaced by the reverse process of a general decline in prices - deflation. The deflationary mechanism ultimately leads to the same results as inflation - it deforms all economic relations in the economy.
2. Inflation of supply and demand. In modern Western economic theory, all manifestations of inflation are reduced to factors on the buyer side (demand inflation) and factors on the seller side (cost inflation).
Demand inflation– imbalance between supply and demand on the demand side. Its main reasons:
– expansion of government orders (military and social);
– an increase in demand for means of production at full capacity of the enterprise and full employment;
– growth in the purchasing power of the population due to increased wages.
Here, excess demand encounters limited supply, which does not keep up with demand, and a general increase in commodity prices occurs, i.e. inflation.
Cost inflation– imbalance between supply and demand on the supply side.
Main reasons:
– oligopolistic pricing practices;
– economic and financial policy of the state;
– rising prices for production factors.
The mechanism of inflation on the part of producers is a mirror reflection of demand inflation.
Inflationary expectations of the population can lead to the fact that demand and supply inflation begin to combine with each other and arise inflationary spiral(Fig. 42.1).
Rice. 42.1. Inflationary spiral
a) initiated by demand inflation; b) initiated by supply inflation;
R– general price level; at– volume of national production;
AD, AD I , A.D. II – aggregate demand; A.S., A.S. I , AS II – aggregate supply.
3. Socio-economic consequences of inflation. The consequences of inflation are complex and contradictory. A little inflation is even good for the economy, as it revives business activity. But gradually, everyone - from consumers in the market and right up to the state - is affected by the critical point of inflation, when its overall positive effect becomes negative.
Rapid, galloping inflation is already introducing an element of disorganization into the economy, increasing imbalances through uneven price growth, distorting supply and demand, leading to overproduction of some goods and underproduction of others. As a result, consumers begin to protect themselves from inflation by getting rid of depreciating money.
Under these conditions, the business sector cannot develop a strategy for its behavior in the market. Banks, insurance companies, pension funds and investment companies, being the main creditors of the business sector, are also suffering losses. The government, faced with monetary discord, receives taxes in worthless money.
In addition to negative economic consequences, inflation also generates social consequences:
a) is a kind of super tax on all segments of the population, from which no one can protect themselves;
b) worsens the financial situation of wage workers, since real wages lag behind nominal wages, and that, in turn, lags behind sharply rising prices for goods and services;
c) is a channel for the redistribution of national income from one group of the population to another, while the absolute losers are the recipients of fixed incomes: state employees, pensioners, rentiers, students;
d) harms persons in creative, liberal professions, devaluing their large but irregular one-time incomes;
e) undermines employment.
4. Phillips curve. The relationship between inflation and unemployment can be illustrated using the A.U. curve. Phillips (1914–1975), a professor at the London School of Economics, who proposed it in 1958. After analyzing the British economy for a hundred years (1861–1956), Phillips constructed a curve showing the inverse relationship between changes in the wage rate and the p rate of unemployment.
Since behind the growth of wages are the market prices of wages are the market prices of the goods on which it is spent, American economists P. Samuelson and R. Solow subsequently transformed the theoretical Phillips curve, replacing wage rates with the growth rate of commodity prices, i.e., inflation (Fig. 42.2).
Rice. 42.2.
Modified Phillips curve
In this form, the chart is often used to develop macroeconomic policy. If the government considers the existing level of unemployment in the country to be excessively high, it takes fiscal and financial policy measures to stimulate demand. Their result is the expansion of production, the creation of new jobs, i.e. the movement of the economy from point to U2P2 If the economy at this point demonstrates excessive activity (overheating), then the opposite measures will come into effect - credit restrictions and reductions in government spending, causing the economy to move from U2P2 in U3P3.
5. Anti-inflationary policy. The state's anti-inflationary policy can be carried out using active and adaptive policy methods. Active policy carried out with the aim of eliminating the causes of inflation, and adaptive– to adapt the economy to it and mitigate its negative consequences.
Active anti-inflationary policy involves the use of the method shock therapy, in which the causes of inflation on both the demand and supply sides are eliminated in a short period of time, and which consists of the following:
a) government spending decreases;
b) taxes rise;
c) a deficit-free budget is formed;
d) a tight monetary policy is being pursued;
e) wage growth is restrained;
f) market infrastructure is developing;
g) a fixed exchange rate is introduced;
h) the competitive principles of the economy are strengthened through the fight against monopolies.
The listed measures lead to a sharp decrease in both inflation itself and the population's inflation expectations, which creates conditions for sustainable economic growth. At the same time, shock therapy leads to a significant decline in production and an increase in unemployment, greatly reduces the standard of living of the population and leads to an increase in social tension in society.
Adaptive policy involves the use of a gradual reduction in inflation method – graduation. A gradual reduction in the excess money supply in circulation makes it possible to avoid a shock in the sphere of employment and production, as well as excessive social tension in society, however, it does not deceive the inflationary expectations of the population, which are fueled by the government’s periodic indexation of income of the population. These indexations are considered as protection against the current level of inflation, but at the same time they are the reason for its increase in the future.
The government is not free to choose its policy, since its individual forms affect the interests of population groups and sectors of the economy to varying degrees.
Thus, it is not possible to determine in advance the most effective way to combat inflation: everything depends on the specific conditions prevailing in the national economy and the capabilities available to the government.
Topic 43. CYCLICITY OF ECONOMIC DEVELOPMENT
1. The concept of cyclicity.
The real economy is characterized by underemployment and price fluctuations, which leads to periodic ups and downs in the gross national product (GNP).
Rice. 43.1. Types of economic growth.
R – constant rate of economic growth; R1 – slowing growth rate; R2 – accelerating growth rate; R3 – oscillatory growth rate; GNP is gross national income.
Economic growth, i.e., the progressive development of the national economy, as a whole can occur not only through constant or uneven growth, but also oscillatingly, with the latter path being absolutely predominant.
Fluctuations in the dynamics of economic growth are not random, spontaneous, but, in fact, are an expression of the movement of the economy from one stable state to another, i.e., a manifestation of the market self-regulation mechanism. Moreover, they can be combined into a sequential chain - cycle.
Economic cycle– these are ups and downs in people’s economic activity that are repeated over a long period, with a general tendency towards economic growth.
The economic cycle can be expressed in graphical models of two- or four-phase fluctuations in economic conditions (Fig. 43.2):
Rice. 43.2.Economic cycle
a) two-phase model: 1 – compression phase; 2 – expansion phase; b) four-phase model: 1 – crisis phase; 2 – depression phase; 3 – revival phase; 4 – rise phase.
Economic science has accumulated many explanations of the causes of cyclicality in the economy (see table).
Table
A comparison of different points of view on the causes of cyclicity shows that it manifests itself as external (exogenous) factors, So and internal (endogenous). In modern conditions, it is generally accepted that external factors give the initial impulse to cyclicity, and internal factors transform them into phase oscillations. The reason for the repeated repetition of fluctuations, i.e., the formation of the cycle itself, is the mechanism of action of the multiplier - the investment accelerator, which ensures the turn of economic dynamics from expansion to contraction, and vice versa. At the same time, the impact of the investment accelerator multiplier on the cycle can determine its type (Fig. 43.3):
Rice. 43.3.Types of cycles by nature of oscillations
a) decaying cycle; b) expanding cycle; c) explosive cycle;
d) uniform cycle.
2. Cycles of Kitchin, Juglar, Kondratiev. In modern economic science, about 1400 different types of cyclicity have been developed with a duration of action from 1–2 days to 1000 years.
The most common of them are:
1. Cycles by J. Kitchin– short-term (small) cycles of market conditions of 3–4 years. They are usually associated with the disruption and restoration of equilibrium in the product market due to periodic mass updating of the product range;
2. Cycles by K. Juglar– medium-term (industrial, business, business) economic cycles lasting about 10 years. It is during this period of time that, on average, fixed capital operates in production. The replacement of worn-out fixed capital in the economy occurs continuously, but not at all evenly, since it is under the determining influence of scientific and technical progress. This process is combined with the flow of investment, which in turn depends on inflation and employment.
3. Cycles of N. Kondratiev– long-wave (long) cycles, covering approximately 50 years. Their existence is associated with the need to change the basic infrastructure of the market economy: bridges, roads, buildings and structures that last an average of 40–60 years.
3. State regulation of the cycle. The policy of government regulation of the economic cycle comes down to counteracting the phases of the cycle: during the period of economic contraction, the government stimulates business activity by reducing taxes, providing investment incentives, and reducing the interest rate on loans, and during the period of expansion, on the contrary, it seeks to restrain economic growth. To this end, the government increases tax rates, reduces government spending, pursues a policy of “expensive” money, tightening credit conditions and increasing the required reserves of commercial banks.
It might seem that the government should make the expansion phase as long as possible and minimize the contraction phase. However, this cannot be done, since at the inflection points of the cycle a multiplier-accelerator mechanism operates, which, like a pendulum, multiplies and accelerates the opposite phase. As a result, government policy in relation to the economic cycle represents counteraction to it, its smoothing (Fig. 43.4).
Rice. 43.4.Business cycle smoothing policy
In addition to fiscal and monetary measures to influence the economic cycle, the government also uses measures of a general healing nature: it fights inflation, monopolism, corruption, pursues a policy of eliminating imbalances, etc.
Topic 44. MACROECONOMIC EQUILIBRIUM IN THE NATIONAL ECONOMY
1. Contents and conditions of general macroeconomic equilibrium. The many different types of markets that exist in the economy are intertwined into a complex national market system, where changes in one market entail numerous and significant changes in others. The national market economy as a whole, like partial markets, is characterized by general equilibrium.
General Economic Equilibrium (GEE)– a stable state of the economy, in which: 1) consumers maximize the value of the utility function; 2) producers maximize their profits; 3) market prices ensure equality of supply and demand; 4) resources in society are divided efficiently.
The OER is based on a self-regulation mechanism. The macroeconomic balance of the entire national economy allows you to maintain:
– dynamic sustainable growth of national production;
– stable price level based on free market pricing and inflation control;
– high level of employment;
– the equilibrium foreign trade balance of the country.
2. Theoretical views on equilibrium in the national economy. For the first time, A. Smith drew attention to the possibility of OER in economics in the middle of the 18th century, suggesting the “invisible hand of providence”, which directs the selfish actions of people towards the common good. The followers of A. Smith (neoclassical school) proceed from automatism in the formation of OER, since the supply of goods, in their opinion, creates demand: after all, no one will produce goods and bring them to the market if no one buys them there. Therefore, the OER is observed at.
AS=AD,(44.1)
Where AS– aggregate supply; AD– aggregate demand.
The mechanism of transition from the macroeconomic level of equilibrium to the OER within the framework of this concept was developed by L. Walras (see question 33). General economic equilibrium according to L. Walras:
Where m– list of benefits; n– a list of factors spent on the production of goods; xn– the amount of goods produced; p1...pn– prices of goods produced; y1...yn– prices of sold factors; y1...yn– sold and consumed factors.
It follows from the formula that the total supply of final products in monetary terms must be equal to the total demand for them in the form of the amount of income received by their owners.
D.M. Keynes, based on the experience of the Great Depression of the 30s. XX century, substantiated the impossibility of achieving economic efficiency without government intervention in the economy. He also proved that the balance between AD And AS is derived from the balance of investment and savings in the economy. Therefore, according to D.M. Keynes? EER is observed at.
S = I,(44.3)
Where S– general savings of the population; I– total investment in the economy.
3. Equilibrium modeling. As with many other economic processes taking place in a market economy, in modern economic theory there is no unity of views regarding OER. However, they can be reduced to two positions: a) the classical approach and b) the Keynesian approach.
Each of the listed concepts has its own OER model. The classic OER model assumes:
a) the economy of perfect competition;
b) complete self-regulation of the market;
c) money as a unit of account;
d) full employment of the population and full utilization of production capacities;
e) the result of production is a production function for only one single factor - labor.
According to this model, the formation of OER will occur as follows (Fig. 44.1):
Rice. 44.1.Classical OER model
ND– demand for labor; N.S.– labor supply.
In quadrant III, equilibrium is formed in the labor market, where the wage rate is established (W1) and number of employees (N1).
In quadrant IV, by projecting the equilibrium value of employed (N1) on the production possibilities curve y(N) we obtain the equilibrium volume of the national product.
In quadrant I, the equilibrium volume of the national product assumes that aggregate supply is equal to demand. Aggregate supply is represented by a vertical line AS, since under conditions of full employment production is at its maximum capacity and cannot be increased. Intersection AS And AD gives not only the equilibrium volume of production y, but also the equilibrium price (P1).
Quadrant II contains the equilibrium price of labor, which, like the price of goods in quadrant I, depends on the amount of money in circulation, i.e. MV= P.Q. If the supply of money increases, then the equilibrium will not be disrupted, but will only move to a higher price level. This is exactly what the shifts in the curves demonstrate. AD To AD? And W To W? quadrants I and II.
In general, the classical model, with the simultaneous equilibrium state of the markets for factors of production, money and goods, shows the possibility of achieving OER.
Keynesians, when defining the OER, proceed from judgments that differ from the classical school:
a) the economy lacks price flexibility and complete self-regulation, which necessitates government intervention (indirectly, through economic policy);
b) supply does not determine demand, but vice versa. Therefore, the starting point is not the labor market (quadrant III), but the goods market (quadrant I);
c) the money market is not separated from other markets, and prices are not nominal values, but an important factor in the formation of the OER.
Topic 45. AGGREGATE DEMAND AND AGGREGATE SUPPLY
1. Aggregate demand and its composition. Aggregate demand is the volume of national production that the state, consumers and entrepreneurs are willing to buy on the market:
AD=C + I + G + X,(45.1)
Where AD– aggregate demand; WITH– consumer; I– investment costs; G– government spending; X– net exports.
The dependence of aggregate demand on the price level can be R express graphically (Fig. 45.1).
45.1. Aggregate demand curve
The price factor influencing aggregate demand is split into three effects:
1. Interest rate effect (Keynes effect).
An increase in the general price level (P) leads to an increase in the interest rate (%), which reduces purchasing power (purchases) and reduces the investment activity of entrepreneurs (I). As a result, aggregate demand decreases (AD).
2. Wealth effect (cash balances)
An increase in the general price level (P) causes a decrease in the real value of the population's financial assets (cash balances) (I), which in turn makes people less rich (R), and their demand on the market naturally decreases (AD);
3. Effect of import purchases (goods)
An increase in the general price level (P) causes a decrease in demand for domestic goods (ADx) and makes imported goods attractive, which replace them in consumption (ADE).
All price factors (AD) traditionally influence its movement along the aggregate demand curve, and non-price– shift it in the coordinate system to the right or left.
Non-price factors include the factors specified in formula 45.1.
2. Aggregate proposal and its elements. Aggregate offer- the volume of national production that entrepreneurs can produce and offer for sale on the market.
Addiction AS(aggregate supply) from the price level is described by the aggregate supply curve (Fig. 45.2).
Rice. 45.2. Aggregate Supply Curve
AS– total supply.
Aggregate Supply Curve AS conditionally consists of three sections:
I – horizontal – production grows at a low, constant price level;
II – ascending – an increase in production volumes occurs against the background of rising prices;
III – vertical – the economy reaches the highest point of its production capabilities.
Proponents of neoclassical and Keynesian approaches to economics assess the curve differently AS in a short period: Keynesians believe that it is represented by section I, and neoclassics – by section II. The difference in their views lies in the different interpretation of the behavior of sellers and buyers in the market. Neoclassicists, as is known, proceed from price flexibility and complete rationality in the behavior of market agents (homo economicus), while the latter deny this.
Essentially, the kind of curve AS in a short period depends on the behavior of economic entities and market conditions, i.e. a number of non-price factors.
Among the main non-price factors of aggregate supply are:
– level of production technology in the country;
– overall labor productivity;
– changes in business conditions;
– the nature of the use of resources (extensive, intensive), etc.
If, under the influence of the price factor, aggregate supply slides along the curve AS, then a change in non-price factors leads to its shift.
In the long run, proponents of both opposing economic theories agree on the following: the AS curve takes on a vertical form, since in the long term, following an increase in commodity prices, workers always demand an increase in wages, and following an increase in profits, there is an increase in costs. Under these conditions, the volume of supply is limited by the technical capabilities of production and cannot increase arbitrarily.
3. Graphic interpretation of the interaction of aggregate supply and demand. Aggregate supply and demand meet in the goods market, forming an equilibrium situation: AD = AS. In its most general form, the AD curve intersects AS in section II, forming the equilibrium volume of national output (GNP) and the equilibrium price PE.
This situation is described by the graph (Fig. 45.3).
Different views on the short-run AS curve lead neoclassicals and Keynesians to opposite assessments of macroeconomic equilibrium in the goods market.
Rice. 45.3.Equilibrium in the goods market
Representatives of the neoclassical school believe that in conditions of flexibility of prices, wages, and interest rates, they are able to grow and contract under the influence of supply and demand. As a result, a decrease AD does not lead to a reduction in national production, but only R 4 changes prices. Hence the conclusion is drawn that free pricing is capable of establishing equilibrium in the goods market on its own, without any government intervention (Fig. 45.4).
Rice. 45.4.Neoclassical interpretation of equilibrium in the goods market
HER 1 – equilibrium points.
Representatives of the Keynesian school do not recognize such an assessment of equilibrium and propose their own: the aggregate supply AS has a vertical form only in the long period, and in the short period it takes on a horizontal form: there are constantly unused resources in the economy (including unemployment), and prices and wages are not flexible , as they are recorded in product supply contracts, purchased raw materials and equipment, concluded labor agreements with employees for a long period (months and years), etc.
A reduction in aggregate demand AD leads to a reduction in the volume of national production (GNP), therefore, in order to prevent a recession or even a crisis in the economy, government intervention is necessary to support a sufficient level of aggregate demand AD (Fig. 45.5).
Rice. 45.5. Keynesian interpretation of equilibrium in the goods market.
Topic 46. STABILIZATION POLICY
1. Goals and methods of stabilization policy.Stabilization policy– a system of government measures implemented to ensure sustainable economic development of the country.
Accordingly, both active and passive stabilization policies are developed.
Active stabilization policy is based on the principle of “fine-tuning” the economy and is expressed in a policy of counteraction: stimulating the economy during periods of depression and slowing down its growth during periods of overheating - “boom”. For this purpose, both monetary and tax levers are used.
Passive stabilization policy is built on the principle of “do no harm” and is expressed in a policy of adjusting ongoing processes.
Both types of stabilization policies have the right to be implemented: in the vicinity of inflection points in the economic cycle, it is advisable to use mainly active policies, and passive ones in between. The duration of the cycle depends on the timeliness of government agencies recording statistics on changes in the economy and the political authorities’ awareness of the need to take appropriate measures.
2. Lags of stabilization policy. Monetary and fiscal policies affect economic development over a period of time, and stabilization policy takes place in two stages:
1) the stage of awareness of the need to take measures regarding the economy. Such a period of time is usually called internal lag of stabilization policy;
2) the stage of implementing the decisions made. The period of time between the adoption of stabilization policy measures and the receipt of the first results is usually called external lag.
The period of time covering the internal and external lags of the stabilization policy is usually called decision lag(see Fig. 46.1).
Rice. 46.1.Lag of stabilization policy decisions
Time lags that exist in stabilization policy reduce its effectiveness. However, they are opposed by automatic built-in stabilizers, which make it possible to slow down or stimulate the economic development of the country without special active measures to change economic policy. The built-in stabilizers of the economy are:
1. System of taxes on personal income of the population. During a period of economic recession, as the incomes of citizens and firms decrease, taxes are automatically reduced without special legislation, and during a “boom” period, inflation pushes incomes up, and they are automatically taxed at a higher rate.
2. Government spending on social insurance. During an economic downturn, a large number of people turn to the state for unemployment assistance and social support. The development of inflation leads to the same results, as more and more people find themselves below the poverty line and can legally qualify for assistance from the state. During periods of expansion, these processes weaken, which automatically leads to a reduction in government spending.
The use of built-in automatic market regulators allows one to avoid a number of mistakes when pursuing an active stabilization policy by the state.
Topic 47. CONSUMPTION AND SAVINGS
1. Motives for the use of income by the population.
2. The relationship between savings and consumption.
3. Marginal propensity to consume and save.
1. Motives for the use of income by the population. Every product created in society is intended for consumption. Consumption– individual and joint use of goods aimed at satisfying the material and spiritual needs of people.
Population consumption is a leading indicator of economic development, since it accounts for more than half of the gross national product, and consumer spending– an important predictive indicator of future development, characterizing people’s moods and their consumer expectations.
2. The relationship between savings and consumption. Savings are closely related to consumption. Saving– this is temporarily deferred consumption. It occurs when income and consumption do not coincide with each other. The reason that encourages firms not to fully use the income received, but to save and accumulate it, is their investment activity in order to expand their business.
The motives for saving among households are more diverse and are associated with the psychological characteristics of people.
The amounts of both consumption and savings depend on the income received and are limited by it.
The dependence of the consumed and saved parts of income on its total value is usually called functions of consumption and saving.
A) S = f(s);
b) C = f(c);
V) y = C + S,(47.1)
Where U- income; WITH– consumption; S– savings.
The psychology of people has a significant impact on the use of income, therefore, in economic theory, indicators of the average propensity to consume and save are used.
3. Marginal propensity to consume and save. Behind the average propensity of the population to consume and save are fluctuations in both income and people's moods, so it is important to know how a person reacts to changes in his income - towards increasing consumption or saving? For this purpose, indicators of the marginal propensity to consume and save are used, respectively (Fig. 47.1).
Rice. 47.1.Marginal propensity
a) for consumption; b) to savings.
Marginal propensity to consume– change in consumption due to changes in income:
where: ?С – increase in consumption; ?у – increase in income; MpC– marginal propensity to consume.
Marginal propensity to save– change in saving due to change in income:
where?S is the increase in savings; ?у – increase in income; MPS– marginal propensity to save.
Quantities MPC And MPS always fluctuate within the limits of income growth - this shows their interconnection and interdependence.
A) MPC + MPS = 1;
b) 1 – MPC = MPS;(47.5)
V) 1 – MPS = MPC.
Corrective effect on MRS and in addition to income, they provide:
- price level;
– taxation;
– accumulated property, etc.
By summarizing the individual aspirations of individual people, we can proceed to the calculation MRS And MPS at the macroeconomic level.
Topic 48. FUNCTIONAL ROLE OF INVESTMENTS IN THE ECONOMY
1. The concept of investments and their types. Investments– long-term capital investments in enterprises in various industries, spent on expanding production, improving quality and increasing the competitiveness of products.
By the nature of use, investments are divided into gross and net (see question 30), and according to the impact of the national product on them - into autonomous and derivative (induced). Autonomous are investments that do not depend on the dynamics of GNP, but, on the contrary, themselves have an impact on its growth. Derivatives(induced) investment is a direct result of GNP growth.
Unlike savings, the value of which is directly and directly determined by the size and dynamics of GNP and income, investments only in the most general form depend on income. To a greater extent, they are influenced by a variety of market factors, which make them the most unstable part of aggregate demand (Fig. 48.1).
2. The role of investment in establishing macroeconomic equilibrium. An increase in investment activity in the market leads to the creation of new jobs, and, consequently, to an increase in employment and a reduction in unemployment. However, this process is not unlimited, because if you cross a certain optimality threshold, you can get inflation.
Rice. 48.1.Factors directly influencing investment decisions of market agents
Rice. 48.2.Macroeconomic equilibrium based on equality of savings and investments
S– savings; I– investments; at– volume of national production (GNP); FFX– line of potential production under conditions of full employment; yE– equilibrium volume of GNP; E, E1, E2– equilibrium points.
Such an optimality point is the equality of savings and investments, i.e. S = I(Fig. 48.2).
The graph shows that the lines of investment and savings intersect at point E, which, when projected onto the horizontal axis of the graph, shows the equilibrium volume of national production, i.e., the optimal state of the economy in which the interests of market participants are balanced.
Line FF1 The graph shows that macroeconomic equilibrium can develop at a level where full employment is not achieved, that is, in conditions of cyclical unemployment.
Topic 49. MULTIPLIER THEORY
1. Justification of the multiplier effect in the national economy. Investment is an important factor in economic development. At the same time, they are subject to the action of a special multiplier mechanism, which multiplies their impact on the growth of gross national product (GNP).
Investment multiplier is a numerical coefficient showing an increase in GNP by 1 + n with investment growth by 1.
The animation effect is a kind of economic echo, which, like its acoustic analogue, repeats the original impulse many times. Income consists of consumption and savings. Therefore, the multiplier effect can be expressed using the marginal propensity to consume (MRS) and savings (MPS):
Where TO– investment multiplier.
The greater the share of consumption in income, the stronger the multiplier effect will manifest itself in the economy, since the increase in consumption (expense) of some people leads to an increase in the income of others who sold their goods and services. This chain (echo) will continue until gradually the initial level of consumption is completely replaced by savings.
The investment multiplier can be depicted graphically (Fig. 49.1).
Rice. 49.1. Investment multiplier effect in the economy
S– savings; I– initial level of investment; I, I", I" – change in investments; E,– equilibrium in the market; Yeah– initial volume of national production; yE1,yE2 – changes in the volume of national production.
The multiplier multiplies not only the increase in investments, but also their reduction, i.e. it works in both directions. To verify this, it is enough to see 50.1 below the line on the chart I construct line I". Then UE – UE2 will show the impact of the multiplier on the reduction of GNP.
2. Investment accelerator. The investment multiplier effect is complemented by the accelerator effect.
Investment accelerator– a coefficient showing the relationship between the increase in investment in a given year and the increase in GNP in the previous year.
The economic development of a country is not only a consequence of investments in it, but serves as the starting point for increasing them in the future. In this regard, it is advisable to divide all investments into autonomous and derivative (induced). The value of the former does not depend on the current level of GNP and can be considered as the initial impetus for the active actions of entrepreneurs in the market. It is these investments that create multiplier effect. The magnitude of the latter is a consequence of previous development: entrepreneurs, seeing that the volume of national production is growing and market conditions are improving, strive to take advantage of favorable conditions and expand investments. As a result, derivatives are superimposed on autonomous investments, which leads to accelerated development, i.e. accelerator effect.
Topic 50. STATE BUDGET AND TAXES
1. The concept of budget. Economic relations that develop in society regarding the use of money are called finances. A significant part of them is accumulated by the government in the form of public finance. A significant portion of GNP is redistributed through public finances. The main element of public finance is the budget.
The budgetary structure of unitary states differs from federal ones: the former have two levels of budget - national (federal) and local, and the latter have three: between the federal and local budgets there is an intermediate regional link in the form of state budgets (USA), lands (Germany), subjects of the federation (Russia). If we bring all levels of budgets together, we can get consolidated state budget, which is used for special analysis and forecasting of cash flows in the national economy.
The leading link in the country's budget structure is the state budget– the state’s financial plan for the centralized attraction and expenditure of financial resources to perform its functions.
In countries with developed market economies, the state budget performs, in addition to its direct functions of ensuring the security of the country, maintaining the state administrative apparatus, implementing social policy and developing science, education, and culture, another additional function - regulating the economy, indirectly influencing the market behavior of firms in order to achieve sustainable development.
2. Budget surplus and deficit. The state budget is compiled in the form balance of income and expenses for the year. The equality of income and expenditure parts between themselves presupposes budget balance, However, the presence of cyclicality in the economy, the need to carry out an active stabilization policy and implement structural changes in the national economy in order to implement the achievements of scientific and technical progress, often leads to a mismatch in the own parts of the budget and the emergence of a deficit (more often) and a surplus (less often).
Budget deficit– the amount of excess of state expenses over its income within a financial year. Distinguish current(temporary, not exceeding 10% of the budget revenue) and chronic(long-term, critical, exceeding 20% of the revenue). When approving a deficit state budget, its maximum permissible value is usually established. If in the process of budget execution it is exceeded, then budget sequestration, i.e., a proportional reduction in spending for the remaining budget period for all items of expenditure, with the exception of socially protected ones.
Budget surplus– the amount of excess of state revenues over its expenses within a financial year.
Alternating periods of budget deficit and surplus allows you to balance the budget not for a year, but for 5 years. This approach allows the state to maneuver its finances in order to smooth out the business cycle by approximately 30–40% (Fig. 50.1).
Rice. 50.1.Cyclical balancing of the State Budget
R – government revenues; G – government expenditures; M – balanced budget.
3. Public debt- this is the excess of the total state budget deficits accumulated over previous years over its surpluses. The country's public debt is formed through both internal and external borrowings.
Domestic public debt- the debt of the government of one's country. It is served by issuing government bonds and obtaining loans from the country's Central Bank.
External public debt– state debt to foreign creditors: individuals, states, international organizations. If the government is unable to pay its public debt and misses payment deadlines, then a situation arises default– temporary waiver of obligations, entailing creditor sanctions up to and including boycott and confiscation of state property located abroad.
Significant public debt disrupts the state’s financial system, worsens the business climate in the country and significantly limits the growth of the population’s well-being.
4. The principle of taxation. Taxes– these are obligatory payments of individuals and legal entities levied by the state. They form 90% of the revenue portion of the country’s state budget.
Taxes, in addition to the fiscal function (i.e. filling the state budget), are intended for:
a) regulation;
b) stimulation;
c) redistribution of income.
The principles of rational taxation, developed by A. Smith, have not lost their relevance to this day:
Principle of fairness: The tax burden must be borne by the entire society, and tax evasion and the creation of various “gray schemes” for settlements with the state must be condemned by society.
Certainty principle: the tax must be specific in amount, period and method of payment. Taxes cannot be introduced retroactively (current practice in Russia).
Convenience principle: The tax should be convenient, first of all, for the population, and not for the taxman.
Saving principle: the costs of collecting taxes should not be excessive or burdensome for society.
5. Direct and indirect taxation. According to the method of collection, taxes are distinguished between direct and indirect.
Direct taxes– these are visible taxes, since they are established on the income received by a person or company, as well as on the property they own: income tax, corporate profit tax, inheritance and gift tax, land and property tax, etc.
Indirect taxes- These are implicit taxes, invisible to consumers, since they are levied on producers, who are obliged by the state to include them in the price of goods and transfer them to state income immediately after sale. These are turnover tax, value added tax, sales tax, excise taxes.
6. Laffer curve. In taxation, they play a significant role tax rates– the amount of tax per unit of taxation. If they are excessively high, then the economic activity of the population will be restrained. In the early 80s. XX century A. Laffer, who was then an adviser to President R. Reagan, found that an increase in rates increases tax revenues to the treasury only up to a certain limit, after which the population goes into the shadow economy, preferring not to pay taxes at all. This situation in economic theory is described using Laffer curve(Fig. 50.2).
Rice. 50.2.Laffer curve
Topic 51. BUDGET AND TAX POLICY
1. The impact of government spending and taxes on households.
2. The impact of government spending and taxes on the business sector.
1. The impact of government spending and taxes on households. The population actively responds to the government's policies in both parts of the state budget - revenue and expenditure. Changes in taxation directly affect the income of the population, therefore their consumer behavior in the market depends on whether taxes are changed permanently or temporarily in the country; are they expected by society or take it by surprise.
Temporary tax increase does not affect the overall level of household consumption in the long term, since the population during the period of high taxes will strive to borrow funds in order to maintain the existing level of consumption. Consequently, they will reduce savings. An increase in taxes leads not only to a reduction in savings, but also to an actual decrease in household consumption. At the same time, government spending can soften and sometimes even neutralize the effect of tax increases on aggregate demand, since the economy operates government spending multiplier.
Where Su- government spending.
This coefficient shows how much the gross national product will change with an increase in government spending by one unit. The multiplier effect is obtained due to the fact that following an increase in government spending, household incomes increase, and therefore tax revenues, which partially cover additional government expenses.
2. The impact of government spending and taxes on the business sector. For the business sector, changes in taxation are important from the point of view of investment opportunities. Since investments in the business sector are formed mainly on a borrowed basis, the dynamics of household savings is the initial basis for their activities.
As for firms' own savings, government tax policy has a direct effect on them. For example, increasing the income tax and tightening the conditions for tax holidays when investing in objects needed by the state reduces the resource base for investment for firms.
On the other hand, the government, along with increased taxation, often provides for expenses to subsidize the investment activity of firms and allows accelerated depreciation of used equipment, which covers the losses of firms from increased taxes.
In general, given a choice between an equal increase in government spending and a decrease in tax revenue, the gross national product will increase more in the first case. At the same time, the state budget deficit will be larger with a reduction in taxes than with an identical increase in government spending.
Topic 52. MONEY AND ITS FUNCTIONS
Money- this is a product of a special kind, historically distinguished from a number of other goods and becoming a universal equivalent for all other goods.
Money has come a long way in its development from exotic random forms to gold and paper money.
2. Functions of money. The use of money in the household consists in performing five interrelated functions (Fig. 52.1).
Rice. 52.1.Functions of money
How measure of value money measures the value of all goods. The price of any product can be determined using ideal money, which was used until the 1930s. XX century gold was used, and currently the exchange rate of the national currency is used.
How medium of exchange money acts as a fleeting intermediary in purchase and sale transactions, which makes it possible to use paper money. If the state releases them in excess, they will depreciate and be replaced by barter. Ultimately, the depreciation of money may lead to restrictions on market transactions using cards and coupons.
Money like instrument of payment express the relationship between the debtor and the creditor, since the act of purchase and sale is often broken in time. The period of payment for goods and services in this case, for a number of reasons, does not coincide with the delivery of products. Such transactions are formalized in the form of debt obligations - bills, banknotes, bills, checks, etc. On their basis, credit money arises.
Money like store of value represent a reserve of financial resources for future expenses, form household savings and investments of entrepreneurs.
Performing a role world money is that money functions as a medium of circulation and a means of payment in international economic exchange.
3. Theories of money. In economics, three main theories of money have developed: 1) metal; 2) nominalistic and 3) quantitative.
Metal theory was developed within the framework of mercantilism and reduced monetary circulation to two functions - a means of accumulation and world money. It was these functions that were most successfully performed by noble metals, being the personification of the wealth of the nation.
Nominalistic theory was developed by the classical school in polemics with supporters of the metal theory. Pointing to the limited approach of mercantilists to money, supporters of this theory went to the other extreme, absolutizing the meaning of the functions of a means of circulation and payment and declaring money to be purely conventional symbols, monetary units that were legitimized by the state.
Quantitative theory money also arose within the framework of the classical school. Gradually it began to dominate economic theory and developed even in the twentieth century. (equation of the quantitative theory of I. Fisher; Cambridge equation of A. Pigou). Its meaning boils down to the fact that money has a cost basis, so its increase in the economy does not lead to an increase in national wealth, but only to an increase in prices. Therefore, the exchange equation can be written:
MV=PQ,(52.1)
Where M- the amount of money in circulation; V– velocity of money circulation; R– prices of goods; Q– quantity of goods (production volume).
This equation was derived by the American economist I. Fisher in 1911. Essentially, the equation of exchange is an identity and is constantly observed in economics, but it is of no small importance, since it shows what an unreasonable policy of issuing paper money by the state can lead to.
4. Monetary system. In any country, monetary circulation is organized by the state on certain principles, i.e. in the form monetary system. The elements of the monetary system are:
– national monetary unit (ruble, dollar, yen, etc.), in which prices for goods and services are expressed;
– types of banknotes in the form of credit paper money and small change coins, which are legal tender in cash circulation;
– organization of the issue of money, i.e., the procedure for issuing money into circulation;
– government bodies that regulate and control money circulation (institutions of the Central Bank of the country, the Ministry of Finance, state treasuries).
5. Modern concept of money. In modern conditions, monetary circulation is not based on the gold standard, but is a system of paper credit money.
Credit money, in turn, gave birth to a system of credit cards, which, with the advent of the computer era, gave rise to the so-called “electronic money”, which performs the functions of money in a paperless manner, in the form of computer signals.
Topic 53. PROPORTIONS OF THE MONETARY SECTOR OF THE ECONOMY AND THE MONEY MULTIPLIER
1. Monetary sector of the economy– a connecting link between all agents of market relations. The money market has a specific feature that sets it apart from other markets: a special commodity circulates here - money. They have a special price - the interest rate, which is the opportunity cost of money. Therefore, in this market money is not bought or sold, but is exchanged for other financial assets.
The proportions between supply and demand in the money market depend on the dynamics: money supply, deposit ratio, deposit multiplier.
2. Money supply. Liquidity. In modern economic theory, the functional approach to money prevails: anything that is used as money is money. At the same time, the share of money itself in the total volume of means of payment does not exceed 25%. For these reasons, along with the concept of money, the broader concept money supply.
Money supply- this is a set of cash and non-cash purchasing and payment means available to the population, firms and the state.
Typically, the money supply is classified according to two criteria: by physical appearance and by liquidity (Fig. 53.1).
Liquidity of money supply is the ability of a monetary asset to turn into cash and perform its functions.
According to the principle of liquidity, the entire money supply is divided into several aggregates, formed according to the matryoshka principle.
Unit M1 includes cash and bank deposits for which settlements are carried out.
Rice. 53.1.Classification of money supply
Unit M2 includes M1 and is supplemented by savings deposits, shares of mutual funds, etc. It is approximately four times larger than the M1 aggregate. Both of these units are usually referred to as highly liquid.
MZ unit in addition to M2, it takes into account securities of large bank depositors and shares of investment funds.
Unit L along with the MH, it contains bankers' acceptances, commercial papers, short-term securities and bonds of the Central Bank of the country. Monetary aggregates MZ and L are usually referred to as low liquid.
The indicator is close in meaning to the money supply monetary base, which is calculated as the sum of cash in circulation and bank reserves.
The monetary base indicator allows you to calculate deposit multiplier, demonstrating the possibility of expanding deposits of commercial banks with an increase in the monetary base by 1:
Where M.D.– deposit multiplier; rr– mandatory reserve ratio as required by the Central Bank; fr– the share of banks’ own reserves, in excess of required reserves.
3. Calculation of the money multiplier. The state completely controls the issue of money into circulation, but it cannot do this in relation to the money supply, since banks, through their professional activities, significantly increase the money supply.
The ratio of new money created by banks to their reserves is called money multiplier.
Money multiplier is a numerical coefficient showing how many times the money supply will increase or decrease as a result of a change in the monetary base by one.
The multiplier is inversely related to the level of reserves and can be described by a simplified formula:
Where M– money multiplier; R– bank reserves.
The main factors for growth of the money supply due to the multiplier effect are:
– the size of the minimum reserve rate;
– demand for new loans.
Using these levers, the Central Bank can influence the money supply in the country, and through it regulate:
– economic activity of market agents;
– macroeconomic proportions;
– inflationary processes;
– investments, etc.
Topic 54. EQUILIBRIUM IN THE MONEY MARKET
1. Demand for money. Money is needed, at a minimum, to purchase goods and pay for services, as well as to accumulate them as a reserve. These initial factors create demand. An alternative to money in the market are bonds and other financial assets, therefore, if these non-monetary assets bring their owners a higher interest rate than money, then the population will prefer to buy bonds. The benefits of owning money, compared to investing in securities, lie in the following motives:
– transactional motive: money is needed for current payments in the economy;
– speculative motive: money may be required to purchase the same bonds under favorable conditions;
– precautionary motive is associated with the risk of loss of capital.
In general, people tend to value the liquidity of money by comparing their preferences with interest rate movements. In addition, as household incomes rise, prices also increase, which means more money is required to service the economy.
Demand for money– the amount of money that households and firms wish to have at their disposal, depending on their available income and interest rate.
A change in the interest rate causes the quantity demanded to slide along the curve MD, and the higher it is, the less money remains with the population and, therefore, the faster it must circulate in order to service a greater number of transactions. A change in the population's income leads to a shift in the curve MD right or left (Fig. 54.1).
Rice. 54.1.Demand for money
MD- demand for money.
2. Supply of money – This is the amount of money issued into circulation by the country's central bank.
If demand is formed freely in the market depending on the needs of the population for money, then supply is always set by the state banking system (Fig. 54.2).
Rice.54.2.Money supply by the Central Bank of the country
MS- offer of money.
The size of the money supply is influenced by three key factors:
– the amount of money generated by the country’s Central Bank;
– the ratio of reserves to deposits, showing the ability of commercial banks to increase the money supply;
– deposit ratio, reflecting the population’s ability to invest money in commercial banks.
3. Equilibrium in the money market.
Rice.54.3. Equilibrium in the money market
MS– supply of money;
M.D.– money supply.
As a result of the interaction of demand and supply of money, their market equilibrium arises, i.e., the amount of money offered on the market is ensured to be equal to the total amount that the population wants to have (Fig. 54.3)
The peculiarity of monetary equilibrium in comparison with the commodity and resource markets is that it is constant in the market; otherwise, serious disruptions occur, often leading to a financial crisis (as in August 1998).
Topic 55. BANKING SYSTEM
1. Credit relations. In a market economy, money is constantly in circulation, so temporarily free financial resources must enter the money markets and be put into action.
Credit– movement of borrowed capital carried out on the principles of urgency, repayment, payment, security and the intended purpose of monetary resources received for temporary use.
Credit performs important functions in the economy:
– redistributes money: from those who have it free to those who need it;
– helps to save circulation costs, since it does not require the state to issue additional money into circulation;
– accelerates the concentration and centralization of business. Credit has many forms (Fig. 55.1):
Rice. 55.1.Types of loan
2. The concept of banking.Banks– these are economic institutions that serve the system of credit relations in society.
Market agents contact the bank in the following cases:
– if there are temporarily available funds;
– in case of temporary shortage of funds;
– for cash settlements with counterparties (Fig. 55.2).
Rice. 55.2.Banking activities
There are three main types of bank deposits:
1) deposit, or demand deposit. With the help of such a deposit, the population makes small savings, which they can withdraw from the bank at any time, and firms open current accounts for the purpose of carrying out current operations;
2) time deposit, or deposit for a period. Money is placed in a bank with an obligation not to use it until a certain date;
3) certificate of deposit is a security indicating that the bank has accepted a deposit on the terms of a fixed-term account. Such securities may be the subject of collateral transactions or settlement on the securities market.
The bank provides loans in the form of cash loans, varying in terms of maturity:
– short-term – up to 1 year;
– medium-term – from 1 to 5 years;
– long-term – over 5 years.
3. Structure of the credit and banking system. The credit and banking system is a monetary and financial structure of the economy, consisting of two-level banks and specialized credit and financial organizations.
The country's central bank is the first level of the banking system. Its main functions are:
– emission(issue) of money into circulation and its withdrawal from it;
- function of the government's bank, which involves financing government programs, servicing public debt and the budget sector, and implementing monetary policy;
– bank of banks function expressed in the refinancing of the economy by providing commercial banks with the opportunity to obtain a loan if they lack funds. The Central Bank does not provide loans to the population and companies.
– supervision and control function financial markets and banks.
Commercial banks constitute the second level of the country's banking system. They are intended for credit and settlement services to the population and firms, in the process of which they create credit money (see question 54). By main types of activity, commercial banks can be divided as follows (Fig. 55.3):
Rice. 55.3.Classification of commercial banks
Specialized credit and financial institutions are organizations that are not banks in form, but in fact partially perform their functions. In a market economy, they compete fiercely with commercial banks for the funds of the population and firms.
These include:
– pension funds;
- Insurance companies;
– trust companies(half jars);
– pawnshops;
– mutual credit societies;
– credit partnerships.
The credit and banking system must ensure financial stability. For this purpose it is necessary:
– improve banking legislation;
– consolidate banking systems, since small banks are unstable, low-profitable and unable to provide investment loans;
– strengthen the connection between the banking sector and the real sector of the economy.
Topic 56. MONETARY POLICY FOR REGULATING THE MARKET ECONOMY
1. The importance of monetary policy.Money-credit policy state is to regulate monetary circulation in order to influence production growth and curb inflation and unemployment.
The main body implementing this policy is the Central Bank of the country, which must:
a) ensure the stability of the national currency;
b) develop uniform rules for the money market and control the actions of its agents;
c) implement a consistent macroeconomic policy that allows for the use of various economic regulators and stabilizers for the development of the real sector of the economy.
To achieve these goals, the Central Bank manipulates money and loans.
Rice. 56.1. Tight monetary policy.
MD – money supply;
MD1 – movement of money supply; MS – money supply.
2. Types of monetary policy. Depending on the economic situation, the Central Bank pursues a policy of either “expensive” or “cheap” money.
If inflation in a country reaches dangerous proportions, then the Central Bank sets itself the goal of maintaining the money supply at existing levels and preventing a new issue of money. Then, despite changes in the demand for money, the aggregate supply curve in the market will take a vertical form (Fig. 56.1).
In this case, an increase in the demand for money will cause an increase in the interest rate (the price of money), which will negatively affect the investment activity of the business sector. Such a monetary policy of the Central Bank is called a tight monetary policy with its inherent “expensive” money.
If it is necessary to create favorable conditions for investment in the country, then the Central Bank will be forced to sacrifice the stability of the money supply and will control the level of the interest rate, preventing it from rising under the influence of the demand for money.
This monetary policy of the Central Bank is called a flexible monetary policy, which is based on “cheap” money (Fig. 56.2).
Rice. 56.2.Flexible monetary policy
If the country sets the task of supporting economic development or compensating for the slowdown in money turnover, then a simultaneous increase in the money supply and interest rate is allowed.
This compromise policy is usually called intermediate monetary policy.
The Central Bank’s choice of one or another policy in the supply of money depends on the reasons that gave rise to changes in the demand for money.
3. Monetary policy instruments. The monetary policy of the Central Bank consists of four elements:
1. Open market operations. The meaning of the action is that, by selling and buying securities on conditions accessible to the entire population, the Central Bank regulates monetary circulation in the country: by selling securities, the Central Bank binds the money supply, withdraws excess money from the population, firms and commercial banks, and by buying it increases it.
2. Changes in the discount interest rate. The state, represented by the Central Bank, is a creditor to commercial banks, which receive loans from it against their own debt obligations. Central Bank loans are secured by government securities owned by commercial banks.
Accounting policy is carried out by establishing and revising the refinancing rate, which makes it difficult or easier to obtain financial resources, which, in turn, affects the ability of commercial banks to issue loans to customers.
3. Changes in reserve requirements for commercial banks. All banks must reserve part of their financial resources to guarantee payments, without putting them into circulation. Mandatory reserve requirements are set at approximately 10%.
If the Central Bank tightens reserve requirements for commercial banks and this leads to a reduction in the money supply, then such actions are called restrictive monetary policy, and if vice versa - expansionist.
Money supply targeting. The meaning of the measures is to establish upper and lower limits for the growth of the money supply for a certain period of economic development. Moreover, the upper limit of money supply growth should under no circumstances be exceeded. Essentially, we are talking about a kind of “monetary corset” for the economy.
Topic 57. ECONOMIC GROWTH AND DEVELOPMENT
1. The concept of economic growth. Under economic growth refers to a stable increase in the productive power of the economy over a long period of time.
Economic growth is measured in two interrelated ways:
1. An increase in real gross national product (GNP) for a certain period (year).
2. An increase in real GNP per capita over a certain period (year).
To determine the rate of change in economic growth, the following indicators are used:
High rates of economic growth are not always justified if they are achieved at the expense of product quality. In these cases, economic growth is carried out on an unhealthy basis and sooner or later undermines the economic potential of the country.
2. Goals, efficiency and quality of economic growth. By ensuring economic growth, the state can achieve the following goals:
1) improve the living conditions of the population;
2) put into practice the achievements of scientific and technical progress;
3) increase the production capabilities of the economy;
4) smooth out the social differentiation of incomes of the population and stabilize the economic system.
The effectiveness of economic growth is expressed in improving the quality of national goods and services and increasing their competitiveness in the domestic and foreign markets, developing new industries, deepening specialization and cooperation of production, mastering new technologies, as well as overcoming "X-inefficiency"(i.e., unnecessary costs) through improved management.
Economic growth is not only quantitative expression, But and quality content, which is expressed in the social protection of disabled members of society and the unemployed; safe working and living conditions for people; increased investment in human capital; supporting full and effective employment.
3. Factors of economic growth. Factors of economic growth are conditions that ensure an increase in GNP. All factors can be divided into two groups:
straight– factors ensuring the physical growth of the economy, creating its economic potential;
indirect– factors influencing straight lines by slowing them down or speeding them up (Fig. 57.1).
4. Ways to ensure economic growth. Economic growth in a country can be achieved through extensive or intensive development.
Essence extensive way comes down to the development of the economy in breadth due to the increased involvement in production of more workers, raw materials, means of labor, land, etc. With the help of extensive growth, society solves important problems:
– provides employment and reduces unemployment;
– develops new industries, restructures the economy in accordance with market needs;
Rice. 57.1.Main factors of economic growth and their interaction
– involves new territories and resources in economic circulation;
– eliminates territorial imbalances, allowing depressed and undeveloped regions to be brought up to the national average.
Essence intensive path is expressed in the development of the economy in depth due to the qualitative improvement of the workforce, the use of advanced technologies, and higher labor productivity. Intensive economic development allows:
– use available resources economically;
– increase the competitiveness of national goods by improving quality and reducing production costs;
– introduce the achievements of scientific and technical progress into production.
Extensive and intensive factors of economic growth always coexist together, so the country’s economy can only develop predominantly along one particular path.
Topic 58. INTERNATIONAL ECONOMIC RELATIONS
1. World economy is a global economic system that involves national economies in economic processes that are common to all through the international division of labor.
It arose on the basis of intercountry economic ties and relationships, which initially manifested themselves in the field of foreign trade, and then spread to the production sector, scientific research and development, labor migration, and the use of financial resources.
The world economy developed on the basis of a free competition market by the middle of the 19th century, but at the turn of the century, under the influence of economic monopolism and the export of capital, it took the form of world empires. The struggle between them led to the loss of a number of countries from the system of the world capitalist economy and the emergence of two world subsystems - capitalism and socialism, which were finally formed in the middle of the 20th century. However, at the end of the 20th century. The world economy has again become unified, which makes it possible to consider it as a global whole.
The material basis of the world economy is the international division of labor– specialization and cooperation of countries in the production of goods and services (Fig. 58.1).
Rice. 58.1.Structure of connections of the international division of labor
In addition to it there are:
– international trade in goods and services;
– international capital movement;
– international labor migration;
– international monetary and financial relations;
– international economic integration.
In recent decades, international economic relations have embraced changes occurring in the sphere of property, internationalizing them, and also causing macroeconomic regulation of entire groups of countries on a supranational basis (EEC), etc.
2. Internationalization, integration and globalization of economic processes. The current state of the world economy is characterized by the openness of national economies, that is, involvement and integration into the world market, when goods produced in one country are consumed in other countries.
At the same time, the internationalization of economic processes, the globalization of the economic space and the integration of individual countries into a single whole should not infringe on national economic security or lead to the economic dictatorship of some countries over others.
An indicator characterizing the involvement of a national economy in the world economy is export quota, calculated as the ratio of a country's exports to its gross domestic product (GDP), expressed as a percentage:
3. Forms of international economic relations. World economic relations are to a certain extent influenced by the migration of capital and labor resources.
Capital migration finds expression in moving from country to country in search of a higher rate of profit. Capital is exported in two main forms - direct and portfolio investments. Direct investments lead to the formation of property abroad, and portfolio– are expressed in the acquisition of shares of foreign companies, without ensuring ownership rights to enterprises and even control over them.
Countries importing capital have developed special techniques and measures to attract foreign investment:
1) reducing the tax burden up to the introduction of a “tax holiday” regime;
2) creation of special economic zones and offshores;
3) introduction of special legislation regulating the regime of foreign investment.
Based on international capital movements, transnational companies, dominant in world markets for individual goods and services.
International labor migration is a consequence of the movement of the population in search of work. It is characterized by the presence of countries with mass emigration of the working-age population with low levels of wages and economic development and countries pursuing an active immigration policy to attract foreign workers. Despite their own unemployment, it is profitable for rich states to import cheap labor, since it does not shy away from hard, unskilled, low-prestige work and does not require large expenditures on social protection, unlike the local population.
As the world economy develops, international labor migration is intensifying, including due to illegal migration, which has affected not only the United States and the European Union, but in recent years also Russia.
Labor migration is changing not only quantitatively, but also qualitatively, taking the form of “brain drain”.
Topic 59. FOREIGN TRADE AND TRADE POLICY
1. The importance of foreign trade for the national economy.International trade represents a country's interaction with foreign countries regarding the movement of goods and services across national borders.
Foreign trade allows the state to:
a) receive additional income from the sale of national goods and services abroad;
b) saturate the domestic market;
c) overcome the limited national resources;
d) increase labor productivity by specializing in world trade in the supply of certain products to the world market.
Foreign trade is characterized by the concepts export And import: the first involves exporting goods and services abroad and receiving foreign currency in return, and the second involves importing them from abroad with appropriate payment. Exports, like investments, increase aggregate demand in a country and drive foreign trade multiplier, creating primary, secondary, tertiary, etc. employment. An increase in imports limits the effect of this effect due to the outflow of financial resources abroad.
Foreign trade is organized on the principles developed in 1947 and enshrined in the General Agreement on Trade and Tariffs (GATT ) . It was replaced in 1996 by the World Trade Organization (WTO), which takes a broader view of foreign trade, including the exchange of goods and services and the purchase and sale of intellectual property.
2. Profitability of foreign trade. The theory of comparative advantage. Export in foreign trade, according to A. Smith, becomes profitable if the costs of producing goods within the country are significantly lower than in other countries. In this case, goods produced by the national economy have absolute advantages ahead of foreign competitors and can be easily sold abroad. On the other hand, no state can have an absolute advantage in all produced goods; therefore, it is necessary to import those that are more expensive within the country and cheaper abroad. Then, at the same time, there is direct benefit from both exports and imports.
Based on the absolute advantages of A. Smith, D. Ricardo formulated a theory comparative costs (benefits), according to which, when determining the profitability of foreign trade, one should compare not the absolute, but the relative effect, and not the costs themselves, but their ratios. At the same time, it must be taken into account that by producing certain goods in conditions of limited resources, the country is deprived of the opportunity to produce others that are no less necessary for it, therefore, in accordance with the theory of comparative advantage of D. Ricardo, a situation is quite possible in which it is profitable for the country to import goods, even if their production within the country is cheaper. In this case, A. Smith's theory of absolute costs becomes a special case of the theory of comparative costs.
The theory of comparative costs of D. Ricardo in modern conditions is supplemented by the Heckscher-Ohlin theory, named after two Swedish economists who proved that countries strive to export not only those goods that have absolute and relative advantages, but also in the production of which relatively surplus production factors are intensively used , but import goods for the production of which there is a shortage of factors in the country. Unlike A. Smith and D. Ricardo, their modern followers believe that both sides benefit from foreign trade - both the country and the rest of the world.
Topic 60. BALANCE OF PAYMENTS
1. Macroeconomic importance of the balance of payments.Payment balance– state accounting and recording of payments received from abroad on a par with payments abroad.
The balance of payments affects the market rate of the national currency, which in turn affects the intensity and direction of export-import flows, the flow of investment resources from one country to another and, in general, the macroeconomic balance in the country.
In addition to the equilibrium state of the balance of payments (when the balance is zero), an active and a passive balance is possible. Active balance indicates an excess of foreign currency receipts into the country over payments, and passive- vice versa.
A clearly expressed active balance of payments is less favorable for the national economy than a zero one, and a passive, negative one, observed for a number of years in a row, shows the insufficiently effective, subordinate position of the country in the world market and can ultimately lead to a decrease in its exchange rate (devaluation ).
2. Structure of the balance of payments. The main sections of the balance of payments are the current account balance and the capital balance.
Current account balance includes items related to the movement of exported, imported and re-exported goods, the provision of insurance, transport, repair, financial and other services, various types of transfers: remittances from individuals, gifts and scientific grants, subsidies and loans to individuals, as well as the purchase of foreign currency for import and export.
Capital flow balance reflects the total amount of purchases and sales of land, shares, bonds, bank deposits, loans and credits, etc. The sale of capital to foreign investors will be an import of capital, and the purchase will be an export.
3. Trade balance. One of the important components of the balance of payments included in the current account balance is trade balance, characterizing the ratio of exports and imports of goods. It is calculated on the basis of customs statistics of cargo crossing the state border.
For certain groups of goods, the government establishes customs duties– special border commodity taxes, which are consolidated into a special customs tariff. This rate can be reduced by customs preferences(benefits).
4. Factors influencing the balance of payments. The balance of payments is adjusted through the Central Bank's transactions in the purchase and sale of foreign currency, gold and other financial assets. All these actions of the bank do not pursue the goal of making a profit, but form official state reserves. These reserves cover the current account and capital account deficits. By selling accumulated reserves of gold and currency, the government increases their market supply. With a positive balance of payments balance, it withdraws excess resources from the market, increasing its gold and foreign exchange official reserves.
Topic 61. EXCHANGE RATE
1. International monetary system– a set of international norms, rules and methods of settlements between states, enshrined in an agreement between them.
The modern monetary system has existed since 1976 and is called Jamaican. She came to replace Bretton Woods system, which existed for 30 years on the basis of the gold-dollar standard. The Jamaican system is based not on one currency - the dollar, but on a “basket” of several major world currencies (dollar, mark, yen, pound sterling, French franc), which is why it is called a multi-currency standard. The world monetary standard in this system is the special international monetary unit SDR, which is often called “paper gold.” HAPPY BIRTHDAY(Special Drawing Rights) are non-cash electronic money in the form of an entry in the accounts of countries in the International Monetary Fund. It is pursuing a course to ensure that SDRs become dominant in international payments, but they have not yet been able to seriously displace the dollar. In addition, in recent years, a new serious contender for the role of world money has emerged - the euro.
2. Determination of the exchange rate.Exchange rate – is the price of one currency expressed in units of another. Depending on which currency is the basis for comparison, it is divided into two types: exchange And motto exchange rates.
Exchange rate is the price of a unit of foreign currency expressed in national money, and the currency is the opposite.
The exchange rate is influenced by the size of the money supply and the associated inflation. Depending on the form of exchange rate regulation, there are fixed And floating courses. Fixed exchange rate assumes its invariability in relation to other currencies. If the ratio in the market changes, then the Central Bank carries out foreign exchange intervention (sale) in the market in order to restore the established fixed exchange rate of the national currency. Floating exchange rate determined in the process of free market exchange under the influence of supply and demand. In the Russian Federation, the exchange rate is floating with some restrictions from the Central Bank and is set daily.
The ratio of official currency rates can be brought into line with market demand and supply by methods of devaluation and revaluation of the national currency.
Devaluation– a decrease in the official exchange rate of the country’s national currency in relation to foreign ones.
Revaluation– increase in the official exchange rate of the national currency in relation to foreign ones.
The purchase and sale of foreign currency is carried out on currency exchanges, where carried out in the form spot(direct) or forward(with a delay of up to three months) transactions. The leading centers of foreign exchange markets are New York, Hong Kong, London, Tokyo.
3. Currency convertibility. The use of the national currency in international payments at its official rate makes it convertible.
The following types of currencies are distinguished by the degree of convertibility:
1. Freely convertible currency(CCV) - fully fulfills the role of world money, i.e., without any restrictions or obstacles, it is used in all foreign trade operations of a current and investment nature, recognized by all countries as a universal means of payment and settlement between them. The hard currency includes the American dollar, Swiss franc, German mark, British pound sterling, Japanese yen, etc.
2. Partially convertible currency. The most common form of currency, which involves various restrictions on currency transactions. These restrictions are usually associated with the use clearing(bilateral) payments, licensing of exports and imports, the use of different exchange rates depending on the type of transactions, restrictions on the import and export of national currency, regulation of the export of profits, the import of investments, etc.
3. Non-convertible currency. It is widespread among developing countries and involves strict prohibitions and restrictions on transactions with national and foreign currencies. A similar currency was the Soviet ruble.
Currency convertibility can be assessed from the perspective of both the country's population and foreigners.
4. Internal currency convertibility means its ability to service transactions for goods and services within the country and the ability for the population to exchange it for foreign currency.
5. External currency convertibility means the opportunity for foreigners to freely exchange national currency for any foreign currency at the official rate.
Achieving the convertibility of the national currency has a beneficial effect on the country's trade and payments balances, and its stability forces national producers to compete internationally by reducing costs and improving the quality of products.
Literature
1. Amosova V., Gukasyan G., Makhovikova G. Economic theory. St. Petersburg; M.; Kharkiv; Minsk: Peter, 2001.
2. Mankiw G. Principles of economics of St. Petersburg; M.; Kharkiv; Minsk: Peter, 1999.
3. Dobrynin A.I., Salov A.I. Economy. M.: Yurayt., 2002.
4. Popov A.I. Economic theory. St. Petersburg; M.; Kharkiv; Minsk: Peter, 2000.
5. Fischer S., Dornbusch R., Schmalenzi R. Economics, M.: Delo, 1993.
Main Factors economic growth :
1) an increase in the quantity and quality of labor, or human, resources ;
2) increase in volume fixed capital ;
3) new technology and technology ;
4) new in the management system;
5) development of natural resources.
These five factors of economic growth are called supply factors. They are the ones who ensure the physical growth of production. Only the availability of greater quantity and quality of resources, both human and material, including technological potential, makes it possible to increase the production of a real product. However, factors influencing changes are also important for economic growth. demand : price and non-price factors.
Thus, economic growth means not only the full involvement of resources in economic circulation and their most effective use, but also taking into account demand factors in order to obtain the maximum amount of useful products and profits (see Fig. 36.1).
Increasing GNP can be done in two ways:
1) extensive;
2) intense(see Fig. 36.2).
From these positions, let's take a closer look at the above factors.
1. The role of labor costs in economic growth.
Economic growth, or growth real GNP , partly depends on the amount of labor costs, but mainly on their quality, which inevitably causes an increase labor productivity .
What does it depend on quantity labor costs? It depends on the number of employees and the length of the working week. The average working week is determined by legal and institutional factors, as well as collective agreements. In turn, employment depends on the population size and the share of the working-age population that is actually engaged in production. The use of labor increases either as a consequence of an increase in the length of the working day or as the share of employed people in the total population increases. Under normal conditions, the first of these factors is unlikely to cause growth, since an increase in people's level of well-being is likely to increase their “demand” for free time. On the contrary, the second factor is quite capable of promoting economic growth if the share of the working-age population increases or people’s attitudes towards work change.
What does it depend on quality labor? The quality of labor depends on factors such as education, training and retraining of personnel, and professionalism. The development of education and training allows for more significant shifts in labor productivity. However, such shifts should rather be attributed to the growth investment V human resources . From economic analysis it follows that in developed countries, an increase in labor costs gives approximately 1/3 of the increase in real income, the remaining 2/3 of the increase is provided by an increase in labor productivity.
Increasing the level of education and professional training is the most significant factor in increasing labor productivity. Educated, literate people with extensive work experience, creating high-quality products, contribute to the satisfaction of limitless needs . Hence, investment in human capital is an important condition for economic growth, but not only.
2. The role of the volume of fixed capital in economic growth.
The volume of fixed capital is a decisive factor determining the dynamics of economic growth. To increase the volume of fixed capital, it is necessary to increase the share of investments in GNP . Of particular importance are public investments in infrastructure : information, electricity, highways, bridges, airports, public transport, water treatment systems, etc. Often, the slowdown in economic growth is due to a lack of investment in its development. Influence savings benefit factor , determined by the scale of production, means that the expansion of markets and the size of enterprises allows the introduction of more efficient production methods, and this leads to an increase in labor productivity.
Height should not be confused capital "in breadth" and "in depth".
The growth of capital “in breadth” increases the volume of capital involved in economic turnover, but, unfortunately, does not increase labor productivity. And this is where help is needed - capital growth “in depth”.
The growth of capital “in depth” is expressed in more efficient production due to increased labor productivity. This means that more qualified labor is hired (“keep up the good work” ¾ constantly learn, grow professionally, become a “pro”!), new technology is used and technology , new management etc.
3. Technical progress. Technical progress is an important (one might say super-important) factor in economic growth. Essentially it is the engine of economic progress. The rate of introduction of technical inventions and renewal of capital largely depends on the ratio of the price of capital equipment and the wages of workers whose labor replaces this capital. Over the past 50 years in developed countries wage , as a rule, grew relatively faster costs related to the purchase of equipment. Enterprises replaced labor with capital, and the pace of technological progress noticeably accelerated in many industries, which was felt by the agricultural worker, the loader, the transport worker, the docker, and the miner in their workplaces.
4. Changes in management, or production management at different levels.
Technical progress means not only completely new equipment, but also new forms of management and organization of production, i.e., everything that allows you to combine these resources in a new way in order to increase the final output of products.
For example, the transition from centralized economic management system to the market is considered as a factor of economic growth. This transition has been carried out in Russia from 1991 to the present. However, the result is exactly the opposite: instead of economic growth in Russia, there is profound economic crisis 10 year duration. Since 2003, the Russian Government has been forecasting economic growth in the Russian Federation by 5-6%. And then “the grandmother said in two”: maybe there will be, and maybe ¾ not. Nevertheless, we are of the opinion that the application of new forms of management at the general economic, regional and company levels undoubtedly brings great effect. Let's say improvement resource allocation means that work force redistributed from low-profit industries to high-profit industries. For example, the movement of resources from agriculture, where labor productivity is relatively low, to manufacturing, where labor productivity is relatively high. As a result, the average labor productivity of the total employee increases. Moreover, the long-term trend towards liberalization international trade helps improve resource allocation and stimulates productivity growth.
5. The abundance and development of natural resources is a powerful positive factor for economic growth. Thus, oil and natural gas provide Russia with favorable conditions for economic growth. This does not mean that countries with insufficient reserves are doomed to low economic growth rates. Thus, in Japan, natural resources are limited, but the rate of economic growth is significant. At the same time, some countries in Africa and South America, possessing significant reserves of natural resources, are classified as developing countries.
So, we looked at five factors of economic growth. Question: which of the growth factors contributes to this most of all - education, the personnel training system or the growth of capital reserves, the development of technology, management or the development of natural resources? The answer is clear (hold on to your chair!): all the factors together How the role of each of these factors is simply impossible to unambiguously measure.
In addition, economic growth is affected by:
a) fundamental changes in the structure of production. As the level of well-being of the country's residents grows, the structure of their expenses : the center of gravity of spending is gradually moving from agricultural products to industrial products, and then to service sector . Since the possibilities for intensive use of capital and technological innovation are greatest in industry, the growth rate of any economy increases with its industrialization . However, as the share of spending on purchasing private and public services increases, the rate of growth slows again;
b) sustainable improvement in terms of trade (see chapters on marketing, wholesale and retail trade);
c) social, cultural and political atmosphere in the country. An analysis of this issue is beyond the scope of this textbook, however, it is touched upon quite deeply in the chapters devoted to the problems of the transition economy in Russia.
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