Lecture
Macroeconomics, like microeconomics, is a section of economic theory. Translated from the Greek word "macro" means "big" (respectively, "micro" - "small"), and the word "economy" - "housekeeping". Thus, macroeconomics is a science that studies the behavior of the economy as a whole or of its large aggregates (aggregates), while the economy is considered as a complex large unified hierarchically organized system, as a set of economic processes and phenomena and their indicators.
For the first time the term “macroeconomics” was used in his article in 1933 by the famous Norwegian scientist - mathematician-economist, one of the founders of econometrics, Nobel Prize winner Ragnar Frisch. However, meaningfully, modern macroeconomic theory has its origin in the fundamental work of the eminent English economist, representative of the Cambridge school, Lord John Maynard Keynes. In 1936 he published his book The General Theory of Employment, Interest and Money, in which Keynes laid the foundations of macroeconomic analysis. The significance of Keynes’s work was so great that the term “Keynesian revolution” appeared in economic literature and a Keynesian macroeconomic model or Keynesian approach appeared in contrast to the traditional classical approach to studying economic phenomena, i.e. microeconomic analysis (classical model).
Unlike microeconomics, which study the economic behavior of individual (individual) economic entities (consumer or producer) in individual markets, macroeconomics studies the economy as a whole, explores problems common to the entire economy, and operates with aggregate values, such as gross domestic product, national income, aggregate demand, aggregate supply, aggregate consumption, investment, general price level, unemployment rate, public debt, etc.
The main problems that macroeconomics studies are: economic growth and its rates; economic cycle and its causes; employment rate and unemployment problem; general price level and the problem of inflation; level of interest rates and problems of money circulation; the state of the state budget, the problem of financing the budget deficit and the problem of public debt; balance of payments and exchange rate problems; macroeconomic policy issues.
All these problems cannot be solved from the standpoint of microeconomic analysis, i.e. from the level of an individual consumer, a separate company and even a separate industry. It is precisely because there are a number of such general or macroeconomic problems that it becomes necessary to create an independent division of economic theory, an independent discipline — macroeconomics.
The importance of studying macroeconomics is as follows:
Ex post and ex ante analysis.
There are two types of macroeconomic analysis: ex post analysis and ex ante analysis. Ex post macroeconomic analysis or national accounting, i.e. analysis of statistical data, which allows to evaluate the results of economic activity, identify problems and negative phenomena, develop economic policies to solve them and overcome them, conduct a comparative analysis of the economic potentials of different countries. Ex ante macroeconomic analysis, i.e. predictive modeling of economic processes and phenomena on the basis of certain theoretical concepts, which allows to determine the patterns of development of economic processes and to identify causal relationships between economic phenomena and variables. This is macroeconomics as a science.
In its analysis, macroeconomics uses the same methods and principles as microeconomics. Such general methods and principles of economic analysis include: abstraction, (using models to study and explain economic processes and phenomena); a combination of deduction and induction methods; a combination of regulatory and positive analysis; use of the principle “with other things being equal”, the assumption about the rationality of the behavior of economic agents, etc.
The peculiarity of macroeconomic analysis is that aggregation is its most important principle. The study of economic dependencies and patterns at the level of the economy as a whole is possible only if we consider aggregates or aggregates. Macroeconomic analysis requires aggregation. Aggregation is the union of individual elements into a single whole, into an aggregate, into an aggregate. Aggregation is always based on abstraction, i.e. abstraction from irrelevant moments and the selection of the most significant, significant, typical features, patterns of economic processes and phenomena. Aggregation allows you to select: macroeconomic agents, macroeconomic markets, macroeconomic relationships, macroeconomic indicators.
Aggregation based on identifying the most typical behavioral traits of economic agents provides the ability to identify four macroeconomic agents:
Households (households) - is an independent, rationally operating macroeconomic agent, whose goal of economic activity is utility maximization, which in the economy: a) the owner of economic resources (labor, land, capital and entrepreneurial abilities). Selling economic resources, households receive incomes, most of which they spend on consumption (consumer spending) and therefore are b) the main buyer of goods and services. The remaining part of household income is saved and therefore is c) the main saver or lender, i.e. provide credit supply in the economy.
Firms (business firms) - is an independent, rationally operating macroeconomic agent, whose goal of economic activity is profit maximization. Firms are: a) the buyer of the economic resources with which the production process is ensured, and therefore firms are b) the main producer of goods and services in the economy. The resulting revenue from the sale of goods and services produced, firms pay households in the form of factor income. For the expansion of the production process, ensuring the growth of the capital stock and compensation for the depreciation of capital, firms need investment goods (primarily equipment), therefore firms are c) investors, i.e. buyers of investment goods and services. And since, as a rule, firms use borrowed funds to finance their investment expenses, they are d) the main borrower in the economy, i.e. impose a demand for credit funds.
Households and firms form the private sector.
The state (government) is a combination of state institutions and organizations that have the political and legal right to influence the course of economic processes and regulate the economy. The state is an independent, rationally operating macroeconomic agent whose main task is to eliminate market failures and maximize social welfare — and therefore acts as: a) a producer of public goods; b) the buyer of goods and services to ensure the functioning of the public sector and the performance of its many functions; c) the redistributor of national income (through the system of taxes and transfers); d) depending on the state of the state budget - by the lender or borrower in the financial market. In addition, the state acts e) regulator and organizer of the functioning of a market economy.
It creates and provides the institutional basis for the functioning of the economy (legislative base, security system, insurance system, tax system, etc.), i.e. develops the "rules of the game"; ensures and controls the money supply in the country, since it has the monopoly right to issue money; conducts macroeconomic policies, which are divided into:
The private and public sectors form a closed economy.
Foreign sector (foreign sector) - unites all other countries of the world and is an independent rationally operating macroeconomic agent interacting with this country through: a) international trade (export and import of goods and services), b) movement of capital (export and import of capital, i.e. financial assets).
Adding to the analysis of the foreign sector allows you to get an open economy.
The aggregation of markets is carried out in order to identify patterns of functioning of each of them, namely: studies of the characteristics of the formation of supply and demand and the conditions of their equilibrium in each of the markets; determine the equilibrium price and the equilibrium volume based on the ratio of supply and demand; analyzing the effects of changing equilibria in each of the markets.
Market aggregation makes it possible to identify four macroeconomic markets:
To obtain an aggregated market of goods and services (goods market), we must abstract (distract) from the whole variety of goods produced by the economy and highlight the most important regularities of the functioning of this market, i.e. patterns of demand and supply of goods and services. The ratio of supply and demand allows us to obtain the value of the equilibrium price level (price level) for goods and services and the equilibrium volume of their production (output). The market for goods and services is also called the real market (real market), because real assets are sold and bought there (real assets).
The financial market (borrowed funds market) (financial assets market) is a market where financial assets (money, stocks and bonds) are bought and sold. This market is divided into two segments: a) money market or money financial assets market; b) securities market (bonds market) or non-monetary financial assets market. There are no buying and selling processes in the money market (it makes no sense to buy money for money), however, a study of the laws governing the functioning of the money market, generating demand for money and money supply is very important for macroeconomic analysis. The study of the money market, the conditions of its equilibrium allows you to get an equilibrium interest rate (interest rate), which acts as the “money price” (the price of a loan), and an equilibrium money stock, and also consider the consequences of changing the equilibrium in the money market and its effect on goods and services market. The main intermediaries in the money market are banks that accept cash deposits and issue loans.
Stocks and bonds are sold and bought on the stock market. Buyers of securities, in the first place, are households that spend their savings in order to generate income (dividends on shares and interest on bonds). The sellers (issuers) of shares are firms, and bonds are firms and the state. Firms issue stocks and bonds in order to obtain funds to finance their investment expenses and expand production, while the state issues bonds to finance the state budget deficit.
The resource market in macroeconomic models is represented by the labor market (labor market), since the patterns of its functioning (formation of demand for labor and labor supply) make it possible to explain macroeconomic processes, especially in the short term. When studying the labor market, we must distract (abstract) from all the different types of labor, differences in skill levels and vocational training. Long-term macroeconomic models also explore the capital market. The balance of the labor market allows you to determine the equilibrium amount of labor (labor force) in the economy and the equilibrium "price of labor" - the wage rate. An imbalance analysis in the labor market makes it possible to identify the causes and forms of unemployment.
The currency market (foreign exchange market) is a market in which national currency units (currencies) of different countries (dollars for yen, marks for francs, etc.) are exchanged for each other. As a result of the exchange of one national currency for another, the exchange rate (exchange rate) is formed.
Comments
To leave a comment
Macroeconomics
Terms: Macroeconomics