Macroeconomic equilibrium classical and Keynesian approaches. Classical and Keynesian models of macroeconomic equilibrium

It should be noted that before Keynes, economic theory did not consider general economic equilibrium as an independent macroeconomic problem. Therefore, the classical model of general economic equilibrium is a generalization of the views of economists of the classical school using modern terminology.

The classical model of general economic equilibrium is based on the basic postulates of the classical concept:

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

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

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

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

Real variables are variables and other quantities calculated independently of the nominal level of current prices of the goods they measure. According to this principle, indicators such as real wages, real income, as well as real GDP, real GNP, and real national income are determined.

Relative price is the price of a product, determined as a ratio to the price of another, basic product.

A nominal variable is a qualitative variable whose values generally cannot be ordered by magnitude (race, ethnicity, gender).

Absolute prices, in contrast to relative prices, are prices for goods and services expressed directly in the number of monetary units.

3. Employment, due to self-regulation of the labor market, appears to be full, and unemployment can only be natural. At the same time, the labor market plays a leading role in shaping the conditions of general economic equilibrium in the real sector of the economy.

Full employment - the presence of a sufficient number of jobs to satisfy the work demands of the entire working population of the country, the practical absence of long-term unemployment, the opportunity to provide those who wish with jobs that correspond to their professional orientation, education, and work experience.

The natural level of unemployment is an objectively developing, relatively stable long-term level of unemployment, due to natural reasons (staff turnover, migration, demographic factors), not related to the dynamics of economic growth.

The full, or natural, rate of unemployment occurs when labor markets are balanced, that is, when the number of job seekers equals the number of available jobs.

Equilibrium in the labor market means that firms have realized their plans regarding production volumes, and households have realized their plans regarding the level of income, determined in accordance with the concept of internal income.

The short-run production function is a function of one variable - the amount of labor; therefore, the equilibrium level of employment determines the level of real production. And since employment is full (everyone who wanted a job at a given wage rate got it), the volume of production is fixed at the level of natural output, and the aggregate supply curve takes on a vertical form.

The volume of aggregate supply is the sum of factor incomes of households, which are distributed by the latter to consumption and savings.

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

Since aggregate demand in a simple model represents the sum of consumer and investment expenditures, if the condition is met that consumer and investment expenditures are equal, equilibrium will be established in the goods market. That is, according to Say's law, any supply generates a corresponding demand.

If planned investments do not correspond to planned savings, then an imbalance may arise in the goods market. However, in the classical model, any such imbalance is eliminated in the capital market. The parameter that ensures balance in the capital market is a flexible interest rate.

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

Graphically, the relationship between the interest rate, investment and savings according to the “classics” is as follows:

The graph shows an illustration of the equilibrium position between savings and investments: curve I - investment, curve S - savings; on the ordinate axis are the values of the percentage rate (r); on the x-axis are savings and investments.

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

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

If we assume that the volume of planned savings turned out to be less than the volume of planned investments, then competition between investors for available credit resources will begin in the capital market, which will cause an increase in the interest rate.

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

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

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

Thus, Walras's law is confirmed, according to which, if equilibrium is established in two of the three interconnected markets (the labor market and the capital market), then it is established in the third market - the goods market.

Price flexibility extends not only to goods, but also to factors of production. Therefore, a change in the price level for goods causes a corresponding change in the price level for factors. This changes the nominal wage, but the real one remains unchanged.

It follows from this that the prices of goods, factors and the general price level change in the same proportion.

It should be noted that the classics considered macroeconomic equilibrium only in the short term under conditions of perfect competition. Jean-Baptiste Say first formulated the so-called “law of markets”, the essence of which boiled down to the following statement: the supply of goods creates its own demand, in other words, the volume of production produced automatically provides an income equal to the cost of all created goods.

This means that, firstly, the goal of an individual receiving income is not to receive money as such, but to acquire various material goods, that is, the income received is spent entirely. Money with this approach plays a purely technical function, simplifying the process of exchange of goods. Secondly, only your own funds are spent.

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

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

Interest balances the supply and demand of investment funds. Flexible wages balance supply and demand in the labor market, so that any prolonged existence of involuntary unemployment is simply impossible. Flexible prices ensure that the market is “cleared” of products, so that long-term overproduction is also impossible. An increase in the money supply in circulation does not change anything in the real flow of goods and services, having only an impact on nominal value values.

Thus, the market mechanism in the theory of the classics is itself capable of correcting imbalances that arise throughout the national economy and government intervention turns out to be unnecessary.

The principle of state non-intervention is the macroeconomic policy of the classics.

So, summarizing all of the above about the classical concept of general economic equilibrium, we can say that the formation of conditions for general economic equilibrium in the classical model occurs on the principle of self-regulation, without government intervention, which is ensured by three built-in stabilizers: flexible prices, flexible nominal wage rate and flexible wage rate percent. At the same time, the monetary and real sectors are independent of each other.

In economic theory, there are two main approaches to the issue of the mechanism for regulating a market economy: neoclassical (dominated until the 30s of the twentieth century and received a new impetus for development in the 60-70s) and Keynesian.

Neoclassicists proceed from the fact that:

1) perfect competition prevails in the market for factors of production and the market for goods; a market economy is able to ensure the full use of resources;

2) wages and prices can flexibly change up and down, they are completely elastic. At the same time, those who want to work at a wage rate determined by the market can easily find work, that is, involuntary unemployment is impossible;

3) the market mechanism ensures a balance of aggregate supply and demand at the level of full employment of all factors of production. Accordingly, the aggregate supply curve AS is always a vertical line at potential output. It reflects changes in the price level and the constancy of the volume of production produced. Aggregate demand AD is stable;

4) the economic policy of the state can only affect prices, and not the volume of production and employment (Fig. 11.12).

Rice. 11.12. Equilibrium in the classical model

The state should not interfere in the process of establishing macroeconomic equilibrium. A market economy is an ideal self-regulating mechanism;

5) aggregate supply is considered as the engine of economic growth. Shifts in AS are possible when the value of production factors or technology changes.

The Keynesian approach assumes that:

1) in the short term, prices and wages are rigid. Price rigidity does not allow factor markets to reach a state of equilibrium, so in the short run there is a surplus of factors of production in the economy. Accordingly, due to the presence of unemployment, average costs do not change with changes in output, and the short-term aggregate supply curve AS looks like a horizontal straight line. A reduction in prices and wages cannot, in principle, even alleviate the problem of unemployment, since such a reduction leads to lower cash incomes, which, in turn, causes a reduction in aggregate spending.

In the long run, the volume of actual output will correspond to potential output, the level of which is determined by the vertical long-term aggregate supply curve AS.

Aggregate demand AD is unstable because there is a mismatch between investment plans and savings plans;

2) since the market economy is unstable and often underutilizes all its resources, the market mechanism without government intervention is not able to balance the economy, ensuring full employment of all factors of production;

3) since in the short term the aggregate supply is a given value, the engine of economic growth is effective demand. Effective demand through the marginal propensity to consume and the increase in new investments sets the maximum possible level of economic activity. Effective demand– this is the aggregate demand for goods and services, provided with resources for their acquisition. It can be communicated to producers through the price mechanism;

4) autonomous expenses, thanks to the multiplier mechanism, can increase total income by a large amount;

5) macroeconomic equilibrium can occur at different segments of the aggregate supply curve (Fig. 11.13).

Rice. 11.13. Equilibrium in the Keynesian model

The basis of neoclassical theory is Say's law, according to which supply itself creates demand for itself. At the same time, neoclassicists believed that Say’s law also applies if part of the income is saved, since savings through the interest rate are converted into investments. And the interest rate, which is the price of credit resources, like any other price, strives to balance supply and demand.

Keynes showed that investment does not automatically lead to full employment through the interest rate, since decisions to save and invest are made by different individuals on different grounds. According to Keynes, equality of savings and investment is achieved not through a change in the interest rate, but through the level of total income.

Keynes also showed that an increase in savings in an economy with incomplete use of resources will lead to a decrease in the level of production and employment, since with an increase in household savings, consumption decreases, which does not allow the sale of the entire mass of goods, overproduction is created and the growth rate of national income decreases. This effect is enhanced by the action of the multiplier. The state of the economy described by Keynes was called paradox of frugality.

The focus of the Keynesian model of economics is the relationship between income and expenditure. Keynes proposed a method for determining the equilibrium level of production at the current, unchanged price level (prices are determined exogenously) by comparing total expenditures and production volume, which was called income-expense model or Keynesian cross(Fig. 11. 14).

Fig. 11.14. Model of macroeconomic equilibrium income - expenses

This simple Keynesian model analyzes macroeconomic phenomena solely from the demand side as a static equilibrium position in which the supply of real national output ( Y) is equal to the amount of real national production that people would like to purchase ( A.E.). That is, in this model the volume of total expenditures A.E. determines production volume Y and the associated unemployment rate.

The starting point of this model is a line at an angle of 45 degrees. Any point on a given line can be an equilibrium point. Accordingly, the point of intersection of the total expenditure graph A.E., which are simplified as aggregate demand, consisting of the sum of consumer ( C) and investment costs( I), and the line at an angle of 45 degrees will be the point of macroeconomic equilibrium. At this point the equality Y = C+I holds. In a simple Keynesian model, equilibrium can either be associated with full employment or demonstrate equilibrium under conditions of unemployment.

In the world economic literature, two main directions of the mechanism for regulating national production in market conditions can be distinguished. The first is the classic direction of automatic self-regulation of the market system. Its representatives are D. Ricardo, D. St. Mill, F. Edgeworth, A. Marshall, A. Pigou. The second is Keynesian, based on the need for mandatory government intervention in the market system, especially in conditions of depression. According to these directions, two models of macroeconomic equilibrium have emerged.

Classical theory

The classical model of macroeconomic equilibrium dominated economic science for about 100 years, until the 30s of the 20th century. It is based on J. Say's law: the production of goods creates its own demand. For example, a tailor produces and offers a suit, and a shoemaker offers shoes. The supply of a suit to the tailor and the income he receives is his demand for shoes. In the same way, the supply of shoes is the shoemaker's demand for a suit. And so throughout the economy. Each manufacturer is at the same time a buyer - sooner or later he purchases goods produced by another person for the amount received from the sale of his own goods. Thus, macroeconomic equilibrium is ensured automatically: everything that is produced is sold. This similar model presupposes the fulfillment of three conditions: each person is both a consumer and a producer; all producers spend only their own income; the income is completely spent.

But in the real economy, part of the income is saved by households. Therefore, aggregate demand decreases by the amount saved. Consumption expenditures are insufficient to purchase all products produced. As a result, unsold surpluses are created, which causes a decline in production, increased unemployment and a decrease in income.

In the classical model, the lack of funds for consumption caused by savings is compensated by investments. If entrepreneurs invest the same amount as households save, then Say’s law applies, i.e. the level of production and employment remains constant. The main task is to encourage entrepreneurs to invest as much money as they spend on savings. It is decided in the money market, where supply is represented by savings, demand by investments, and price by interest rates. The money market self-regulates saving and investment using the equilibrium interest rate.

The higher the interest rate, the more money is saved (because the owner of the capital receives more dividends). Therefore, the savings curve will be upward sloping. The investment curve, on the other hand, is downward sloping because the interest rate affects costs and entrepreneurs will borrow and invest more money at a lower interest rate. The equilibrium interest rate occurs at the point of intersection of these curves. Here, the quantity of money saved equals the quantity of money invested, or in other words, the quantity of money supplied equals the demand for money.

In this case, the analysis of the aggregate supply curve is constructed taking into account the following conditions:

- the volume of output depends only on the number of production factors and technology;
- changes in production factors and technology occur slowly;
- the economy operates in conditions of full employment and output is equal to potential;
- prices and nominal wages are flexible.

Under these conditions, the aggregate supply curve is vertical at the level of output at full employment of factors of production.

Shifts in the aggregate supply curve in the classical model are possible only when the value of production factors or technology changes. If there are no such changes, then the aggregate supply curve in the short run is fixed at its potential level, and any changes in the aggregate demand curve are reflected only at the price level.

Figure 1.2 Classical equilibrium model

Note - Source:

The factor ensuring equilibrium is the elasticity of prices and wages. If for some reason the interest rate does not change at a constant ratio of savings and investment, then the increase in savings is compensated by a decrease in prices, as producers seek to get rid of surplus products. Lower prices allow fewer purchases to be made while maintaining the same level of output and employment.

In addition, a decrease in the demand for goods will lead to a decrease in the demand for labor. Unemployment will cause competition and workers will accept lower wages. Its rates will decrease so much that entrepreneurs will be able to hire all the unemployed. In such a situation, there is no need for government intervention in the economy.

Thus, classical economists proceeded from the flexibility of prices, wages, and interest rates, i.e., from the fact that wages and prices can freely move up and down, reflecting the balance between supply and demand. In their opinion, the aggregate supply curve looks like a vertical straight line, reflecting the potential volume of GNP production. A decrease in price entails a decrease in wages, and therefore full employment is maintained. There is no reduction in the value of real GNP. Here all products will be sold at different prices. In other words, a decrease in aggregate demand does not lead to a decrease in GNP and employment, but only to a decrease in prices. Thus, classical theory believes that government economic policy can only affect the price level, and not output and employment. Therefore, its interference in regulating production and employment is undesirable.

Keynesian theory

In the early 30s of the 20th century, economic processes no longer fit within the framework of the classical model of macroeconomic equilibrium. Thus, a decrease in wages did not lead to a decrease in unemployment, but to its increase. Prices did not decrease even when supply exceeded demand. It is not without reason that many economists criticized the positions of the classics. The most famous of them is the English economist J. Keynes, who in 1936 published the work “The General Theory of Employment, Interest and Money,” in which he criticized the basic provisions of the classical model and developed his own provisions for macroeconomic regulation: savings and investment, according to Keynes, carried out by different groups of people (households and firms), guided by different motives, and therefore they may not coincide in time and in size; The source of investment is not only household savings, but also funds from credit institutions. Moreover, not all current savings will end up in the money market, since households leave some money on hand, for example, to pay off bank debt. Therefore, the amount of current savings will exceed the amount of investment. This means that Say’s law does not apply and macroeconomic instability sets in: excess savings will lead to a reduction in aggregate demand. As a result, output and employment decline; the interest rate is not the only factor influencing saving and investment decisions; lowering prices and wages does not eliminate unemployment. The fact is that the elasticity of the price-wage ratio does not exist, since the market under capitalism is not completely competitive. Monopolistic producers prevent price reductions, and trade unions prevent wages. The classic assertion that lowering wages in one firm would allow it to hire more workers turned out to be inapplicable to the economy as a whole. According to Keynes, a decrease in wages causes a decline in income for the population and entrepreneurs, which leads to a decrease in demand for both products and labor. Therefore, entrepreneurs will either not hire workers at all, or will hire a small number.

So, the Keynesian theory of macroeconomic equilibrium is based on the following provisions. The growth of national income cannot cause an adequate increase in demand, since an increasing share of it will go to savings. Therefore, production is deprived of additional demand and is reduced, causing unemployment to rise. Therefore, an economic policy is needed that stimulates aggregate demand. In addition, in conditions of stagnation and depression of the economy, the price level is relatively stationary and cannot be an indicator of its dynamics. Therefore, instead of price, J. Keynes proposed introducing the “sales volume” indicator, which changes even at constant prices, because it depends on the quantity of goods sold.

AD1 and AD2 -- aggregate demand curves

AS -- aggregate supply curve

Q* -- potential production volume.

The analysis of AS in this model is based on the following premises:

- the economy operates under conditions of underemployment;
- prices and nominal wages are relatively rigid;
- real values are relatively mobile and quickly respond to market fluctuations.

The aggregate supply curve in the Keynesian model is horizontal or has a positive slope. It should be noted that in the Keynesian model the aggregate supply curve is limited on the right by the level of potential output, after which it takes the form of a vertical straight line, i.e. actually coincides with the long-run aggregate supply curve.

Thus, the volume of aggregate supply in the short run depends mainly on the amount of aggregate demand. In conditions of underemployment and price rigidity, fluctuations in aggregate demand primarily cause changes in output and only subsequently can be reflected in the price level.

Figure 1.3 Keynesian equilibrium model

Graphically, macroeconomic equilibrium will mean the combination of curves in one figure AD And AS and their intersection at some point. The relationship between aggregate demand and aggregate supply (AD–AS) gives a characteristic of the value of national income at a given price level, and in general - equilibrium at the level of society, i.e. when the volume of products produced is equal to the total demand for it. This model of macroeconomic equilibrium is basic. Curve AD may cross the curve AS in different areas: horizontal, intermediate or vertical. Therefore, three options for possible macroeconomic equilibrium are distinguished (Fig. 12.5).

Rice. 12.5. Macroeconomic equilibrium: AD–AS model.

Three segments of the AS curve

The horizontal segment of the AS curve (segment I) corresponds to a recession economy, high levels of unemployment and underutilization of production capacity

The intermediate segment of the AS curve (segment III) assumes a reproduction situation when an increase in real production volume is accompanied by a slight increase in prices, which is associated with the uneven development of industries and the use of less productive resources, since more efficient resources are already used

The vertical segment of the AS curve (segment II) occurs when the economy is operating at full capacity and it is no longer possible to achieve a further increase in production volume in a short period of time.

Non-price factors influencing aggregate demand

The amount of cash income of the population;

Price level for goods and tariffs for paid services;

The state of the taxation system in the country;

Lending terms;

State of money circulation;

National and historical features;

Geographical and demographic features;

Professional and qualification structure of employment of the population;

Unemployment rate in the country;

Level and state of property differentiation in society

Non-price factors affecting aggregate supply include:

1) resource prices (R resources). The higher the prices for resources, the higher the costs and the lower the aggregate supply. Rising resource prices lead to a shift in the curve AS left up, and their decrease leads to a shift in the curve AS down right. In addition, the value of resource prices is influenced by:

A) amount of resources. The greater the resource reserves a country has, the lower the prices for resources;

b) prices for imported resources. Rising prices for imported resources increases costs, reducing aggregate supply (curve AS moves up to the left);

V) degree of monopoly in the resource market. The higher the monopolization of resource markets, the higher the prices for resources, and therefore costs, and, consequently, the lower the aggregate supply;

2) resource productivity, i.e. the ratio of total production to costs;

3) business taxes (Tx). A change in taxes, for example on wages, while influencing aggregate demand, does not directly affect aggregate supply, since it does not change the firm’s costs;

4) transfers to companies (Tr);

5) state regulation of the economy.

Classical model of macroequilibrium in economics

The classical (and neoclassical) model of economic equilibrium primarily considers the relationship between savings and investment at the macro level. An increase in income stimulates an increase in savings; converting savings into investment increases output and employment. As a result, incomes increase again, and at the same time savings and investments. The correspondence between aggregate demand (AD) and aggregate supply (AS) is ensured through flexible prices, a free pricing mechanism. According to the classics, price not only regulates the distribution of resources, but also provides a “resolution” of nonequilibrium (critical) situations. According to the classical theory, in each market there is one key variable (price P, interest r, wage W) that ensures market equilibrium. Equilibrium in the goods market (through the demand and supply of investments) is determined by the interest rate. In the money market, the determining variable is the price level. The correspondence between supply and demand in the labor market is regulated by the value of real wages.

They considered government intervention unnecessary. For consumption to grow, savings must not lie idle; they must be transformed into investments. If this does not happen, then the growth of the gross product slows down, which means that incomes decrease and demand shrinks.

Keynesian model

Used in analyzing the impact of macroeconomic conditions on national flows of income and expenditure. Equilibrium is achieved only when planned expenditures (aggregate demand) equal national product (aggregate supply

Savings are a function of income. Prices (including wages) are not flexible, but fixed. The commodity market is becoming key. The balancing of supply and demand occurs due to changes in inventories.

Rice. 25.1. Aggregate demand curve

Aggregate demand (AD) changes under the influence of price movements. The higher the price level, the smaller the consumers' reserves of money and, accordingly, the smaller the quantity of goods and services for which there is effective demand.

Rice. 25.2. Aggregate Supply Curve

In the short term (two to three years), the aggregate supply curve, according to the Keynesian model, will have a positive slope close to the horizontal curve (AS1).

Rice. 25.3. Economic equilibrium model

The intersection of the AD and AS curves at point N reflects the correspondence between the equilibrium price and the equilibrium production volume (Fig. 25.3).

The following options are possible in this model:

1) aggregate supply exceeds aggregate demand. Sales of goods are difficult, inventories are building up, production growth is slowing down, and a decline is possible;

2) aggregate demand exceeds aggregate supply. The picture on the market is different: inventories are decreasing, unsatisfied demand is stimulating production growth.

Economic equilibrium presupposes a state of the economy when all the economic resources of the country are used (with a reserve capacity and a “normal” level of employment). In an equilibrium economy there should be neither an abundance of idle capacity, nor excess production, nor excessive overextension in the use of resources.

To make it easier to study the material, we divide the article Macroeconomic Equilibrium into topics:

The merit of L. Walras in the development of the theory of economic equilibrium lies, first of all, in the fact that he substantiated the need for an approach to analyzing the economy as a single macroeconomic whole, and connected the markets of various goods into a single system. The basis of the general equilibrium model of L. Walras is the provision that contracts are conditional and can be renegotiated during a certain period even before receiving goods and paying money, if demand exceeds supply or supply exceeds demand. The latter, with a constant budget of the participants in transactions, will stimulate an increase in relative prices, in which the price of one product is expressed in natural units of another product, and the excess of supply over demand will cause a decrease in prices.

The interaction of relative prices, supply and demand leads to the fact that a change in demand is accompanied by a change in the relative prices of goods. Moreover, buyers will purchase goods at a higher price in order to satisfy their demand when their supply is low. Manufacturers will not sell goods at a lower price if demand is lower than supply, so as not to lose income. Similar dynamics of prices, supply and demand are observed in markets if buyers seek to maximize utility from purchasing goods, and sellers seek to minimize their costs and maximize their income. Based on this, we can define L. Walras's law, according to which the amount of excess demand and the amount of excess supply in all markets under consideration coincide.

The general equilibrium model of L. Walras, based on the analysis of supply and demand, includes a whole system of equations. Among them, the leading role belongs to the system of equations characterizing the equilibrium of two markets: productive services and consumer products. In the market of productive services, the sellers are the owners of production factors (land, labor, capital, mainly money). Buyers are entrepreneurs producing consumer goods. In the market for consumer products, owners of factors of production and entrepreneurs change places. It turns out that these prices are determined by the aggregate values of supply and demand when they become equal to each other. It is these prices that provide each rational member of the economic system with maximum utility. Consequently, according to the general equilibrium model of L. Walras, in the process of concluding contracts for the sale and purchase of goods in markets, such relative prices are established at which all desired goods are sold and bought and there is no excess demand or excess supply.

In its final form, L. Walras’ system of equations will look like this:

The general equilibrium model of L. Walras had a great influence on the development of economic science. However, it is in many respects at odds with the real state of bourgeois society. It is enough to note that it allows for the possibility of zero unemployment, full utilization of the production apparatus, the absence of cyclical fluctuations in production, and does not take into account technical progress and capital accumulation. L. Walras, like his predecessors, could not explain the nature of prices, moving in a vicious circle, when prices depend on supply and demand, and the latter on prices.

L. Walras's model is inherently contradictory with the practice of the movement of money and prices. Thus, according to L. Walras, no changes in the supply and demand of goods will occur if, in the presence of equilibrium in all markets, relative prices remain the same, and absolute prices for all goods increase. However, it does not show that an increase in absolute prices leads to an increase in the demand for money.

This contradiction was resolved by the American scientist D. Patinkin in the book “Money, Interest and Prices” (1965). He introduced into L. Walras's model such an additional component as the money market and real cash balances, which represent the real value of the amounts of money remaining in the hands of sellers and buyers.

D. Patinkin created a macroeconomic general equilibrium model that included not only goods markets, but also a money market with real cash balances. At the same time, D. Patinkin proceeded from the fact that the real value of cash balances affects not only commodity demand, but also money demand. Let us assume that the amount of money remaining in the hands of buyers and sellers has not changed in nominal terms. However, the general increase in prices led to the fact that their purchasing power decreased, and therefore the demand for goods in all markets decreased. Therefore, the balance will be disrupted, which will cause an excess supply of goods, which will lead, according to L. Walras’ law, to an excess demand for money. The latter does not mean that there is less demand in the market. In conditions of shortage of money, which is not enough to purchase a given quantity of goods, absolute prices will decrease while relative prices remain unchanged. As a result of a decrease in absolute prices, the real value of cash balances will increase. The general equilibrium will be restored, which indicates the system’s ability to self-regulate.

However, it should be borne in mind that the general equilibrium of the economy is carried out more efficiently on the basis of self-regulation in conditions of perfect competition. Ideal conditions for general equilibrium exist in an economy free from , with a quick and flexible response of prices to changes in supply and demand, with a flow of capital and labor as a result of inter-industry competition. Naturally, in this case there should not be such phenomena that disturb the general balance of the economy, such as errors in state regulation of the economy, social and natural shocks.

Keynesian model of macroeconomic equilibrium

Unlike the neoclassics, J. Keynes proceeded from the fact that a market macroeconomy is characterized by disequilibrium: it does not provide full employment and does not have a self-regulation mechanism. At the same time, J. Keynes criticized two fundamental theses of the neoclassical theory of equilibrium.

First, he disagreed with the nature of the relationship between investment, savings and interest rates. The point is that there is a mismatch between investing and saving. After all, savers and investors represent different groups of the population, which are guided by different economic interests and motives. So, some save money to buy a house, others - land, others - a car, etc. The motives for investment are also different, which are not limited to the interest rate. Such a motive could be, for example, profit, depending on the size and efficiency of investments. It is impossible not to take into account that credit institutions can be a source of investment, in addition to savings. As a result, saving and investment processes are not coordinated, which gives rise to fluctuations in total output, income, employment and the price level.

Secondly, the economy is developing inharmoniously, there is no elasticity in the ratio of prices and wages, as neoclassicists believe. Here the imperfection of the market associated with the existence of monopolistic producers is manifested. Under these conditions, according to J. Keynes, aggregate demand becomes volatile and prices become inelastic, which maintains unemployment for a long time. Therefore, government regulation of aggregate demand is necessary.

According to J. Keynes, the amount of goods and services produced is directly dependent on the level of aggregate expenditures (or aggregate demand), that is, the costs of goods and services. The most important part of total expenditure consists of consumption, which together with saving equals after-tax income (disposable income). Consequently, this income determines not only consumption, but also savings. In addition, the amount of consumption and savings depends on factors such as the amount of consumer debt, the amount of capital, etc.

The next component of total expenses is investment, the amount of which depends on two factors: the real interest rate and the norm. The amount of investment costs is affected by the costs of acquiring, operating and maintaining fixed capital, changes in the availability of this capital, in technology and other temporary factors.

Thus, these expenditures on consumption and investment, which determine the amount of aggregate demand, are unstable. This causes instability in the market macroeconomy.

In order to balance the economy, to ensure its equilibrium, it is necessary, according to J. Keynes, to have “effective demand”. The latter consists of consumption and investment costs. Effective demand should be supported using a multiplier that links the increase in this demand with the increase in investment. In this case, each investment turns into individual income, used for consumption and savings. As a result, the increase in “effective demand” becomes multiplied by the increase in the initial investment. Moreover, the multiplier is directly dependent on how much of their income people spend on consumption. But personal consumption increases along with income, although to a lesser extent than income. This is explained by the psychological factor of people's desire to save. It is the latter, according to J. Keynes, that leads to a decrease in the share of consumption in total income.

Considering the reduction in the share of consumption in total income to be a natural phenomenon inherent in human nature, J. Keynes notes that it is necessary to maintain such a component of total income as investment. Private investment must be supported through tax, monetary policy and government spending. In this way, the lack of “effective demand” is compensated by additional government demand, which helps achieve macroeconomic equilibrium.

Modern macroeconomics is characterized by inflation and unemployment. Prices and wages are dynamic and may decrease or increase. Therefore, the aggregate supply curve AS does not have a strictly vertical and horizontal meaning, as presented in the neoclassical and Keynesian general market equilibrium models. It should be noted that the shape of the aggregate supply curve AS depending on changes in AD has not only theoretical, but also practical significance for stabilization and economic growth in the country.

Thus, in the current crisis conditions in Russia, the Keynesian option of increasing aggregate demand AD, in which the growth of GNP is not accompanied by an increase in prices, is more appropriate. At the same time, the classical concept is not suitable, when an increase in aggregate demand AD leads not to an increase in GNP, but to an inflationary rise in prices.

Model of macroeconomic equilibrium by K. Marx

K. Marx's model of macroeconomic equilibrium is based on the theory of movement of the total social product and capital that is adequate to it. Social capital operating at the macro level is a collection of individual capitals in their interrelation and interdependence in the process of circulation. The connection between circuits and the turnover of individual capital forms the movement of social capital.

In the process of functioning of social capital, a total social product (CSP) is formed, which has a cost and natural form.

In terms of cost, the SOP consists of three parts:

Constant capital - c (cost of consumed means of production);
variable capital - v (reproductive labor force fund);
surplus value - t (surplus value created during the year).

Thus, the cost of SOP will be equal to c+ v+m = T.

In its physical form, the SOP is divided into two main divisions:

I - production of means of production, which are used in production and are capital;
II - production of consumer goods that are used for consumption and constitute income.

The process of social reproduction, which offers macroeconomic equilibrium, means, firstly, under what conditions entrepreneurs sell all their goods; secondly, how workers and capitalists buy personal consumption goods on the market from the social product; thirdly, how, from the composition of the social product, capitalists on the market find the means of production necessary to compensate for the consumed means of production; fourthly, how the social product not only satisfies personal and production needs, but also makes it possible to ensure accumulation and expanded reproduction.

When clarifying the conditions for the reproduction of social capital, K. Marx used the method of scientific abstraction. At the same time, he was distracted from a number of secondary, private processes and phenomena affecting the macroeconomic equilibrium.

Among these abstractions are the following:

1) reproduction is carried out with “pure”, i.e. only the relations of two classes are taken into account - capitalists and workers;
2) goods are exchanged according to their value;
3) reproduction is possible without foreign trade;
4) the organic structure of capital (O = C: V, where C is constant capital; V is variable capital) is unchanged;
5) the cost of constant capital is transferred entirely to the finished product during the year;
6) the rate of surplus value (t) is constant and equal to 100%, etc.

Social reproduction can be carried out both in constant sizes (simple reproduction) and in increasing sizes (expanded reproduction).

The structure of the SOP in terms of cost and in kind is expressed as follows:

I c + v + m (Production of means of production).
II c + v + m (Production of consumer goods).

With simple reproduction, which constitutes the starting point and the basis of expanded reproduction, all surplus value is consumed by capitalists as income.

The process of implementing SOP in divisions I and II is carried out in the following threefold way:

I c, consisting of means of production, is sold within division I; I (v + t) and II с are realized through exchange between divisions I and II;
II (v + m), consisting of consumer goods of workers and capitalists, is sold within division II.

The result is compensation of c, v, m in both divisions in kind and in value. At the same time, production resumes at its previous levels.

Thus, the main condition for equilibrium during simple reproduction will be:

I (v + t) = II s.

The following are the derived equilibrium conditions:

I (c + v + + t) = I c + II c; II (c + v + t) = I (v + t) + II (v + t).

These equalities mean that the products of division I must be equal to the compensation funds of both divisions, and the products of division II must be equal to the net product of society.

With expanded reproduction, part of the surplus value of both divisions is directed to accumulation purposes, i.e. to increase capital. It is used when purchasing additional capital goods and labor.

Therefore, with expanded reproduction, the following is necessary to ensure balance:

I (v + t) > II s; I (c + v + t) > I c + II c;
II (c + v + t)
It follows that the net product of division I must exceed the replacement fund for means of production in division II by the cost of the accumulated means of production necessary to expand production in both divisions.

V.I. Lenin, based on the macroeconomic model of reproduction of K. Marx, developed and concretized the schemes of simple and expanded reproduction. Within Division I, V.I. Lenin identified two subgroups: the production of means of production for the production of means of production and the production of means of production for the production of consumer goods. He also examined schemes for expanded reproduction in the conditions of technical progress and changes in the organic structure of capital. This allowed him to conclude: the production of means of production for the production of means of production is growing fastest, then the production of means of production for the production of consumer goods, and the slowest is the production of consumer goods.

K. Marx's model of social reproduction characterizes the abstract theory of implementation, i.e. he showed the conditions under which realization and equilibrium are realized. However, in reality, these conditions are not always met, since the proportions between the various parts of the SOP develop under market conditions and competition. In modern conditions, when the international division of labor and trade have developed, when analyzing the reproduction of the social product and equilibrium, it is no longer possible to abstract from foreign trade, the economic role of the state, which acts as a large consumer, a regulator of basic macroeconomic proportions and processes.

V. Leontiev’s model of inter-industry balance

The considered models of social reproduction contain the basic conditions of macroeconomic equilibrium. However, they do not allow solving such practical problems as forecasting economic development, determining rational proportions and structure of the national economy, prospects for their improvement, investment dynamics, material and energy intensity of production, employment status and foreign economic relations. To solve these problems, the input-output balance (IBM) model is used.

The idea and fundamental methodological principles of constructing the MBB, which is the development of the balance of the national economy, originated in the USSR. The first balance sheet of the national economy of the USSR for 1923 - 1924, drawn up at the Central Statistical Office under the leadership of P.I. Popov, already contained the basic principles of constructing the MOB, indicators and tables characterizing intersectoral production macroeconomic relations. However, these innovative works were criticized and administratively interrupted, and were not developed. They were resumed only in the second half of the 50s. based on the use of economic and mathematical methods and computers. The first reporting MOB in the USSR was calculated in 1961 based on data from 1959, and the first planned MOB was calculated in 1962. However, MOBs were used mainly for technological rather than economic purposes.

Equilibrium is stable, because forces operate in the market (primarily prices for factors of production and goods) that level out deviations and restore “equilibrium.” It is assumed that “incorrect” prices are gradually eliminated, as this is facilitated by complete freedom of competition.

Conclusions from the Walras model

The main conclusion arising from Walras' model is the interconnectedness and interdependence of all prices as a regulatory instrument, not only in the goods market, but in all markets. Prices for consumer goods are set in relationship and interaction with prices for factors of production, labor prices - taking into account and under the influence of product prices, etc.

Equilibrium prices are established as a result of the interconnectedness of all markets (goods markets, labor markets, money markets, etc.).

In this model, the possibility of the existence of equilibrium prices simultaneously in all markets is proven mathematically. Due to its inherent mechanism, a market economy strives for this equilibrium.

From the theoretically achievable economic equilibrium, the conclusion follows about the relative stability of the system of market relations. The establishment (“groping”) of equilibrium prices occurs in all markets and, ultimately, leads to an equilibrium of supply and demand for them.

Equilibrium in the economy is not reduced to the equilibrium of exchange, to market equilibrium. From Walras's theoretical concept follows the principle of interconnectedness of the main elements (markets, spheres, sectors) of a market economy.

Walras's model is a simplified, conventional picture of the national economy. It does not consider how equilibrium is established in development and dynamics. It does not take into account many factors that operate in practice, for example, psychological motives and expectations. The model considers established markets, established and consistent with market needs.

Macroeconomic disequilibrium

The functioning of the market mechanism is sometimes compared to the interaction and strict coupling of elements of a clock or other similar mechanism. However, this comparison is very conditional. The market mechanism operates successfully when there are no sharp price fluctuations or unforeseen and dangerous influences of external factors. Deep and unpredictable price surges throw market economies into disarray. The usual financial and legal regulators are not working. The market does not want to return to an equilibrium state or does not return to normal immediately, but gradually, with significant costs and losses.

As a result, there are many differences between the traditional picture emerging in the macromarket, in which equilibrium prices occupy commanding heights, and the “atypical” situation generated by the unconventional behavior of the aggregate demand and aggregate supply curves.

The system of equilibrium prices as a kind of “ideal” exists only in theory. In real economic practice, prices constantly deviate from equilibrium. Sometimes the “habitual” relationships no longer work; Contradictory and sometimes unexpected situations arise. Some of them are called "traps".

As an example, let us refer to the so-called trap, in which the amount of money in circulation (in liquid form) grows, and the decrease in the interest (discount) rate practically stops.

“Liquidity trap” is a situation when the interest rate is at an extremely low level. This would seem to be good: the lower the interest rate, the cheaper the loan and, therefore, the more favorable the conditions for productive investment.

In reality, this situation turns out to be close to a dead end. It is not possible to “spur” investments with the help of interest, since no one wants to part with money and store it in banks. Savings do not turn into investments. Keynes believed that lowering interest rates in order to increase the profitability of investments has its limits. A liquidity trap is an indicator of inefficiency.

A different situation, called the “equilibrium trap,” arises in a transition economy due to a sharp decline. Equilibrium at an unjustifiably low level of income for the main groups of the population is a dead end. Due to the erosion of effective demand, getting out of this situation is extremely difficult. The “equilibrium trap” prevents the exit from the crisis and the achievement of stability.

The significance of the Walras equilibrium model

This model helps to understand the features of the market mechanism, self-regulation processes, tools and methods for restoring broken connections, and ways to achieve stability and sustainability of the market system.

Walras's theoretical analysis provides a conceptual framework for solving more specific and practical problems associated with the disruption and restoration of equilibrium. Walras's concept and its development by modern theorists serves as the basis for studying the main problems of macroeconomics: economic growth, inflation, employment. The theory of balance is the initial basis for practical developments and practical activities, analysis of a set of problems associated with understanding how balance is disturbed and how it is restored.

Models AD – AS and IS-LM

In the theory of equilibrium, there are both general provisions and specific conceptual approaches of representatives of various schools and directions. Differences in approaches are associated with the depth of development, with changes in economic reality itself. To varying degrees, they usually reflect national characteristics and specific situations of individual countries. Analysis of functional dependencies between individual macroparameters helps to understand the situation and clarify economic policy, but does not provide universal solutions.

Classical model of macroequilibrium in economics

The classical (and neoclassical) model of economic equilibrium considers, first of all, the relationship between savings and investment at the macro level. An increase in income stimulates an increase in savings; converting savings into investment increases output and employment. As a result, incomes increase again, and at the same time savings and investments. The correspondence between aggregate demand (AD) and aggregate supply (AS) is ensured through flexible prices, a free mechanism. According to the classics, price not only regulates the distribution of resources, but also provides a “resolution” of nonequilibrium (critical) situations. According to the classical theory, in each market there is one key variable (price P, interest r, wage W) that ensures market equilibrium. Equilibrium in the goods market (through the demand and supply of investments) is determined by the interest rate. In the money market, the determining variable is the price level. The correspondence between supply and demand is not regulated by the value of real wages.

Classicists saw little problem in converting household savings into firm investment spending. They considered government intervention unnecessary. But between the deferred expenses (savings) of some and the use of these funds by others, a gap can (and does) arise. If part of the income is set aside in the form of savings, then it is not consumed. But for consumption to grow, savings must not lie idle; they must be transformed into investments. If this does not happen, then the growth of the gross product slows down, which means that incomes decrease and demand shrinks.

The picture of the interaction between savings and investment is not so simple and unambiguous. Savings disrupt the macroequilibrium between aggregate demand and aggregate supply. Relying on the mechanism of competition and flexible prices does not work under certain conditions.

As a result, if investments are greater than savings, there is a risk of inflation. If investment lags behind savings, then the growth of gross product slows down.

Keynesian model

Unlike the classics, Keynes substantiated the position that savings are a function not of interest, but of income. Prices (including wages) are not flexible, but fixed; the equilibrium point AD and AS is characterized by effective demand. The commodity market is becoming key. The balancing of supply and demand occurs not as a result of an increase or decrease in prices, but as a result of changes in inventories.

The Keynesian AD - AS model is the basis for analyzing the processes of production of goods and services and the price level in the economy. It allows you to identify factors (causes) of fluctuations and consequences.

The aggregate demand curve AD is the quantity of goods and services that consumers are able to purchase at the current price level. The points on the curve represent combinations of output (Y) and the general price level (P) at which the goods and money markets are in equilibrium (Figure 25.1).

Rice. 25.1. Aggregate demand curve

There is also an inverse relationship between the size of aggregate demand and the price level: an increase in the demand for money entails an increase in the interest rate.

The aggregate supply (AS) curve shows how much goods and services can be produced and put on the market by producers at different average price levels (Figure 25.2).

Rice. 25.2. Aggregate Supply Curve

In the short term (two to three years), the aggregate supply curve, according to the Keynesian model, will have a positive slope close to the horizontal curve (AS1).

In the long run, with full capacity utilization and labor employment, the aggregate supply curve can be represented as a vertical straight line (AS2). Output is approximately the same at different price levels. Changes in the size of production and aggregate supply will occur under the influence of shifts in production factors and technological progress.

Rice. 25.3. Economic equilibrium model

The intersection of the AD and AS curves at point N reflects the correspondence between the equilibrium price and the equilibrium production volume (Fig. 25.3). If the equilibrium is disturbed, the market mechanism will equalize aggregate demand and aggregate supply; First of all, the price mechanism will work.

The following options are possible in this model:

1) aggregate supply exceeds aggregate demand. Sales of goods are difficult, inventories are building up, production growth is slowing down, and a decline is possible;
2) aggregate demand exceeds aggregate supply. The picture on the market is different: inventories are decreasing, unsatisfied demand is stimulating production growth.

Economic equilibrium presupposes a state of the economy in which all countries are used (with reserve capacity and a “normal” level of employment). In an equilibrium economy there should be neither an abundance of idle capacity, nor excess production, nor excessive overextension in the use of resources.

Equilibrium means that the overall structure of production is brought into line with the structure of consumption. The condition for market equilibrium is the balance of supply and demand in all major markets.

Let us recall that, according to Keynesian views, the market does not have an internal mechanism capable of ensuring equilibrium at the macro level. State participation in this process is necessary. To analyze the equilibrium situation under underemployment, a simplified Keynesian model was proposed. To study the relationship between the interest rate and national income in the goods market, another scheme was developed that combined the analysis of these two markets.

Model IS-LM

The problem of general equilibrium in the goods market and the money market was analyzed by the English economist John Hicks in his work “Cost and Capital” (1939). Hicks proposed the IS-LM model as a tool for equilibrium analysis. IS stands for investment-savings; LM - “liquidity - money” (L - demand for money; M - supply of money).

The American Alvin Hansen also took part in the development of the model that combined the real and monetary sectors of the economy, and therefore it is called the Hicks-Hansen model.

The first part of the model is designed to reflect the condition of equilibrium in the goods market, the second - in the money market. The condition for equilibrium in the goods market is the equality of investments and savings; in the money market - equality between the demand for money and its supply (money supply).

Changes in the goods market cause certain shifts in the money market and vice versa. According to Hicks, the equilibrium in both markets is determined simultaneously by the rate of interest and the level of income, in other words, both markets determine simultaneously the level of equilibrium income and the equilibrium level of the rate of interest.

The model somewhat simplifies the picture: it assumes constant prices, a short period, equality of savings and investments, and the demand for money corresponds to its supply.

What determines the shape of the IS and LM curves

The IS curve shows the relationship between the interest rate (r) and the level of income (Y), which is determined by the Keynesian equation: S = I. Savings (S) and investment (I) depend on the level of income and the interest rate.

The IS curve represents equilibrium in the goods market. Investments are inversely related to the rate of interest. For example, with a low interest rate, investments will grow. Accordingly, income (Y) will increase and savings (S) will increase slightly, and the interest rate will decrease in order to stimulate the transformation of S into I. Hence, shown in Fig. 25.4 slope of the IS curve.

Rice. 25.4, IS Curve

The LM curve (Fig. 25.5) expresses the equilibrium of demand and supply of money (at a given price level) in the money market. The demand for money increases as income (Y) increases, but the interest rate (r) also increases. Money becomes more expensive, “pushed” by the growing demand for it. The interest rate increase is intended to moderate this demand. Changing the interest rate helps to achieve some balance between the demand for money and its supply.

If the interest rate is set too high, money owners prefer to purchase securities. This bends the LM curve upward. The rate of interest falls and equilibrium is gradually restored.

Rice. 25.5. LM curve

Equilibrium in each of the two markets - the goods market and the money market - is not established independently, but is interconnected. Changes in one market invariably lead to corresponding changes in the other.

Interaction of two markets

The intersection point of IS and LM satisfies the double (monetary) equilibrium condition:

First, the equilibrium of savings (S) and investment (I);
secondly, the equilibrium between the demand for money (L) and its supply (M). The “double” equilibrium is established at point E when IS crosses LM (Fig. 25.6).

Rice. 25.6. Equilibrium in two markets

Let's say investment prospects improve; the interest rate remains unchanged. Then entrepreneurs will expand capital investments in production. As a result, due to the multiplier effect, national income will increase. As income increases, feedback will begin to flow. There will be a shortage of funds in the money market, and the balance in this market will be disrupted. The demand of business participants for money will increase. As a result, the interest rate will rise.

The process of mutual influence between the two markets does not end there. A higher interest rate will “slow down”, which in turn will affect the level of national income (it will decrease slightly).

Now macro equilibrium has been established at point E1 at the intersection of the IS1 and LM curves.

Equilibrium in the goods market and in the money market is determined simultaneously by the rate of interest (r) and the level of income (Y). For example, the equality between saving and investment can be expressed as follows: S(Y) = I (r).

The equilibrium of regulatory instruments (r and Y) in both markets is formed interconnectedly and simultaneously. When the process of interaction between two markets is completed, a new level of r and Y is established

The IS-LM model was recognized by Keynes and became very popular. This model means a specification of the Keynesian interpretation of functional relationships in the commodity and money markets. It helps to present the functional dependencies in these markets, the monetary equilibrium diagram according to Keynes, and the influence of economic policy on the economy.

The model helps to substantiate the financial and monetary policies of the state, identifying their relationship and effectiveness. Interestingly, the Hicks-Hansen model is used by proponents of both Keynesian and monetarist approaches. This achieves a kind of synthesis of these two schools.

The conclusion from the model is this: if the money supply decreases, then credit conditions become stricter and the interest rate rises. As a result, the demand for money will decrease slightly. Part of the money will be used to purchase more profitable assets. The balance between the demand for money and its supply will be disrupted and then established at a new point. The interest rate here will be lower, and there will be less money in circulation. Under these conditions, the central bank will adjust its policy: the money supply will increase, the interest rate will decrease, i.e. the process will go in the opposite direction.

Equilibrium in statics and dynamics

Let us assume that general equilibrium has been achieved in society. Let's try to imagine how long the equilibrium state of the main parameters will remain? As you know, the economy is in constant motion, continuous development: cycle phases and incomes change, shifts in demand occur.

All this suggests that the equilibrium state can only conditionally be considered static. Coordination of supply and demand, the interconnection of the main links of the economy are achieved only in development and dynamics, and balance at the current moment is only its prerequisite.

Equilibrium in the economy is a state of the system to which it constantly returns in accordance with its own laws. In the event of an imbalance, the overall direction of the process becomes significant, in other words, we are talking about increasing disequilibrium or, on the contrary, weakening it.

General economic equilibrium is the balance of the entire economy of the country, a system of interconnected and mutually agreed upon proportions in all spheres, industries, in all markets, among all participants, ensuring the normal development of the national economy.

Macroeconomic equilibrium of the market

General economic equilibrium means the coordinated development of all spheres of the economic system. Equilibrium implies the correspondence of social goals and economic opportunities. The goals and priorities of social development change, the needs for resources change, therefore, changes in proportions occur, and the need arises to ensure a new equilibrium state.

Economic equilibrium presupposes a state of the economy when all the economic resources of the country are used. Of course, capacity reserves and a normal level of employment must be maintained. But in an equilibrium economy there should be neither an abundance of idle capacity, nor excess production, nor excessive overextension in the use of resources. Equilibrium means that the overall structure of production is brought into line with the structure of consumption.

The condition for general equilibrium in the economy is market equilibrium, the equilibrium of supply and demand in all other markets.

The market for goods and paid services is a system of economic relations between sellers and buyers regarding the movement of goods and services that satisfy the consumer and investment demand of macroeconomic entities. An important condition for the functioning of the commodity market is the economic freedom of its subjects. They must have the right to freely choose the industry of production, type of product, dispose of it, establish connections, conduct their own in accordance with current legislation, etc. The degree of economic freedom is determined by the form of ownership. A viable developed market requires both private and public ownership of the means and results of production. However, we still need a sufficient number of economically independent market entities, when it is possible to choose a partner, to create a competitive environment. Competition ensures (together with other factors) effective regulation of the product market. Competition performs a number of functions: regulation, distribution, motivation. The function of regulation is that, in a competitive environment, the market mechanism guarantees the transfer of factors of production to industries whose products are in greatest demand. The distribution function means that the market equilibrium achieved under competitive conditions determines the income of enterprises, which is subsequently redistributed between households and other enterprises and institutions. The function of motivation is that competition creates incentives for enterprises to save costs and introduce advanced technologies.

In economic theory, there is the concept of perfect competition. Competition is considered to be perfect if none of the sellers or buyers is able to significantly influence the price of the product. Perfect competition is achieved under the following conditions: the presence of a large number of sellers and buyers of a particular product, homogeneity of the product from the point of view of buyers, the absence of entry barriers for a new manufacturer to enter the industry, the existence of the possibility of free exit from the industry. Entry barriers may be: the exclusive right to engage in a given type of activity; legal barriers (export licensing, etc.); economic advantages of large production, high advertising costs; full awareness of all market participants about prices and their changes; rational behavior of all market participants who care about their own interests. Perfect competition is rare in modern practice. The opposite of a perfectly competitive market is a monopolized market. The power of a monopolist is greater, the higher the barriers to entry in the industry and the fewer substitute products for a given product. The main manifestations of monopolism in the commodity market are the washing out of “cheap” assortments, the imposition of favorable delivery conditions on consumers by manufacturers: volumes, terms, and the creation of an artificial shortage of products produced by monopolists. Thus, the monopolist forms a market structure that is convenient and beneficial for itself, which destroys and deforms market relations, and the profit received by the monopolist is inflationary in nature.

A manifestation of monopolization is also price discrimination, when a monopolist enterprise sells the same goods or services to different buyers at different prices depending on their ability to pay. Price discrimination occurs if a monopolist enterprise controls production and prices or can determine separate groups of goods with different levels of price.

However, both perfect competition and pure monopoly are extreme versions of market structures. The modern market is characterized by a synthesis of competition and monopoly in the form. An oligopoly is a market structure in which a particular sector of the economy is dominated by several large corporations that compete with each other. At the same time, there are high barriers to entry into the industry for other manufacturers. Thus, a situation arises where external competition is practically absent, but remains within the oligopolistic structure itself.

The characteristic features of an oligopoly are: a small number of enterprises in the industry. Most often their number does not exceed ten.

In this regard, the following are highlighted:

- “hard” (when the market for a given product is dominated by 2-3 large enterprises) and “loose” oligopolies (when the market is dominated by 6-7 enterprises);
- the presence of high barriers to entry into the industry, which is associated with the savings that large enterprises have (the so-called economies of scale), ownership of patents, control over raw materials, and high advertising costs;
- interdependence, which manifests itself in the fact that each enterprise (provided there is a small number of them) is obliged to take into account the reaction of competitors when forming its economic policy.

That is why the state limits monopolization, protecting competition.

To achieve this, various antimonopoly measures are applied, including declaring the actions of individual enterprises illegal in the following cases:

Explicit monopolization of the market, when the share of the hotel manufacturer in general exceeds 35%;
- price fixing;
- merger of enterprises, if the creation of a new large enterprise leads to a decrease in competition;
- related contracts, when the purchase of goods is possible only on condition of the purchase of another product; exclusive contracts, when it is prohibited to buy a product from a competitor of a given manufacturer.

In reality, some forms of competition influence the monopolist: potential competition (the possibility of a new manufacturer appearing in the area), competition for innovations from substitute goods, competition with imported goods.

To determine the degree of competition in the product market, a number of indices are used:

Harfizzal-Hirschman Index (HHI);
- market concentration coefficient (CR);
- stage (level) of market monopolization (MR); index of market monopolization (IMR).

Competition plays an important role in establishing equilibrium in the product market. Competition forces manufacturers to look for ways to reduce the cost of their products in order to maximize profits and thus stimulates the introduction of resource-saving technologies and continuous scientific and technological progress. Equilibrium in the goods market is achieved when aggregate demand is equal to aggregate supply (AD-AS model), when investments are equal to savings (withdrawal-injection model), when total expenditures of the national economy are equal to GDP (input-output model). Macroeconomic theory studies the construction of these models. But to analyze the national economy, it is important to pay attention to some features of achieving equilibrium in the commodity market.

The equilibrium of the market for an individual product and the dynamics of its parameters - price, profit and volume of commodity mass - is a partial equilibrium (i.e., equilibrium for an individual product). General equilibrium is considered as a set of partial equilibrium states in each goods market.

The mechanism for establishing partial equilibrium is predetermined by the action of supply and demand factors. At the macroeconomic level, the establishment of equilibrium occurs as a result of aggregate demand and aggregate supply.

As you know, there are price and non-price factors of aggregate demand. Let's focus on price ones: the interest rate effect, the effect, the effect of import purchases.

Analyzing these effects, it should be emphasized that the interest rate effect affects aggregate demand through a change, first of all, in the demand for investment goods, for which one must borrow money. This changes the demand for investment. Enterprises react by changing production volumes, the source of expansion of which is investment. For example, a decrease in production leads to a decrease in demand for labor, unemployment increases, and household incomes decrease, which affects the decrease in consumer demand. Consequently, the interest rate effect acts through investment demand on consumer demand; together they make up a large share of aggregate demand and therefore determine its change. Conversely, the wealth effect first causes a change in household consumer demand, and hence a change in savings. As a result, investment demand, as well as the entire aggregate demand, changes.

When analyzing the macroeconomic equilibrium of the commodity market, it is necessary to take into account the following methodological principles (provisions):

Suppose that a manufacturer operating in a product market expands production and sales. Then he inevitably turns to the market for means of production, the labor market, the money and securities market. At the same time, he can only count on the amount of equipment, materials, and labor that can be purchased in the relevant markets.

Within the framework of microeconomic analysis, the market was considered separately, i.e. based on the assumption that it is not connected to other markets. However, it is clear that an entrepreneur acting at the micro level is at the same time an element of the entire market system, i.e. thus he is involved in macroeconomic processes.

Secondly, to expand the production of goods, investments are required, which can be obtained from various sources (using one’s own profits, obtaining loans, securities).

The decision to use profits or raise borrowed funds is influenced by the interest rate. For example, if the rate of return expected by an entrepreneur for his project exceeds the bank interest rate, then he will be interested in realizing his investment intentions. Similar comparisons are made in the case of lending and issuing securities: the higher the interest rate (increase in the cost of loans and servicing the circulation of securities), the less profitable the investments are.

Thirdly, for all options for obtaining investments, it is logical to formulate the dependence of investment demand on the interest rate I. For any investment financing options, the rule applies: the higher the interest rate, the lower the investment demand, and vice versa.

This dependence acts as a trend. Of course, there may be cases when investment demand is weakly dependent on changes in the interest rate. For example, if the prospect of developing a new market with unpredictable demand boundaries has opened, then the entrepreneur will risk investing capital there, despite the terms of the loan. He may even incur losses, hoping to compensate them with income in the future. However, these individual cases are rare and do not cancel the noted pattern.

Fourthly, to establish equilibrium in commodity markets (AD=AS), it is necessary that the investment demand presented by entrepreneurs be fully satisfied by the expected savings: I(i)=S(Y).

It should be recalled here that investment demand presupposes continued savings, which can become investments. The demand for investment is offered by entrepreneurs, and savings is offered by households, which are guided by different motives. Manufacturers, when forming investment demand, focus on expected future income. Owners of monetary income, based on their value in the present, distribute their funds for current consumption and savings, focusing on current prices, interest rates, etc. As a result, savings and investments may not match.

Thus, for the markets for consumer and investment goods, as well as labor, to simultaneously be in equilibrium, four conditions must be met.

Namely:

1. The volume of production of consumer goods and services must be equal to the sum of expenditures of the population and the state on consumer goods and services. In addition to equality in monetary terms, equality of needs and production for each significant group of goods (food, clothing, shoes, heat, light, communication services, etc.) in kind must be observed.
2. The amount of funds invested by enterprises and the state must be equal to the amount of savings. At the same time, equality in the production of investment goods and the need for them in kind must be maintained.
3. The volume of exports must be equal to the costs of its purchase by foreigners, and the volume of imports should be equal to the costs of its purchase by consumers and investors of their country. If the sum of exports and imports is equal, net exports are zero.
4. The number of people offering their labor power for sale must be equal to the number. In this case, the cost of the necessary product consumed by hired workers must be equal to their wage fund, excluding taxes.

The last condition is the factor that gives rise to all the practical and theoretical problems of ensuring macroeconomic equilibrium.

Macroeconomic equilibrium Keynesian

The Keynesian model of macroeconomic equilibrium is built on principles different from the postulates of the classical school.

In the Keynesian model, there is no price flexibility, since, firstly, in the short term, economic entities are subject to monetary illusions; in addition, in the economy, due to institutional factors (long-term contracts, monopolization, etc.), there is no real price flexibility.

Of particular importance is the relative rigidity of nominal wages. Keynes emphasized that nominal wages are fixed in the short term, as they are determined by long-term labor contracts; moreover, if they change, they change only in one direction - increases during periods of economic growth. Trade unions, which have great influence in developed countries, prevent its reduction during periods of economic recession. Because of this, the labor market is imperfect and equilibrium is established, as a rule, in conditions of underemployment.

However, the main feature of the Keynesian model is that the real and monetary sectors of the economy are interconnected. This relationship is determined by the specifics of the Keynesian interpretation of money demand, according to which money is wealth and has independent value, and is expressed through the transmission mechanism of the interest rate.

The most important market in the Keynesian model is the market for goods. In the connection “aggregate demand - aggregate supply,” the leading role belongs to aggregate demand. But since its value is adjusted as a result of interaction with the money market, the determining parameter of the general equilibrium becomes effective demand, the value of which is established in the joint equilibrium model.

The Keynesian model of macroeconomic equilibrium describes the economy as an integral system in which all markets are interconnected, and a change in the equilibrium conditions in one of the markets causes a change in the equilibrium parameters in other markets and the conditions of macroeconomic equilibrium as a whole. At the same time, the classical dichotomy is overcome (the division of the economy into two sectors: real and money markets), the strict division of variables into real and nominal disappears, and the price level becomes one of the parameters of general equilibrium.

One of the central concepts of general economic equilibrium is the mutual relationship between planned economic agents, the population and the state, expenditures and the national product. At the same time, the item of expenditure usually distinguishes personal consumption, investment and government expenditures. An increase in each of the noted components increases the total planned costs as a whole.

The amount of income received by each economic agent is not always equal to the amount of his personal consumption. As a rule, when income levels are low, savings from previous periods are spent (savings are negative). At a certain level of income, they are completely spent on consumption. Finally, with rising incomes, economic agents have increasingly greater opportunities to increase both consumption and their savings.

According to Keynes, all expenses of society consist of 4 similar components:

Personal consumption;
- investment consumption;
- government spending;
- net exports.

When analyzing personal consumption, it is important to examine the role of objective and subjective factors that influence the total amount of resources spent by society on consumption. Total consumption generally depends on total income. The relationship between a change in consumption and the change in income it causes is called the marginal propensity to consume.

According to the “basic psychological law,” the marginal propensity to consume is between zero and one, and the marginal propensity to save is equal to the ratio of the change in savings to the change in income.

When total income increases, part of the increase will be used for consumption and the other part for saving.

If there is a very significant saving factor in the economy, the ideal situation, from the point of view of compliance with the state of general economic equilibrium, will be a situation where all savings are fully accumulated and mobilized by existing financial institutions (institutional investors), and then directed to investment. That is, a situation where investment / is equal to savings S in the short-term and long-term periods.

The level of investment has a significant impact on the volume of national income of a society; Many macro-proportions in the national economy will depend on its dynamics. Keynesian theory emphasizes the fact that the level of investment and the level of savings are determined by largely different processes and circumstances.

Investments (capital investments) on a national scale determine the process of expanded reproduction. The construction of new enterprises, the construction of residential buildings, the construction of roads, and, consequently, the creation of new jobs depends on the process, or capital formation.

The source of investment is savings. Savings are disposable income minus personal consumption expenses. Of course, the source of investment is the accumulation of industrial, agricultural and other enterprises operating in society. Here the “saver” and the “investor” are the same. However, the role of savings of households that are not also business firms is very significant, and the discrepancy between the processes of saving and investment due to these differences can lead the economy to a state deviating from equilibrium.

Factors determining the level of investment:

The investment process depends on the expected rate of return, or expected investment. If this profitability, in the opinion of the investor, is too low, then the investment will not be made.

When making decisions, an investor always takes into account alternative investment opportunities and the level of interest rate will be decisive here. If the rate of interest turns out to be higher than the expected rate of profit, then investments will not be made, and, conversely, if the rate of interest is lower than the expected rate of profit, entrepreneurs will carry out investment projects.

Investments depend on the level of taxation and the general tax climate in a given country or region. Too high a tax level does not stimulate investment. The investment process responds to the rate of inflationary depreciation of money. In conditions of galloping inflation, when costs represent significant uncertainty, the processes of real capital education become unattractive, and preference will be given to speculative operations.

The difference between the classical and Keynesian equilibrium models I and S lies in the impossibility of the existence of long-term unemployment in the classical model. The flexible response of prices and interest rates restored the disturbed balance. In the Keynesian model, equality of I and S can also be achieved under part-time employment. Keynes questioned the existence of a flexible price mechanism: entrepreneurs, faced with a drop in demand for their products, do not reduce prices, but cut production and fire workers.

So, equilibrium on the scale of society in all interconnected markets for goods and services, i.e. equality between aggregate demand and aggregate supply requires equality in the volumes of savings and investment. The fact that investment is a function of interest and saving is a function of income makes the problem of finding equality a very difficult task.

National income is used through two main channels: consumption and investment, i.e. Y = C + I. Total expenditures are expenditures on personal consumption (C) and on productive consumption (I). In a stagnating economy, the level of propensity to consume is low, and the level of national income, corresponding to the equality of income and expenditure (for personal consumption), is at the level of zero saving. The greater the investment, the higher and the closer the “cherished” level of full employment. If the state not only stimulates private investment, but also carries out a whole range of different expenses itself.

Let's look first at the accelerator effect, which demonstrates the relationship between changes in real GDP and derivative investments? One of the first to pay serious attention to this effect was the American economist John Maurice Clark, who actively studied the problems of economic cycles. Clark believed that an increase in demand for consumer goods creates a chain reaction leading to multiple increases in the demand for equipment and machinery. This pattern, which, according to Clark, was the key point of cyclical development, was defined by him as the “acceleration principle” or the “accelerator effect”.

To understand the accelerator effect, the capital intensity ratio is used. Entrepreneurs try to maintain the capital/finished product ratio at the desired level. At the macroeconomic level, the capital intensity ratio is expressed by the capital / income ratio, i.e. K / Y. Different sectors of the economy have different levels of capital ratio. Thus, it is high in shipbuilding, where the production of a unit of finished product requires large expenditures of fixed capital. It is much lower in light industry. A change in sales volumes of finished products will also entail the need for changes in investments in fixed capital in order for the capital intensity ratio to remain at the desired level.

When considering the principle of acceleration, we are primarily interested in pure investment. Net investment cannot be of any size. Since gross investment on the scale of the national economy cannot take negative values, the maximum limit that negative net investment can reach is the amount of depreciation.

When creating the multiplier model, we assume that the increase in investment occurs in the same year as the increase in sales. However, when constructing an accelerator model, economists proceed from a certain lag (time lag) in the reaction of economic agents making investments to an increase in sales or real GDP growth. Indeed, it is difficult to imagine new factories and factories being built immediately in response to increased annual sales. Even if an entrepreneur is extremely quick to react, he will first sell off stocks of finished products, calculate various options for investment projects, and only then make investments.

Thus, the accelerator can be represented mathematically as the ratio of investments in period t to changes in consumer demand or national income in previous years.

In addition, the accelerator effect in combination with the well-known multiplier effect gives rise to the multiplier-accelerator effect. This model was developed by Paul Samuelson and John Hicks.

The accelerator multiplier effect shows the mechanism of self-sustaining cyclical fluctuations of the economic system.

As is known, an increase in investment by a certain amount can increase national income by many times larger amounts due to the multiplier effect. The increased income, in turn, will cause in the future (with a certain lag) an accelerated growth of investments due to the action of the accelerator. These derivative investments, being an element of aggregate demand, generate another multiplier effect, which will again increase income, thereby encouraging entrepreneurs to make new investments.

The multiplier-accelerator model assumes several options for cyclic fluctuations. These options are determined by a combination of different values of MPC and V. In the real economy, MPC>1 and 0.51, at which the values of national income indicators would have to acquire enormous proportions in 5-10 years. But practice does not demonstrate explosive type vibrations. The fact is that the amount of income or real GDP is actually limited by a “ceiling”, i.e. the value of potential GDP. This is a limitation on the amplitude of fluctuations on the part of aggregate supply. On the other hand, the fall in national income is limited by “gender”, i.e. negative net investment equal to depreciation. Here we are faced with a limitation on the amplitude of fluctuations on the part of aggregate demand, an element of which is investment. The wave of growing national income, hitting the “ceiling”, leads to its reverse dynamics. When the downward trend in business activity reaches the “floor,” the opposite process of revival and recovery begins.

The traditional view of classical theory on the processes of saving and investing emphasizes the benefits of high savings. After all, the higher the savings, the deeper the “reservoir” from which investments are drawn. Therefore, a high propensity to save, according to the logic of the classical school, should contribute to the prosperity of the nation.

The modern view of this problem, originally formulated by Keynes, differs significantly from the classical interpretation. J.M. Keynes concluded that “such arguments (i.e., the arguments of the classics) are completely inapplicable to countries that have reached a high stage of economic development.” In countries that have reached this level, the desire to save will always outstrip the desire to invest. This happens for the following reasons. Firstly, with the growth of capital accumulation, the marginal efficiency of its functioning decreases, since the range of alternative opportunities for highly profitable capital investments is increasingly narrowed. Secondly, with rising incomes in industrialized countries, the share of savings will increase - just remember that S is a function of Y, and this dependence is positive.

In order to answer this question, it is necessary to return to the category of investments. There are so-called autonomous investments, i.e. capital investments independent of the volume and dynamics of national income. This is a kind of simplification of the relationships that exist on the scale of the national economy. In reality, there is an interaction between investment and income. Autonomous investments made in the form of an initial “injection”, due to the multiplier effect, lead to an increase in national income.

The revival of business activity and employment growth will lead to an increase in the propensity to invest among various entrepreneurs. These investments are usually called derivatives because they depend on the dynamics of national income. Derivative investments, being “superimposed” on autonomous ones, strengthen and accelerate it.

But the acceleration wheel can also turn in the other direction. A reduction in income will (due to multiplier and acceleration effects) also reduce derivative investments, and this will lead to economic stagnation.

If the economy is in a state of underemployment, an increase in the propensity to save naturally means nothing more than a decrease in the propensity to consume. Reduced consumer demand means it is impossible for product manufacturers to sell their products. Overstocked warehouses cannot in any way facilitate new investment. Production will begin to decline, mass layoffs will follow, and, consequently, a drop in national income as a whole and the income of various social groups. This is what will be the inevitable result of the desire to save more! The virtue of saving, which the classical school spoke of, turns into its opposite - the nation becomes not richer, but poorer.

Consequently, Protestant ethics, which preaches frugality as one of the indispensable conditions for increasing wealth, does not always lead to the desired results. In conditions of underemployment, the “paradox of thrift” manifests itself as an unplanned result of the completely conscious actions of individual business entities, guided by their personal ideas about rational behavior.

The volume of real national product (the cost of the product at constant prices) and the rate of inflation, ensuring equality between aggregate demand and supply, are usually called the state of general macroeconomic equilibrium (balance) of the economy. This is the most important component of national economic balance.

In any national economy there is always a certain volume of real gross national product, the excess of which contributes to the accelerated development of inflation processes. The latter, as is known, largely stimulates the development of speculative motives among producers and various kinds of intermediaries - to the detriment of the real needs of the economy. As practice shows, this volume, which should not be exceeded, is determined mainly by the existing structure of the national economy. Moreover, this structure always corresponds to a certain level of forced unemployment. In fact, the indicated volume of real gross national product reflects the growth potential of a particular economy without the threat of a rapid inflationary spiral.

If the current production of real GNP is below the indicated potential, then it is possible to significantly reduce the unemployment rate, stimulating an increase in aggregate demand. This can be achieved using three main levers of state economic policy: reducing taxes, increasing the money (primarily credit) supply, and increasing government spending. In contrast, if the actual production of real GNP sufficiently exceeds the indicated potential, the economy is said to be in an “overheated” state. It is characterized by “overemployment” (a kind of “unemployment at work”), the accelerated development of inflationary processes turning into hyperinflation, and the exacerbation of commodity and budget deficits. In such a situation, society lives beyond its means, the national income is being consumed, and the lag in the technical level of production development is growing.

All this dictates the need for an energetic government policy aimed at reducing aggregate demand and moving the economy to a position close to the E11 state. Theoretically and practically, the latter is achieved by tightening the tax pressure, reducing the money (primarily credit) supply, and significantly reducing (saving) government spending. However, government agencies are not always able to effectively use all these three main levers. The stronger the deviations from the parameters of the state of general economic equilibrium, the smaller the corresponding opportunities.

In relation to the current economy of Kyrgyzstan, it is difficult to demand a rapid transformation of the previously existing system into a classical system of world standard. This does not allow full use of banking levers to reduce the cash and credit money supply, although today the process of “compression” of the latter is undoubtedly underway.

Given the current difficult state of the state budget, a significant reduction in government spending is also a difficult task. After price liberalization, in conditions of progressive inflation, it is unrealistic not to increase social spending. The structure of the national economy cannot be changed quickly. The possibilities for reducing military spending are limited by the traditionally high share of the defense complex in the economy. It is on them that today the center of gravity has been forced to shift when carrying out economic reforms and in solving the most complex problems of national economic balance.

In turn, an ultra-strict implementation of a stabilization financial policy can lead to the fact that economic agents will be forced to significantly reduce the size of supply with the same price change: the AS curve in Fig. will move to position AS1. In this case, a reduction in aggregate supply will most likely cause a new wave of price growth, largely determined by the elasticity characteristics of the AD curve. As a result, a decline in production may be accompanied by fairly high inflation. On the contrary, the increase in inflation caused by stimulation of aggregate demand can be mitigated to a certain extent if, as a result of the measures taken, there is a simultaneous increase in aggregate supply. The presented AD-AS analysis of general economic equilibrium is distinguished by its well-known schematism. At the same time, it can be useful in assessing the logic of changes taking place and the sequence of steps taken within the framework of state policy to achieve economic equilibrium.

Classic macroeconomic equilibrium

In the classical model, the lack of funds for consumption caused by savings is compensated by investments. If entrepreneurs invest the same amount as households save, then J. Say’s law applies, i.e. the level of production and employment remains constant. The main task is to encourage entrepreneurs to invest as much money as they spend on savings. It is decided in the money market, where supply is represented by savings, demand by investments, and price by interest rates. The money market self-regulates saving and investment using the equilibrium interest rate.

The higher the interest rate, the more money is saved (because the owner of the capital receives more dividends). Therefore, the saving curve (S) will be upward sloping. The investment curve (I), on the other hand, is downward sloping because the interest rate affects costs and entrepreneurs will borrow and invest more money at a lower interest rate. The equilibrium rate of interest (R0) occurs at point A. Here, the quantity of money saved equals the quantity of money invested, or, in other words, the quantity of money supplied equals the demand for money.

If savings increase, then the S curve will shift to the right and take position S1. Although saving will exceed investment and cause unemployment, the excess saving implies a reduction in the interest rate to a new, lower equilibrium level (point B). A lower interest rate (R1) will reduce investment spending until it equals saving, reducing full employment.

The second factor ensuring equilibrium is the elasticity of prices and wages. If for some reason the interest rate does not change at a constant ratio of savings and investment, then the increase in savings is compensated by a decrease in prices, as producers seek to get rid of surplus products. Lower prices allow fewer purchases to be made while maintaining the same level of output and employment.

Thus, classical economists proceeded from the flexibility of prices, wages, and interest rates, i.e., from the fact that wages and prices can freely move up and down, reflecting the balance between supply and demand. In their opinion, the aggregate supply curve AS has the form of a vertical straight line, reflecting the potential volume of GNP production. A decrease in price entails a decrease in wages, and therefore full employment is maintained. There is no reduction in the value of real GNP. Here all products will be sold at different prices. In other words, a decrease in aggregate demand does not lead to a decrease in GNP and employment, but only to a decrease in prices. Thus, classical theory believes that government economic policy can only affect the price level, and not output and employment. Therefore, its interference in regulating production and employment is undesirable

General macroeconomic equilibrium

Macroeconomic equilibrium is the main problem of macroeconomic analysis, the balanced state of the economic system as a single integral organism. The form of manifestation of equilibrium of the economic system as a whole is the balance and proportionality of economic processes.

Correspondence must be achieved between the following parameters of economic systems:

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

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

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

Partial equilibrium is equilibrium in individual commodity markets that are part of the national economic system. The foundations are laid in the works of A. Marshall.

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

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

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

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

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

An example of the simplest model of macroeconomic equilibrium is the classical SEL model, in which aggregate supply (AS) is equal to aggregate demand (AD) (see figure). Using this model, it is possible to explore various options for the state's economic policy.

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

Macroeconomic equilibrium AD-AS

The state of the national economy in which there is an overall proportionality between: resources and their use; production and consumption; material and financial flows - characterizes the general (or macroeconomic) economic equilibrium (GER). In other words, this is the optimal implementation of aggregate economic interests in society. The idea of such balance is obvious and desired by the entire society, since it means complete satisfaction of needs without unnecessarily expended resources and unsold products. A market economy, built on the principles of free competition, has economic mechanisms of self-regulation and the ability to achieve an equilibrium state through flexible prices, especially in conditions close to perfect competition, as well as in the long term.

Graphically, macroeconomic equilibrium will mean combining the AD and AS curves in one figure and intersecting them at some point. The ratio of aggregate demand and aggregate supply (AD - AS) characterizes the value of national income at a given price level, and in general - equilibrium at the level of society, i.e. when the volume of products produced is equal to the aggregate demand for it. This model of macroeconomic equilibrium is basic. The AD curve can intersect the AS curve in different sections: horizontal, intermediate or vertical. Therefore, three options for possible macroeconomic equilibrium are distinguished (Fig. 12.5).

Rice. 12.5. Macroeconomic equilibrium: AD–AS model.

Point E3 is an equilibrium with underemployment without an increase in the price level, i.e., without inflation. Point E1 is an equilibrium with a slight increase in the price level and a state close to full employment. Point E2 is an equilibrium under conditions of full employment, but with inflation.

Let's consider how equilibrium is established when the aggregate demand curve intersects the aggregate supply curve in the intermediate section at point E (Fig. 12.6).

Rice. 12.6. Establishment of macroeconomic equilibrium.

The intersection of the curves determines the equilibrium price level PE and the equilibrium level of national production QE. To show why PE is the equilibrium price and QE is the equilibrium real national output, assume that the price level is expressed by P1 rather than PE. Using the AS curve, we determine that at the price level P1, the real volume of the national product will not exceed YAS, while domestic consumers and foreign buyers are ready to consume it in the volume of YAD.

Competition among buyers for the opportunity to purchase a given volume of production will have an increasing impact on the price level. In the current situation, a completely natural reaction of producers to an increase in the price level will be to increase production volume. Through the joint efforts of consumers and producers, the market price, with a marked increase in production volume, will begin to increase to the value of PE, when the real volumes of purchased and produced national products will be equal and equilibrium will occur in the economy.

In reality, there are constant deviations from the desired stable equilibrium under the influence of various factors - both objective and subjective. These include, first of all, the inertia of economic processes (the inability of the economy to instantly respond to changes in market conditions), the influence of monopolies and excessive government intervention, the activities of trade unions, etc. These factors impede the free movement of resources, the implementation of the laws of supply and demand and other integral market conditions .

A prerequisite for macroeconomic analysis is the aggregation of indicators. The aggregate supply of goods at equilibrium is balanced by aggregate demand and represents the gross national product of society.

The equilibrium national product is ensured by establishing the equilibrium aggregate price for the produced product, which is carried out at the intersection point of the aggregate demand and aggregate supply curves. Achieving an equilibrium production volume under conditions of always existing limited resources is the goal of national economic policy.

All the main problems of society, one way or another, are related to the discrepancy between aggregate demand and aggregate supply.

According to the classical model, which describes the functioning of the economy in the long run, the quantity of products produced depends only on the costs of labor, capital and available technology, but does not depend on the price level.

In the short run, prices for many goods are inflexible. They “freeze” at a certain level or change little. Firms do not immediately lower the wages they pay, and stores do not immediately revise the prices of the goods they sell. Therefore, the aggregate supply curve is a horizontal line.

Let us consider the change in the equilibrium state of the economy separately under the influence of aggregate demand and aggregate supply. With constant aggregate supply, a shift of the aggregate demand curve to the right leads to different consequences depending on where in the aggregate supply curve it occurs (Fig. 12.7).

Rice. 12.7. Consequences of an increase in aggregate demand.

In the Keynesian segment (Fig. 12.7 a), characterized by high unemployment and a large amount of unused production capacity, an expansion of aggregate demand (from AD1 to AD2) will lead to an increase in real national output (from Y1 to Y2) and employment without increasing the price level ( P1). In the intermediate period (Fig. 12.7 b), the expansion of aggregate demand (from AD3 to AD4) will lead to an increase in the real volume of national production (from Y3 to Y4) and to an increase in the price level (from P3 to P4).

In the classic segment (Fig. 12.7 c), labor and capital are fully used, and the expansion of aggregate demand (from AD5 to AD6) will lead to an increase in the price level (from P5 to P6) and the real volume of production will remain unchanged, i.e. will exceed its full employment level.

When the aggregate demand curve shifts back, the so-called ratchet effect occurs (a ratchet is a mechanism that allows the wheel to turn forward, but not backward). Its essence lies in the fact that prices rise easily, but do not tend to decline when aggregate demand decreases. This is due, firstly, to the inelasticity of wages, which do not tend to fall, at least for some period of time, and, secondly, many firms have sufficient monopoly power to resist falling prices during a period of declining demand. We show the effect of this effect in Fig. 12.8, where for simplicity we omit the intermediate segment of the aggregate supply curve.

Rice. 12.8. Ratchet effect.

With an increase in aggregate demand from AD1 to AD2, the equilibrium position will shift from E1 to E2, with real production volume increasing from Y1 to Y2, and the price level from P1 to P2. If aggregate demand moves in the opposite direction and decreases from AD2 to AD1, the economy will not return to its original equilibrium position at point E1, but a new equilibrium will arise (E3), in which the price level will remain at P2. Output will fall below its original level to Y3. The ratchet effect causes the aggregate supply curve to shift from P1aAS to P2E2AS.

The shift in the aggregate supply curve also affects the equilibrium price level and real national output (Figure 12.9).

Rice. 12.9. Consequences of changes in aggregate supply.

One or more nonprice factors change, causing aggregate supply to increase and the curve to shift to the right, from AS1 to AS2. The graph shows that a shift in the curve will lead to an increase in the real volume of national production from Y1 to Y2 and a decrease in the price level from P1 to P2. A shift in the aggregate demand curve to the right indicates economic growth. A shift of the aggregate supply curve to the left from AS1 to AS3 will lead to a decrease in the real volume of national production from Y1 to Y3 and an increase in the price level from P1 to P3, i.e., to inflation.

We can say that in its most general form, economic equilibrium is the correspondence between the available limited resources (land, labor, capital, money), on the one hand, and the growing needs of society, on the other. The growth of social needs, as a rule, outpaces the increase in economic resources. Therefore, equilibrium is usually achieved either by limiting needs (effective demand) or by expanding capacity and optimizing the use of resources.

There are partial and general equilibrium. Partial equilibrium is the quantitative correspondence of two interrelated macroeconomic parameters or individual aspects of the economy. This is, for example, the balance of production and consumption, income and supply, demand and supply, etc. Unlike partial, general economic equilibrium means the correspondence and coordinated development of all spheres of the economic system.

The most important prerequisites for OER are the following:

Compliance with national goals and available economic opportunities;
the use of all economic resources - labor, money, i.e. ensuring a normal level of unemployment and optimal reserves of capacity without allowing an abundance of idle capacity, mass unemployment, unsold goods, as well as excessive tension of resources;
bringing the production structure in line with the consumption structure;
correspondence of aggregate demand and aggregate supply in all four types of markets - goods, labor, capital and money.

It should also be noted that OER models will differ for closed and open economies, in the latter case taking into account factors external to a given national economy - exchange rate fluctuations, foreign trade conditions, etc.

Macroeconomic equilibrium cannot be considered as a static state; it is very dynamic and is unlikely to be achievable in principle, like any ideal state. Cyclical fluctuations are inherent in any economic system. But society is interested in ensuring that deviations from the ideal equilibrium (or balance) of economic interests are minimal, because too large fluctuations can lead to irreversible consequences - to the destruction of the system as such. Therefore, compliance with the conditions of macroeconomic equilibrium is the basis for the socio-economic stability of a particular state.

Macroeconomic equilibrium conditions

The problem of macroeconomic equilibrium arises from the fact that in market circulation, equality of expenses and income is a prerequisite. But if expenses (of one) indeed always turn into income (of another), then income does not necessarily turn into expenses, and in any case, does not necessarily equal them. It has been noted that it is typical for households to have an excess of income over expenses, while for firms an excess of expenses over income.

Macroeconomic equilibrium in the money market

The money market is a market in which the demand for money and its supply determine the level of interest rates and “prices” of money; it is a network of institutions that ensure the interaction of demand and supply of money.

In the money market, money is not “sold” or “bought” like other goods. This is the specificity of the money market. In money market transactions, money is exchanged for other liquid assets at opportunity cost, measured in units of the nominal interest rate.

It reflects the equilibrium in the market for real money, or real cash balances.

The demand for real cash balances depends on three main factors:

1. interest rates;
2. income level;
3. circulation speed.

D. Keynes considered the interest rate to be the main factor influencing the demand for money. According to the Keynesian theory of liquidity preference, the interest rate represents the holding of cash. This means that the higher the interest rate, the more potential income people are missing out on if they keep cash at home instead of keeping it in a bank and earning an income on it.

That is, when interest rates rise, people want to hold less money, and as a result, the demand for real cash balances falls.

The second factor influencing the demand for money is real income. As income increases, people enter into more transactions, which consequently requires more money. That is, the relationship between the demand for money and real income is direct.

Macroeconomic equilibrium in the commodity market

The IS (investment-savings) model is a theoretical equilibrium model of only commodity markets with fixed prices. It reflects the relationship between the interest rate (r) and the national income (Y), which is determined by the Keynesian equality S=I.

In the analysis presented by J.M. Keynes and the Stockholm School of Economics, aggregate demand equals the demand for consumer and investment goods:

And aggregate supply is equal to national income (Y), which is used for consumption and savings:

Equilibrium in commodity markets for the entire economy will have the form: AD=AS or C+I=C+S, hence:

That is, savings and investments depend, respectively, on income levels and interest rates.

The resulting Keynesian equilibrium condition allows for multiple equilibrium states of commodity markets, since interest rate and income conditions in the economy can constantly change.

To determine this set of equilibrium states of commodity markets, the English economist John Hicks used the investment-savings (IS) model. This model allows us to find in each specific case the relationship between the interest rate (r) and national income (Y), at which investment is equal to savings, other factors being constant.

The IS model is considered in the short term, when the economy is not in a state of full employment of resources, the price level is fixed, the values of total income (Y) and interest rates (r) are flexible.

The investment-savings model - IS is of great practical importance, since it can be used to show how much the interest rate needs to be changed when national income changes to maintain equilibrium in commodity markets. For example, if the interest rate is reduced, investment will increase, which will lead to an increase in planned spending and an increase in national income. In turn, an increase in national income will cause an increase in savings in society and vice versa.

Rice. 3 - Investment-savings curve

If we depict these processes graphically, we obtain a decreasing IS curve (Fig. 3).

The IS curve is the locus of points characterizing all combinations of Y and r that simultaneously satisfy the income identity of the consumption, saving and investment functions.

The IS curve divides the economic space into two areas: at all points lying above the IS curve, the supply of goods exceeds the demand for them, i.e., the volume of national income is greater than planned expenses (inventories accumulate in society). At all points below the IS curve, there is a shortage in the goods market (society lives on debt, inventories are declining).

Investments are inversely related to the rate of interest. For example, with a low interest rate, investments will grow. Accordingly, income Y will increase and savings S will increase slightly, and the interest rate will decrease in order to stimulate the transformation of S into I. Hence the slope of the IS curve shown in (Fig. 3).

This is explained by the fact that in the first case, at a higher interest rate and a certain level of income, people prefer not to consume, but to put money in the bank, i.e. save, which reduces investment and aggregate demand. In the second case, at a low interest rate, society lives in debt and prefers consumption, thereby increasing investment in the economy and its total costs.

If you change factors that were previously considered unchanged, for example, government spending (G) or taxes (T), then the IS curve will shift up to the right or down to the left depending on the change in these indicators.

For example, if government spending increases and taxes remain unchanged during the stimulus, then the IS curve will shift upward to the right. If taxes increase and government spending remains at the same level while implementing a contractionary fiscal policy, then the IS curve will shift down to the left.

Thus, the IS model can and is used in business practice to illustrate the impact of state fiscal policy on national income.

The IS curve is the equilibrium curve in the product market. It represents the locus of points characterizing all combinations of Y and R that simultaneously satisfy the income identity, consumption, investment and net export functions. At all points of the IS curve, investment and savings are equal. The term IS reflects this equality (Investment=Savings).

The simplest graphical derivation of the IS curve involves the use of the saving and investment functions.

Algebraic derivation of the IS curve

The IS curve equation can be obtained by substituting equations 2, 3 and 4 into the rest of the macroeconomic identity and its solution for R and Y.

The equation of the IS curve relative to R is:

R=(a+e+g)/(d+n)-(1-b*(1-t)+m`)/(d+n)*Y+1/(d+n)*G-b/( d+n)*Ta,
T=Ta+t*Y

The equation of the IS curve relative to Y is:

Y=(a+e+g)/(1-b*(1-t)+m`)+1/(1-b*(1-t)+m`)*G-b/(1-b*( 1-)+m`)*Ta(d+n)/ (1-b*(1-t)+m`)*R,
T=Ta+t*Y

The coefficient (1-b*(1-t)+m`)/(d+n) characterizes the angle of inclination of the IS curve relative to the Y-axis, which is one of the parameters of the comparative effectiveness of fiscal and monetary policies.

The IS curve is flatter provided that:

The sensitivity of investment (d) and net exports (n) to interest rate movements is high;
The marginal propensity to consume (b) is large;
The marginal tax rate (t) is low;
The marginal propensity to import (m`) is small.

Under the influence of an increase in government spending G or a decrease in taxes T, the IS curve shifts to the right. A change in tax rates t also changes the angle of its inclination. In the long run, the slope of IS can also be changed by income policy, since high-income families have a relatively lower marginal propensity to consume. Than the low-income. The remaining parameters (d, n and m`) are practically not confirmed by the impact of macroeconomic policy and are mainly external factors that determine its effectiveness.

Types of macroeconomic equilibrium

In its most general form, macroeconomic equilibrium is the balance and proportionality of the main parameters of the economy, i.e. a situation where business entities have no incentive to change the existing state of affairs. This means that proportionality is achieved between production and consumption, resources and their use, factors of production and their results, material and financial flows, supply and demand. In a market economy, equilibrium is the correspondence between the production of goods and the effective demand for them, i.e. This is an ideal situation when exactly as much product is produced as can be bought at a given price. It can be achieved by limiting the needs for economic goods, i.e. by reducing effective demand for goods and services, or by increasing and optimizing the use of resources.

Macroeconomic equilibrium is classified into several types. First, general and partial equilibrium are distinguished. General equilibrium is understood as the interconnected equilibrium of all national markets, i.e. the balance of each market separately and the maximum possible coincidence and implementation of the plans of economic entities. When a state of general economic equilibrium is reached, economic entities are completely satisfied and do not change the level of demand or supply to improve their economic situation. Partial equilibrium is equilibrium in individual markets that are part of the national economic system.

There is also complete economic equilibrium, which represents the optimal balance of the economic system. In reality, it is unattainable, but acts as an ideal goal of economic activity. Secondly, equilibrium can be short-term (current) and long-term. Thirdly, equilibrium can be ideal (theoretically desired) and real. The prerequisites for achieving ideal equilibrium are the presence of perfect competition and the absence of side effects. It can be achieved provided that all participants in economic activity find consumer goods on the market, all entrepreneurs find factors of production, and the entire annual product is fully sold. In practice, these conditions are violated. In reality, the task is to achieve real equilibrium, which exists with imperfect competition and the presence of external effects and is established with incomplete realization of the goals of participants in economic activity.

Equilibrium can also be stable or unstable. Equilibrium is called stable if, in response to an external impulse causing a deviation from equilibrium, the economy independently returns to a stable state. If, after an external influence, the economy cannot self-regulate, then the equilibrium is called unstable. The study of stability and conditions for achieving general economic equilibrium is necessary to identify and overcome deviations, i.e. to carry out an effective economic policy for the country.

Disequilibrium means that there is no balance in various spheres and sectors of the economy. This leads to losses in gross product, a decrease in household incomes, inflation, and unemployment. To achieve an equilibrium state of the economy and prevent undesirable phenomena, specialists use macroeconomic equilibrium models, the conclusions from which serve to substantiate the state’s macroeconomic policy.

Let us briefly describe some models of macroeconomic equilibrium. The first model of macroeconomic equilibrium is considered to be the model of F. Quesnay - the famous “Economic Tables”. They are a description of simple reproduction using the example of the French economy of the 18th century.

One of the first to develop was the model of L. Walras, a Swiss economist and mathematician, who tried to find out on the basis of what principles the interaction of prices, costs, volumes of demand and supply in various markets is established, whether the equilibrium is stable, and also to answer some other questions. Walras used a mathematical apparatus. In his model, he divided the world into two large groups: firms and households. Firms act on the factor market as buyers and on the consumer goods market as sellers. Households, which own factors of production, act as their sellers and at the same time buyers of consumer goods. The roles of buyers and sellers are constantly changing. In the process of exchange, the expenses of producers of goods turn into household expenses, and all household expenses turn into income of firms.

The prices of economic factors depend on the size of production, demand, and therefore on the prices of manufactured goods. In turn, prices for goods produced in society depend on the prices of production factors. The latter must correspond to the costs of firms. At the same time, firms' income must be matched with household expenditures. Having constructed a rather complex system of interconnected equations, Walras proves that the equilibrium system can be achieved as a kind of “ideal” towards which a specific market strives. Based on the model, Walras' law was obtained, which states that in a state of equilibrium, the market price is equal to marginal cost. Thus, the value of a social product is equal to the market value of the production factors used to produce it, aggregate demand is equal to aggregate supply, price and production volume do not increase or decrease.

The state of equilibrium, according to Walras, presupposes the presence of three conditions:

1. supply and demand for factors of production are equal, a constant and stable price is established for them;
2. supply and demand for goods and services are also equal and are sold on the basis of constant, stable prices;
3. prices of goods correspond to production costs.

Walras's model gives a simplified, conventional picture of the national economy and does not show how equilibrium is established in dynamics. It does not take into account many social and psychological factors that affect supply and demand in reality. Thus, the model considers only already established markets with established infrastructure.

At the same time, Walras's concept and his theoretical analysis provide the basis for solving more specific practical problems related to the disruption and restoration of equilibrium.

In the 20th century other equilibrium models have been created.

Let's consider a neoclassical model of economic equilibrium based on the relationship between investment and savings at the macro level. An increase in income stimulates an increase in savings; converting savings into investment increases output and employment. Then incomes increase again, and with them savings and investments. The correspondence between aggregate demand and aggregate supply is ensured through flexible prices and a free pricing mechanism. According to the classics, price not only regulates the distribution of resources, but also contributes to the resolution of disequilibrium situations. According to this theory, in each market there is one key variable (price P, percentage r, wage WIP) that ensures market equilibrium. Equilibrium in the goods market (through the demand and supply of investments) is determined by the interest rate. In the money market, the determining variable is the price level. The correspondence between supply and demand in the labor market is regulated by the value of real wages.

The classics believed that the transformation of household savings into investment expenditures of firms occurs without any special problems and government intervention is unnecessary. However, in reality, there is a gap between the savings of some and the use of these funds by others, because if part of the income is set aside in the form of savings, then it is not consumed. In order for consumption to grow, savings should not lie idle, they should be transformed into investments. If this does not happen, then the growth of the gross product is inhibited, which means that incomes decrease and demand decreases.

Savings disrupt the macroequilibrium between aggregate demand and aggregate supply. Relying on the mechanism of competition and flexible prices does not work under certain conditions. If investments are greater than savings, then there is a danger of inflation, and if less, the growth of the gross product is inhibited.

Problems of macroeconomic equilibrium

The problem of macroeconomic equilibrium is a central problem in macroeconomics courses. Macroeconomic equilibrium is usually understood as the equilibrium of the entire economic system as a whole, which characterizes the balance and proportionality of all economic processes. It is divided into ideal and real.

An ideal balance is achieved with the full realization of the economic interests of economic entities in all sectors and spheres of the economy. It assumes the existence of conditions of perfect competition and the absence of externalities.

Real equilibrium is established in the economy in conditions of imperfect competition and taking into account external factors influencing the market environment.

In macroeconomics, several models are used to determine macroeconomic equilibrium. The model of aggregate demand and aggregate supply is the basis for studying general equilibrium, fluctuations in the volume of national production and the general price level, the causes and consequences of their changes.

Macroeconomic equilibrium in an open economy

Macroeconomic equilibrium has played a major role in economics since the Great Depression in the 1930s. It was at this time that macroeconomics itself emerged. D. M. Keynes proposed measures to achieve full employment by regulating domestic demand.

But in the conditions of ever-increasing internationalization of economic life, macroeconomic equilibrium presupposes not only minimal inflation and full employment, but also an equilibrium system of external payments.

An unbalanced current account balance, as well as large balance of payments deficits and increasing external debt, could adversely affect the internal state of the economy. This may lead to an economic recession and crisis in various areas and sectors of the economy. But due to the close relationships between different countries of the world, these consequences will manifest themselves beyond the borders of a given state.

To achieve macroeconomic equilibrium, it is necessary to achieve internal and external equilibrium simultaneously. Internal equilibrium presupposes equality of aggregate demand and aggregate supply, subject to minimal inflation. External equilibrium presupposes a balanced balance of payments, a zero current account balance, and a fixed level of foreign reserves.

If in the domestic economy macroeconomic policy is carried out with the help of monetary and fiscal policy, then for an open economy they use foreign trade, foreign exchange policy, etc. This, naturally, involves the complication of macroeconomic relationships between the countries of the world. This is made much more difficult, since it requires taking into account increasingly increasing factors and conditions.

But in the course of implementing macroeconomic policy, a number of difficulties may arise. For example, because it takes a lot of time to discuss monetary and monetary policy, and measures to change it may be needed very quickly. In addition, it is necessary to accurately select exactly the point that is the equilibrium. Unfortunately, not all parameters are amenable to point estimation and not always.

It is also difficult to predict changes in demand, investor behavior, and the behavior of the entire world in relation to a given product.

The effectiveness of the development and implementation of such measures also depends on such indicators as the degree of trust in the government, economic expectations, etc. Macroeconomic equilibrium cannot always be accurately described using an economic model.

If we are talking about the long term, then the national economy will react weakly to changes in the volume of the money supply and the level of the exchange rate.

Real macroeconomic equilibrium

Real macroeconomic equilibrium is an equilibrium established in an economic system under conditions of imperfect competition and external factors influencing the market.

There are partial and complete equilibrium:

Partial equilibrium is called equilibrium in a particular market of goods, services, factors of production;
Complete (general) equilibrium is simultaneous equilibrium in all markets, equilibrium of the entire economic system, or macroeconomic equilibrium.

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