Unstable economy. Macroeconomic instability
Economic cycle
The reasons for the cyclical development of the economy are explained in different ways by individual theories. External theories explain the economic cycle by external causes, the appearance of spots on the Sun, which lead to crop failure and a general economic recession (W. Jevons, V. Vernadsky); wars, revolutions and other political upheavals; the development of new territories and the associated migration of the population, fluctuations in the population of the world; powerful breakthroughs in technology.
allowing to radically change the structure of social production. Internal theories view the economic cycle as a product of internal causes: the ratio of optimism and pessimism in economic activity people (V. Pareto, A. Pigou); excess savings and lack of investment (J. Keynes); the contradiction between the social nature of production and private appropriation (K. Marx); violation in the field of money supply and demand (I. Fisher, R. Houtrn); overaccumulation of capital (M. Tugan-Baranovsky, G. Kassel, A. Spithof), underconsumption and poverty of the population (T. Malthus), etc. Such an abundance of views is explained by the complexity and importance of this economic process.
Unemployment - it is forced unemployment resulting from the constant imbalance between the demand and supply of labor both in the integrated labor market and in its various segments.
The term "unemployment" first appeared in the Encyclopedia Britannica in 1911, then used in 1915 in a report by the US Department of Labor. Currently, unemployment is present in all countries of the world in various volumes, forms, duration.
IN economic theory there are various approaches to explaining the necessity and possibility of the existence of unemployment.
One of the earliest explanations for unemployment was given by T. Malte som. He noted that unemployment is caused by demographic reasons, as a result of which the rate of population growth exceeded the rate of growth of production. This theory has been criticized as untenable, because it does not explain the occurrence of unemployment in high developed countries ah low fertility.
Marxist theory considers unemployment as a historically transient phenomenon inherent in a society based on private ownership of the means of production. The emergence of unemployment is associated with cyclical processes of capital accumulation and reproduction, with the growth of the organic composition of capital. The population of the hut is definitely not absolute, but relative to the need for capital. The consequences of unemployment are the absolute and relative impoverishment of employees.
The neoclassical school is represented by the works of D. Gilder, A. Laffer, M. Feldstein, R. Hall and others. The provisions of the classical theory of A. Smith are taken as a basis. It follows from the neoclassical concept that unemployment is impossible if there is an equilibrium in the labor market, because the price of labor force flexibly responds to the needs of the labor market, increasing or decreasing depending on supply and demand. Currently, representatives of this school recognize unemployment as a natural phenomenon that performs the function of the circuit of the unoccupied part. able-bodied population.
The main ideas of the Keynesian school can be summarized as follows:
At a given level of investment and money wages, the economic system in any short-term period can be in a state of stable equilibrium with underemployment, which means the possibility of the existence of forced unemployment;
The main parameters of employment (the actual level of employment and unemployment, the demand for labor and the level of real wages) are not established in the labor market, but are determined by the size of effective demand in the market for goods and services;
The mechanism for the formation of employment is based on the phenomena of a psychological nature: the propensity to consume, to save, the urge to invest, the preference for liquidity;
The main, decisive factor in the formation of employment is investment of the optimal size. All means are good along this path, but the organization of various public works, up to the construction of pyramids, palaces, temples, and even digging and burying ditches, is especially effective from the point of view of the prospects for expanding employment;
There should be a flexible wage policy. Representatives of the monetarist school investigated the relationship
unemployment with the dynamics of real wages, inflation.
The institutional sociological school offered its vision of the problem from the standpoint of institutional problems, the creation of employment services and other social institutions.
In recent years, the most popular are the concepts of "natural", "normal", "socially acceptable" unemployment level, which study the relationship between unemployment and inflation, money circulation, the equilibrium price of labor, and the ratio of supply and demand for labor. The development of the strategy and tactics of state regulation of employment, support of the unemployed is carried out using methods of economic and mathematical modeling and graphical analysis (Marshall crosses, Phillips curves, Beveridge curve, etc.). In the 60s, the natural unemployment rate was considered to be 2-4% of the labor force; in the 80s, this level increased to 6-7%.
Able-bodied citizens are recognized as unemployed who do not have work and earnings, are registered with the employment service in order to find work, are looking for work and are ready to start it. The modern forms of unemployment are as follows. Frictional unemployment associated with professional, age, regional movements of workers. These are persons of hired labor who, having left their previous job, are in the process of moving to a new job. A distinctive feature of this type of unemployment is voluntariness and low duration.
Structural unemployment is the result of changes in technology, technology and the structure of production, the structure of consumer demand, resulting in a mismatch between the structure of jobs and the professional structure of workers. This type of unemployment, as a rule, is of a long-term nature, requires additional costs of society and individuals for retraining, change of place of residence.
Cyclic unemployment is due to the cyclical nature of the reproduction process in a market economy. It increases in times of crisis and decreases in conditions of economic recovery. Unemployment especially increases during the transition to new technological methods of production based on all-encompassing revolutionary shifts in technology, technology, and organization of production.
Seasonal unemployment is due to seasonal fluctuations in the volume of production of certain industries: agriculture, construction, industries in which during the year there are sharp changes in the demand for labor. The size of seasonal unemployment can be) predicted and taken into account when signing contracts between the employer and the employee.
Regional unemployment arises as a result of imbalances between the demand and supply of labor in a given territory; It is formed under the influence of uneven economic development of territories, and is influenced by demographic, historical, cultural and other specific factors.
To the duration of unemployment can be distinguished stagnant and fluid forms. Duration of unemployment is measured by the time interval between the loss of a job and employment. Sh
new workplace.
The current form of unemployment is characterized by the dismissal of Inca jobs from enterprises by on their own and the initiative of the administration. The reasons for layoffs are very diverse, both objective and subjective.
Voluntary unemployment is due to the fact that a certain number of workers enter the labor market and become voluntary unemployed for one reason or another (in order to find more exit work, with better working conditions and wages, etc.).
Unemployment can be open and hidden, long-term or short-term. Long-term unemployment includes cyclical and structural, and short-term - seasonal and frictional. There are repeated (periodic) and "stagnant" unemployment in the country's economy, taking into account people who are desperate to find a job and finally dropped out of the labor force.
The socio-economic consequences of unemployment can be formulated as follows: there is a depreciation, underutilization of the human potential of society, the quality of life of the unemployed and their family members deteriorates, the pressure on the wages of those employed by those who compete in the labor market increases, the costs of society and the individual for restoration or change increase professional status and level of productive labor, categories of persons with devinant behavior are formed, prone to actions that contradict accepted social norms and values.
Among the factors influencing the dynamics of unemployment, the following are fundamental:
1. Demographic factors - a change in the share of the economically active population as a result of shifts in the birth rate, mortality, gender and age structure of the population, life expectancy, in the directions and volumes of migration flows.
2. Technical and economic factors - the rates and directions of scientific and technological progress, which determine the economy of labor. The destruction of high-tech Russian industries, conversion without taking into account the economic and social consequences at all levels created the threat of massive bankruptcy of enterprises and an avalanche-like release of labor.
3. Economic factors - the state of national production, investment activity, financial and credit system, the level of yen and inflation. According to the law formulated by A. Okun, there is a negative relationship between the level of unemployment and the volume of GNP, each “surge” of unemployment is associated with a decrease in the real volume of GNP.
Unemployment rate UL,%, is determined by the formula:
where is the number of unemployed, N- the size of the labor force.
In world practice for calculating economic losses from unemployment N and used by Okun's law:
P and = VNP P- VNP f,
Where VNP P, VNL f- the potential and actual gross national product, respectively.
According to Okun's Law, an increase in the actual level of unemployment above its natural level by 1% means that the actual GNP lags behind the potential by 2.5%; 2.5 - Okun's coefficient:
where is the actual, UL - natural unemployment rate. * The difference between the actual and natural unemployment rate characterizes the level of opportunistic unemployment.
There is a relationship between unemployment and inflation, first recorded in the 50s by A. Phillips in the form of a curve.
The Phillips curve characterizes the inverse relationship between the rate of inflation and the share of unemployment: the higher the rate of inflation, the lower the share of unemployed. Government intervention can reduce unemployment by expanding aggregate demand. The resulting tension in the labor market will contribute to the growth of wages, prices, and, consequently, the deployment of inflation. To reduce inflation, it is necessary to pursue a policy of limiting demand, which leads to a curtailment of production and an increase in the unemployed. The increase in the latter becomes the payment of society for the implementation of the anti-inflationary policy.
5.4 Economic instability.
The market economy has a known instability, instability economic development... However, this instability is not an evil that inevitably leads to disaster and ruin. economic system... The phenomena of economic instability should be reckoned with and taken into account in the economic policy of the state.
The objective of economic policy is to seek to stabilize the functioning and development of the economy, thereby providing a healthy basis for social and political stability.
Among the many forms of economic instability, the most significant are:
- cyclical fluctuations in the level of GDP, investment, consumption, employment;
- unemployment;
- inflation.
Economic Cycles
Economic development in a market economy presupposes a sequential change of periods of production growth, GDP level, employment by periods of their decline.
The regularity of these successive ups and downs makes economic development cyclical.
Economic cycles are periodic fluctuations in the level of economic activity in a society.
The first economic crisis, from which periodically recurring crises are counted, was recorded in England in 1825. Then crisis phenomena began in other countries, repeating every 8-12 years. In 1873, the economic crisis began simultaneously in a number of countries around the world. This was the first world economic crisis in the history of cycles.
In economic theory, there are:
- long-wave cycles (Kondratieff cycles) with a period of 50 years, which are associated with a change in generations of technology and technology;
- average (industrial) cycles with a period of 8-12 years, which are associated with the deviation of demand from supply; their length is determined by the time required for the massive renewal of fixed assets;
Small cycles with a period of 3-4 years, which are associated with fluctuations in product inventories.
It should be noted that all these types of cycles are superimposed on one another.
We will consider and characterize the main phases of the middle (industrial) cycle.
Phases of the middle (industrial) cycle
A cycle is a period of time during which there is a sequential change of the following phases: recession, depression, recovery and recovery.
Decline - starts from the peak of the previous cycle and continues to the lowest point of the cycle.
This phase is characterized by a sharp decline in business activity. Firms suddenly discover that they have overestimated the projected demand for their products and are unable to sell the goods produced at the same prices.
In order to sell off the resulting surplus, they are forced to lower prices for their products. Firms incur huge losses, they are unable to repay the borrowed loans and pay interest on them. A wave of bankruptcies begins and spreads throughout the economy. Unable to sell off already manufactured products, enterprises reduce their production. Of course, there is no longer any talk of expanding production, and, as a result, enterprises reduce the volume of investments in production, and the demand for equipment is falling.
The decline in production causes a wave of layoffs of workers, and unemployment rises. Population incomes are falling. Due to a decrease in income, as well as because of the desire of people to postpone some of these incomes "for a rainy day", household spending on consumer goods is falling, which means that the demand for consumer goods and services decreases.
The standard of living of the employed is declining. Panic and general pessimism reign in society. It should be especially noted that during this period interest rates on loans are growing: firms are trying to borrow money in order to avoid bankruptcy, there is a general pursuit of money, and the demand for free funds is growing. In addition, banks themselves seek to set higher rates, since the risk of non-repayment of loans issued by them is great.
Perhaps the most severe was the recession of 1929-1933, which went down in history as the "Great Depression", when the United States, according to economists' estimates, was thrown back 146 years, the national income fell by almost 2 times, per capita income fell by 30%, the unemployment rate reached 25%.
Depression: After reaching a low point, the economy stays in this state for a while.
The decline in production has practically stopped, and production and employment are at their lowest. Businesses avoid long-term investments, and the population does not make expensive purchases. Everyone is in a state of uncertainty, fearful of starting new business.
However, commodity stocks are gradually dissolving, the fall in consumer and investment demand stops, and prices for goods stabilize. Since the demand for money has now fallen sharply, interest rates on loans are declining to the lowest level.
And the business world is slowly starting to come to life: enterprises that have managed to survive the crisis are beginning to update their equipment by purchasing more modern equipment (since loans are now more affordable), they are introducing new technologies, and taking measures to improve production efficiency. Their goal is to ensure cost savings in order to make a profit in an environment of low product prices.
As a rule, without the participation of the state, the exit from the state of depression proceeds very slowly, but, having reached the bottom, production gradually begins to pick up speed and revival comes to replace the depression.
Revitalization - begins at the low point of the depression and ends when the economy reaches a pre-crisis peak.
The intensification of economic activity that has begun creates an expectation of an increase in the level of current income. This is manifested in a gradual increase in consumer demand. In response, production begins to increase, primarily due to the involvement of free capacities, employment grows and, as a result, incomes (profits, wages) grow.
Incomes are growing both nominal and real. People have the opportunity to purchase the goods they need. The result is further growth demand. At some point, it becomes clear that it is no longer possible to expand production without large-scale investments and their rapid growth begins. Enterprises have all the conditions for investment growth: there is an opportunity to expand production through relatively inexpensive loans and there is a motive - an increase in profits. Investment demand is growing and at the same time the production of practically all goods and services is expanding.
Expansion of production contributes to the creation of new jobs, an increase in demand for labor and, accordingly, an increase in employment. The well-being of people is growing, in society pessimistic moods are replaced by optimistic ones.
Economists note that at this stage, the growth in demand outstrips the growth in supply, and as a result, aggregate demand exceeds aggregate supply.
It should be noted that, since there is an increase in demand for all types of resources, including monetary resources, then simple interest rates begin.
Ascent: Coming after the recovery phase and continuing until its peak.
At this stage, "the trot goes into a gallop", there is an acceleration of economic development, which is manifested in the fact that new goods appear, new enterprises, investments grow, interest rates, prices, wages, and employment rise. Part of the demand begins to be speculative in nature: many have a desire to purchase goods in order to then resell them profitably, since prices for most of the goods rise. Large loans are taken for these purchases, that is, demand is partially supported by loans. When approaching the peak - the highest point of growth, the economy overheats. Loans are becoming more and more expensive, inventories are growing, and inevitably there comes a time when the whole system collapses like a house of cards, and again the economy finds itself in a state of deep crisis.
In the overwhelming majority of cases, each subsequent "peak" turns out to be higher in level than the previous one, which reflects the overall growth of the economy, its progressive development
Economists associate a sharp transition from an upswing to a recession with the fact that the growth of production is purposefully and systematically organized by producers, and demand is spontaneously formed in the market by buyers and depends on many random factors. And since demand can easily fall, this is exactly what happens during a recession: aggregate supply turns out to be greater than aggregate demand.
Of course, the crisis for the country's economy is a big test, it carries many negative aspects, but let us note the positive side of the economic crisis, which is the recovery of the economy. By the principle of natural selection, inefficient enterprises with a high level of costs go bankrupt during a downturn. The “surviving” enterprises introduce innovations that lead to increased efficiency and, in the future, to production growth. Old technologies are being replaced by new ones.
Currently, recessions in developed market economies have become less deep (up to 2% of GDP) and shorter (6-12 months). There is a clear violation of the classic cycle, the phases of the cycle have become more blurred, some phases completely drop out. Now, in the recession phase, there is no decline in prices; on the contrary, prices are rising. This phenomenon is called stagflation.
Stagflation is a simultaneous rise in inflation and a decline in production, accompanied by an increase in unemployment.
The emergence of stagflation is explained by the fact that the state has a monopoly on the issue of money. The importance of production monopolies, which prefer not to cut prices, but to cut production, has grown in importance; trade unions have appeared on the labor market, which do not allow a reduction in wages.
Reasons for economic cycles
There is no consensus among economists about the reasons for this complex phenomenon. Each economics school explains the nature of economic cycles in its own way.
Some economists argue that cycles are related to external factors. They name such factors as major discoveries in science and advances in technology, natural disasters (droughts, floods), wars, revolutions and other political upheavals, population fluctuations, etc. There is a theory that explains the cycles by a change in the ratio of pessimistic and optimistic moods in society ... There is even a theory that links the dynamics of the business cycle to changes in the configuration of sunspots.
Other economists believe that the explanation of the cycle lies in the internal processes taking place in the economy, and external factors are secondary. They believe that crises occur due to the fact that there are contradictions between the rigid organization of production and an unregulated market, that the spontaneous development of the market leads to market imbalances, and this in turn leads to the emergence of sectoral imbalances. That the crisis can also cause disruptions in the monetary sphere and errors in government budgetary policy.
However, almost all economists agree that:
Fluctuations in the level of economic activity are a consequence of the deviation of the economy from equilibrium;
Investments in real capital, primarily in machinery and equipment, are critical in the movement of the cycle;
The state can actively influence the mechanism of the cycle, using the methods of budgetary policy, i.e. regulating their income and expenses, as well as methods of monetary policy, i.e. adjusting interest rates and volume money supply.
To regulate the economy, the state conducts a targeted economic
5.2 Government policy to stabilize the economy
The main goal of the state's socio-economic policy is to ensure economic and social stability and contribute to the country's economic development. This overall goal can be concretized into the following goals:
- economic growth (allows for a higher standard of living);
- full employment (provides the population with income and relieves society from losses associated with the underutilization of labor resources);
- economic efficiency (use of resources with maximum return to society);
- economic freedom (ensuring, within the framework of the law, freedom of choice, freedom of entrepreneurship, etc.);
- the growth of the well-being of citizens (all citizens should be given the opportunity to lead a life worthy of a person);
- price stability;
- securing strong positions in relations with other countries.
The policy to stabilize economic development includes three components: a countercyclical policy, a policy to achieve and maintain full employment, and an anti-inflationary policy. Moreover, each of these directions of the stabilization policy cannot be carried out in isolation from its other directions.
To achieve these goals, the state uses the following methods of influencing the economy.
1) Administrative methods are based on the strength of state power and include measures of prohibition, permission and coercion. The fact is that the state has special rights that other actors in the economy do not have, first of all, this is the right of coercion. The state has the right, for example, to force you to pay taxes, and if you refuse, then it can deprive you of your property and even put you in jail. To monitor compliance with the rules established by the state, it creates special bodies, for example, the tax police. Administrative methods are methods of direct influence on economic agents.
Instability is becoming one of the defining factors in the modern world. The traditional markets for raw materials are changing, the amplitude of fluctuations in the currency systems reaches dangerous limits, and the losses from unemployment are becoming more and more significant.
Paul Samuelson
Cyclical development of the economy. Types of cycles. Cycle phases and dynamics economic indicators... Structural crises.
The purchasing power of money. The essence of inflation. Causes and main forms of inflation: moderate, galloping and hyperinflation; open and suppressed inflation. The concept of inflationary expectations. Demand inflation and cost inflation. Stagflation. Measuring the rate of inflation using a price index.
Economic and social consequences inflation. Adaptive and anti-inflationary policies.
Unemployment, its essence and causes. The main types of unemployment: frictional, structural, cyclical, their distinctive features and ways to partially overcome.
Full employment problem. The concept of the "natural rate" of unemployment. Unemployment rate and excess unemployment. Employment indicators. Productive employment.
Socio-economic losses from unemployment. Essence of Okun's Law. Directions and types of state regulation of the labor market.
The relationship between unemployment and inflation. The essence of the Phillips curve and the limits of its practical application.
You already know from the previous topic that economic growth is not the same as economic development. On the way of the growth of the national product, there are periods of sharp acceleration, accompanied by an increase in the price level and inflation, and periods of decline in production and employment, when economic growth slows down or even stops. These violations macroeconomic equilibrium viewed by economic science as a manifestation instability of the economy.
As practice shows, this uneven development of the market economy is characterized by rhythm: the acceleration and deceleration of economic growth alternate at a certain rhythm, forming economic cycle.
An economic cycle is a fluctuation in macroeconomics, consisting of an alternation of ups and downs in general business activity.
Addiction market economy to the repetition of economic phenomena was noticed by economists in the first half of the XIX century. They drew attention to the frequency of such phenomena as an increase or decrease in demand, an increase in production or its stagnation.
A certain sequence in the alternation of these phenomena was also revealed. The problem was of such great importance for economic development that practically none of the leading economists bypassed it. Recognizing the objective nature of the economic cycle, economists propose to study this phenomenon through the analysis of internal and external factors that affect the nature and duration of the cycle.
TO external factors Cycle researchers attribute such non-economic phenomena as fluctuations in solar activity, wars, revolutions, earthquakes, population migration. Cycle can be influenced by discoveries large deposits minerals, scientific and technical discoveries and innovations.
Major innovations such as railways, aviation, automobiles, computers have a large impact on consumer spending and investment. But such global innovations appear very irregularly and therefore cause economic instability. Some economists see the reason for fluctuations in the economy in the ratio of optimism and pessimism of participants in business life, that is, they highlight the psychological factors of the cyclical nature of the economy.
Theories explaining the economic cycle by the presence of external factors are usually called external, Unlike internal theories that consider cyclicality as a product of factors inherent in the economy itself. The main internal, inherent in the economic system itself, the cause of fluctuations in business activity, most economists call the dynamics of the ratio of aggregate demand and aggregate supply.
If a boom began in certain industries, which caused a sharp increase in demand for machinery and equipment, then it is quite natural to assume that the phenomenon will repeat itself in 10-15 years, when these machinery and equipment are completely worn out. In addition to the physical wear and tear of fixed capital, there are other reasons giving rise to the economic cycle. Among them are:
- - personal consumption, the decrease or increase of which affects the volumes of production and employment;
- - investment, that is, investment in the expansion of production, its modernization;
- - economic policy the state, expressed in direct or indirect impact on production, demand and consumption.
Modern economic theory assigns external factors the role of a generator of pulses of long waves, while internal causes are considered as converters of these pulses into oscillations in large cycles.
The general "pulse" of the economic cycle covers all aspects of economic development: the level of production, employment, income and prices, stock prices, sales volumes, construction of various facilities, etc. Since economic processes affect such non-economic phenomena as fertility, human health, marriages, as well as political events, it can be concluded that the economic cycle has penetrated all spheres of the life of the nation.
No cycle is similar to another in terms of the intensity and duration of fluctuations in the main macroeconomic indicators: GNP, employment and price level. But there are a number of characteristics that are inherent to one degree or another in any cycle. First of all, this is the passage of the economy during a cycle of four successive phases - crisis, depression, revival and recovery.
A crisis (recession, recession) is a phase of the economic cycle, during which real GNP decreases for two or more quarters.
Let's try to present the general picture of the crisis as a deep shock of the entire economic system from top to bottom.
The market, which has absorbed all produced goods without hindrance, at some time becomes overflowing, goods continue to flow, and demand gradually decreases and finally ceases altogether. Anxiety is spreading throughout the market. Demand has disappeared and inventories are huge, and many factories continue to operate at full capacity due to inertia. A precipitous fall in prices follows.
Truly heroic efforts are being made to save the day, but all means are futile. Liquidation of enterprises and crashes begin. First of all, banks die and credit institutions... The confidence of market participants in each other is undermined.
Everyone demands cash payment. Bills, which were not in doubt yesterday, are becoming simple paper. The lending rate is going up. Crowds of the unemployed appear on the streets. Starvation, suicide begins. The crises of the last century followed such a dramatic scenario.
The most ambitious attempt at overcoming the crisis through government ball events was made by the United States during the Great Depression. You know its essence from previous lectures. At the same time, despite certain results, industrial crises continued.
In a crisis, only enterprises with great financial capabilities continue to make profits by cutting costs. Medium and small enterprises do not have such an opportunity and suffer bankruptcy. Their ruin has its advantages for the industry as a whole, as it increases the overall level of labor productivity. This lowers the cost of goods and, as a result, weakening the fall in the rate of profit. It turns out that the crisis reveals not only a limit, but also an impulse in the development of the economy, gives rise to predominantly intensive development, performing a stimulating function.
But the transition to the expansion of production cannot happen overnight. Therefore, the crisis is replaced by phase of depression.
Depression is the phase of the cycle that occurs after a crisis, when the recession lasts significantly longer than two quarters.
The production level remains stable, but very low in relation to the beginning of the crisis. The unemployment rate remains high. But the fall in prices stops, commodity stocks stabilize.
Revitalization is the phase of the economic cycle during which real GNP increases and employment rises.
The revival is accompanied by a slight increase in the level of production, some reduction in unemployment. Prices gradually rise, and the lending rate begins to rise. The demand for new industrial equipment is growing on the product market. The outlined revival covers an increasing number of industries. At the end of the revitalization phase, the stimuli for renewal exhaust themselves, and extensive development begins again in the ascent phase.
Rise is the highest phase of the cycle when the production level exceeds that achieved in the previous cycle.
The rise often takes on a feverish character. Prices are rising feverishly. Unemployment is declining to a minimum, while wages rise substantially. The demand for the products of the industries that determine the trends in scientific and technological progress is sharply increasing, the demand for raw materials is increasing, and prices for it are growing. The economy is heading for the next round.
A new cycle begins, but with different characteristics, duration and depth. Even from this largely superficial picture, it is clear that each of the phases of the cycle has the ability to reproduce the next phase. As a result, the economic cycle as a whole acquires the property of reproducing a new cycle.
What is the cycle time? Let us turn to the experience of the highly developed economy of the United States. The economic system of this country between 1854 and 1986. went through 30 business cycles of varying intensity and duration. From the point of view of duration, the following types of cycles are distinguished.
Large (classical) economic cycles cover a time period of 7-11 years. Within a large cycle, two or three small, or "commodity" cycles with a duration of 3-5 years are usually distinguished, which are generated by the dynamics of the size of inventories at enterprises. Two large cycles roughly characterize the cycles associated with fluctuations in investment activity in the construction industry. These are construction cycles. If we consider economic growth from a historical point of view, then from the beginning of the XIX century. you can find very long cycles lasting 50-60 years, the existence of which was revealed in the 20s of the XX century. Russian economist N.D. Kondratyev.
Having processed the data on the dynamics of the most important economic indicators of England, Germany, France and the United States using special mathematical methods, Kondratyev discovered interesting patterns. Countries with market economies in their development regularly go through stages of boom and bust, which are repeated after 50-60 years. These cycles are still called "Kondratyev waves". They are associated with a radical renewal of equipment, which has a particularly long service life (railways, bridges, canals, dams).
The fate of Nikolai Kondratyev is very tragic. His views contradicted the theory of the "party approach to economic planning." In 1930 he was arrested on false charges and sentenced to 8 years. At the end of 1936, Kondratyev fell seriously ill and began to go blind. However, in 1938 he was re-convicted in the same far-fetched case and shot. He was only 46 years old.
The modern picture of the market economy began to diverge from the traditional scheme. So, for example, the industrial cyclical crisis of the mid-70s. was exacerbated by the oil crisis, but only in oil-consuming countries. The same countries, which had their own sources of energy resources, not only did not suffer as a result of the two crises, but even tended to some development.
On the other hand, the expected rapid industrial development in the recovery phase in many countries does not occur as a result of a sharp exacerbation of the situation caused by the environmental crisis. Oil, food, energy, raw material crises have been complemented in recent decades by crises of the monetary system. These are the so-called structural crises.
Structural crises are generated by imbalances between the development of individual spheres and industries, are, as a rule, protracted and do not always coincide with the onset of cyclical crises
Thus, the reason for the cyclical nature of economic development lies in the conflict between the conditions of production and the conditions of sale, in the contradiction between the production, which is striving for expansion, and the growth of effective demand that does not keep pace with it. The material basis for the periodicity of crises is the renewal of fixed capital.
There is another approach to explaining the causes of crises in a market economy. According to this approach, the abstract possibility of crises is associated with the function of money as a medium of circulation: the discrepancy between buying and selling in place and time can create preconditions for breaking many links in the chain of sales and purchases; and as a means of payment: any entrepreneur cannot have a guarantee that by the time of payment the buyer of his products will be solvent, and then this rupture of obligations will cause a chain reaction.
Since there are different views on the causes of cyclical fluctuations, there are also different approaches to the problem of their regulation. But there is also a general understanding of the fact that, firstly, the state is able to smooth out cyclical fluctuations, and secondly, the state must do this in order to achieve economic stability.
There is also a general understanding of what should be, in general, the line of conduct of the state, aimed at overcoming cyclical fluctuations. This is already known to you from 3.1. "The policy of expansion and the policy of containment."
In the recession phase all government measures should be aimed at stimulating business activity. In the field of tax policy, this means lowering tax rates, providing tax incentives for new investments. In the field of monetary policy, this is a decrease in interest rates for loans issued, an increase in banks' credit resources, i.e. revitalizing economic life with additional loans.
During the rise In order to prevent overheating of the economy and related painful phenomena, the state pursues a containment policy, which includes opposite measures in the field of fiscal and monetary policy.
That is, in order to smooth out cyclical fluctuations, the state should implement a policy of counteraction: measures should go in the direction opposite to the current fluctuations in the economic environment.
Of course, these are just general guidelines for countercyclical policies. We will talk in more detail about the methods of state regulation of the economy in the next paragraph.
An integral part of the modern economic cycle has become inflation. This is another manifestation of macroeconomic instability.
Inflation (from lat. inflatino- bloating) is a process of increasing the general level of prices for goods and services, at which purchasing power falls monetary unit.
The purchasing power of money is this is the amount of goods and services that can be bought at a given price level for a given monetary unit.
Initially, the widespread transition to paper money was considered the cause of inflation, because it can be printed in any quantity. There was a certain reason in this statement, and when frantic inflation broke out in Germany after the First World War (prices increased by a trillion times in three years!), The blame for this lay largely on The central bank countries.
However, even after the emission of money was taken under the strict control of parliaments, inflation did not disappear. And then economics undertook deeper research and found that inflation is diverse, it has several reasons, many forms of manifestation, and, accordingly, there should be different ways of dealing with it.
Note that not all price increases are indicative of inflation. Prices may rise due to improved product quality, worsening conditions for the extraction of fuel and raw materials, changes in social needs. But this will not be an inflationary rise in prices, but to a certain extent a logical, justified rise in prices for certain goods.
For example, the transition to the production of new modifications of cars with an economical diesel engine that meets international standards will obviously lead to an increase in the selling price: more advanced and high-quality products are expensive and are more valued.
But if there is a systematic rise in prices for mass-produced cars of the same model without any improvement, and often with a deterioration in performance, then it has a pronounced inflationary character.
P. Heine: “We should not forget: not only the prices of goods change, but also the prices of their value, ie. money. Inflation is not an increase in the size of objects, but a decrease in the length of the ruler that we use. "
Inflation is an extremely complex, contradictory, insufficiently studied process.
First of all, inflation is distinguished by its rate as 1) moderate or creeping (usually no more than 10% per year); 2) galloping
(from 20 to 200% per year); 3) hyperinflation(more than 50% per month for three quarters).
Economic theory considers moderate inflation as a boon for economic development, and the state as a subject of effective economic policy. It allows prices to be adjusted to meet changing demand conditions.
Galloping inflation is already a difficult to manage process, a serious strain for the economy, although most transactions and contracts take into account such a rate of price growth.
Hyperinflation poses the greatest danger, causes enormous damage to the population, even to the wealthy strata of society, trade turns into barter, and the national economy is destroyed.
Guinness Book of Records: The World's Strongest Inflation Has Occurred
in Hungary in June 1946, when the 1931 gold penge cost
130 trillion paper penge. On June 3, 1946, Aegimbillion Billion banknotes were issued.
According to the forms of manifestation, they are distinguished open and suppressed inflation. Open inflation manifests itself in rising prices. Suppressed inflation is inherent in an economy with administrative control over prices and incomes: externally, prices are stable, and the excess of money is transformed into a shortage of goods, there are constant angry queues and a black market, which to some extent reflects real prices.
Inflation can be balanced, when price increases are moderate and simultaneous for most goods and services, and unbalanced when prices rise at different rates for different product groups.
By the nature of expectations, economists distinguish expected inflation and unexpected. Expected inflation can be predicted: take into account its rate in collective agreements, prices of factors of production, the government can change taxes and transfers in a timely manner, then the impact of inflation on the economy as a whole will be insignificant.
Unexpected inflation is another matter. It is characterized by a sudden jump in prices, which has an extremely negative effect on money circulation and the tax system.
In such a situation, if inflationary expectations already existed in the economy, the population sharply increases spending on purchasing goods, which in itself creates difficulties in the economy, distorts the real picture of needs in society and leads to a breakdown in economic ties. Thus, a sudden jump in prices could provoke further inflationary expectations and form inflationary psychology- a thing, albeit subjective, but quite real and extremely dangerous, since it creates a vicious circle of self-sustaining inflation.
From the point of view of the cause, there are demand inflation and cost inflation.
Demand inflation occurs when aggregate demand is greater than aggregate supply (too much money “chases” less goods, since the expenditures of the state, population and firms grow faster than production).
Demand inflation reasons:
- 1) expansion of state orders (military and social);
- 2) an increase in demand for means of production in conditions of full utilization of production capacities;
- 3) growth purchasing power population (wages) as a result of concerted action by trade unions.
Cost inflation occurs when prices rise due to increased production costs.
Causes of cost inflation:
- 1) oligopolistic pricing practice;
- 2) the financial policy of the state;
- 3) rising prices for raw materials;
- 4) the actions of trade unions, demanding higher wages.
The danger of cost inflation to society is associated with the so-called inflationary spiral: a general increase in prices leads to a decrease in real incomes of the population, hence the demand for higher wages and public policy indexation of income. This, in turn, increases costs, which leads to a new jump in prices.
In practice, it is not easy to distinguish one type of inflation from another, they closely interact, so wage growth, for example, can look like both demand inflation and cost inflation.
Since the second half of the XX century, prices in all developed countries have been growing constantly, and since the 70s. - even during periods of economic downturns, when production underutilization reached significant levels. This phenomenon, as you remember, was named stagflation.
Stagflation - inflation combined with stagnation (stagnation, depression) of production and high unemployment.
The quantitative assessment of inflationary processes is carried out using inflation indicators. The inflation rate is measured using price index.
The price index is a relative indicator that characterizes the ratio of prices over time. To calculate the price index, prices of the base year are usually taken as 100, and the prices of subsequent years are recalculated in relation to the base year.
Inflation rate for the current year is determined as follows. The price index of the previous year is subtracted from the price index of the current year and divided by the price index of the previous year, and then multiplied by 100%.
In a market economy, inflation has become almost an integral part of economic life. This allows us to talk not just about the consequences, but about some specific functions of inflation.
We have already considered the point of view according to which insignificant inflation (say, an annual increase in prices by 3-4%), accompanied by a corresponding increase in the money supply, can stimulate production. But whatever the supposedly "positive" functions of inflation, getting out of control and even remaining relatively weak, regulated, it has a whole range of purely negative, negative influences on the course of economic development. Let us briefly mention only a few of them.
First, inflation affects efficiency at the microeconomic level. The higher the inflation rate, the more the relative prices are violated, the weaker their relationship with costs. Remember how livestock was fed with bread in Russia until the end of 1993, since prices for it were significantly lower than costs, which resulted in an ineffective distribution of society's limited resources.
Second, inflation makes it difficult to conduct macroeconomic policies due to imbalances between sectors of the economy, falling production and reduced incentives to work.
Thirdly, inflation causes a flight from money to goods, turning this process into an avalanche, exacerbates the shortage of goods, and revives barter.
Fourth, with high inflation, the owners of the factors of production incur huge losses, because in the short term the prices of the factors of production are fixed, and the prices of final goods and services grow very quickly. As a result, there is a sharp decline in the real income of the owners of the factors of production.
Fifth, inflation negatively affects the fiscal system due to the Tanzi-Oliver effect (Latin American economists who first paid attention to it). Its essence is that inflation depreciates tax revenues, which are accrued, for example, in the third quarter, and are paid in the fourth quarter of the year, when they real meaning has already fallen.
Sixth, inflation is damaging to accumulated wealth, especially in its most liquid forms. This applies to the savings of the population, and to banks and institutions that provide loans.
Seventh, the most important social consequence of inflation is the redistribution of national income, a decrease in the living standards of the population, since both nominal and real wages lag behind sharply rising prices even under the condition of income indexation.
Eighth, the internationalization of production facilitates the transfer of inflation from country to country, complicating international monetary and credit relations.
Speaking about the redistribution of income, it should be borne in mind that although the losses from inflation are borne by the entire society, this happens to an unequal extent. During inflation, it is beneficial to live in debt. Therefore, creditors lose much more than debtors. The government gets the biggest gains from inflation, because it is the largest debtor in the country, and inflation devalues debts.
Those who can dramatically increase their income also lose to a lesser extent. And pensioners, disabled citizens and public sector employees do not have such an opportunity, therefore they bear the main burden of inflation on their shoulders.
There is also an age moment here. Among those receiving loans, the absolute majority are those who are under 45 years old, so it turns out that through the use of loans, they actually redistribute in their favor the wealth that the older generation accumulated in the pre-inflationary period.
The negative social and economic impact of inflation is forcing governments different countries to pursue a certain economic policy in this area.
There are two possible approaches to managing the economy in the context of inflation: the first is to develop an adaptation policy, i.e. adjustment to inflation, the second - in an attempt to eliminate inflation through anti-inflationary measures.
Adaptation policy is based on the fact that all subjects of a market economy take inflation into account in their actions, primarily through taking into account losses from a decrease in the purchasing power of money.
Adaptation measures include: indexing the interest rate by the inflation premium; the introduction of inflationary wage adjustments in labor agreements; restructuring family budget towards the most inelastic goods and services, rapid materialization of money; increase in the share borrowed money regarding their own through the issue of shares, leasing, factoring.
Anti-inflationary policy proceeds from the fact that the modern market economy is inflationary in nature, since it is impossible to eliminate all the factors of inflation (budget deficit, monopolies, imbalances in the national economy, inflationary expectations, inflation spread through foreign economic channels, etc.) Therefore, the goal of anti-inflationary policy is to make inflation is moderate, controlled, to prevent its destructive scale.
For this, the following measures are applied:
- 1) reduction budget deficit by raising taxes and reducing government spending;
- 2) the establishment of strict limits on the annual growth of the money supply, which makes it possible to control the level of inflation;
- 3) changing the inflationary psychology of the population through stimulating production, liberalizing prices, easing administrative customs control, etc .;
- 4) reducing the inflationary impact on the economy of foreign capital flows in the form of short-term government loans abroad to finance the budget deficit;
- 5) gradualism- a policy aimed at slowly reducing inflation for a long time by managing aggregate demand and without prejudice to employment;
- 6) privatization of a part of state property in order to increase budget revenues.
The most painful consequences of a downturn in the economy (depression) include unemployment.
Unemployment is a surplus of labor caused by the excess of labor supply over demand for it.
Reasons for unemployment:
- 1) structural shifts in the economy, manifested in the fact that the introduction of new technologies leads to the release of labor (structural unemployment);
- 2) economic downturn, which forces employers to reduce the demand for all resources, including labor (cyclical unemployment);
- 3) the policy of the government and trade unions in the field of wages: an increase in the minimum wage increases production costs and thereby reduces the demand for labor;
- 4) seasonal changes in the level of production in certain sectors of the economy (seasonal unemployment);
- 5) changes in the demographic structure of the population, in particular the growth of the working-age population;
- 6) the existence in society of lumpen strata who do not have and do not seek work, at least in the legal economy (stagnant unemployment).
It should be clarified that only those who are looking for work or expecting to return to work are classified as unemployed. After all, “unemployed” and “unemployed” are not identical concepts. A person may not work for various reasons: some are studying and do not work yet, others are retired and no longer work, others simply do not want to work.
In the USA, for example, only those citizens who do not have a job, are immediately ready to work, have been actively looking for work for the last 4 weeks, and are waiting for the start of work (already invited) within 30 days are considered officially unemployed.
Depending on the reasons, the following types of unemployment are distinguished.
Frictional unemployment(from the English. Friction- friction, disagreement) is unemployment caused by constant and necessary changes in the allocation of society's resources between the types and spheres of production of goods and services.
It arises either due to the fact that employers do not have complete information about the availability of the categories of workers of interest to them, or workers do not know about the availability of suitable jobs. Frictional unemployment covers those who are in a position “between jobs” (voluntary or forced change of place of work, residence; temporary unemployment of women associated with the birth of a child; job search by those who have returned from military service, etc.).
A certain part of people is always in such a situation, therefore this type of unemployment exists constantly. It is believed that frictional unemployment is the payment of society for an efficient economy. Anything that improves information about jobs and the availability of workers, or shortens the time it takes to find a job, leads to a decrease in frictional unemployment.
Structural unemployment caused by changes in the structure of the national economy - the withering away of some professions and even entire industries, the emergence of new ones, the restructuring of the regional economy, changes in technology.
Structural unemployment differs from frictional structural unemployment precisely in that, with frictional unemployment, the employee retains sufficient qualifications to change industry or production. Those who actually lost their jobs due to structural changes are faced with the need for complete or significant retraining. Now Russia is faced with a restructuring that has no analogues in world history.
It is about eliminating millions of jobs that did not meet the country's needs. For the most part, those who have occupied these positions (especially millions of managers) have no chance of finding a job without a radical retraining.
American experts in the late 90s developed a forecast for the development of the labor market in the United States for the next 5-10 years and discovered the inevitability of serious changes in it. It turned out that the share of employed in industry will fall from 18 to 9.7%, 43% of employees will work in the field of informatics.
There will be a special demand for people with the following specialties: an accountant-auditor, a specialist in re-education of offenders, a nurse, a public relations specialist, a programmer, a therapist for occupational diseases, a technician for the maintenance of medical equipment. The state and needs of the labor market of the new century as a whole confirm this forecast.
Structural unemployment is caused by objective reasons, therefore it is inevitable and always exists in society, but it can be reduced by the creation of a network of retraining centers by the state and private firms.
Cyclical unemployment arises as a result of cyclical downturns in production, causing a decrease in the aggregate demand for all factors of production, including labor.
This is the most "unpleasant" type of unemployment - often massive and painful. Cyclicity economic growth is insurmountable, therefore it is not possible to eliminate this type of unemployment, however, anti-crisis measures can smooth out the economic recession and, accordingly, reduce the number of cyclical unemployed.
However, it suggests that full employment of the labor force does not mean a complete absence of unemployment.
In a dynamic economy, some part of the workers, for many reasons, is inevitable and always out of work. Therefore, the question arises: what number of unemployed can be considered acceptable if the labor market works efficiently and the economy does not experience a recession? No one will give an absolutely exact answer to this question, but economists still have a general understanding of what full employment is.
Full-time - the level of employment emerging in the country in the presence of only structural and frictional unemployment.
If the number of unemployed exceeds the average for many years in a given country levels of frictional and structural forms of unemployment, then this excess is most likely associated with the appearance of cyclical unemployment, i.e., with a recession in the economy. In the United States, for example, experts believe that full employment is achieved if 94-95% of able-bodied citizens have a job.
Thus, the concept of full employment is based on the idea of the existence of a natural rate of unemployment. - this is the state of the labor market, in which there is an approximate balance between the number of vacant jobs and the number of skilled workers looking for work.
If the actual unemployment rate in the country is higher than the natural rate, this means that we are faced with excessive unemployment- an undesirable and even dangerous social and political phenomenon.
Unemployment rate is the share (in percent) of the total economically active population of those people who are unemployed.
Full employment, natural unemployment rate, excess unemployment and unemployment rate are the main interrelated indicators that are used to characterize the state of employment.
Guinness Book of Records: Most low level unemployment was registered in Switzerland in December 1973 (population 6.6 million), the total number of unemployed was 81 people. In Europe in 2012, the lowest unemployment rate in Austria was 4.4%, and the highest - in Spain (25.8%).
Full employment is an empty idea if it means the employment of jobs where nothing useful is produced. The semantic goal of the idea of full employment is productive employment.
Productive employment- the organization of the use of labor in such a way that the employed produce goods and services necessary for the population at the lowest cost.
Unfortunately, in our country, over the past decades, we have managed to create millions of positions of unnecessary managers, hundreds of thousands of jobs for quasi-scientists, for reserve workers at large enterprises, especially in the branches of the military-industrial complex.
Despite the objective nature of unemployment, socio-economic the losses it generates are obvious:
First, production is underproduced, i.e. some part of GNP is lost.
Secondly, tax revenues are reduced: the employee receives income that is taxed.
Third, the living standards of those who have lost their jobs are declining, since unemployment benefits are lower than wages.
Fourth, the psychological state of the unemployed is deteriorating due to the loss of qualifications and self-esteem, moral decline begins.
Fifth, social and political tension in society is growing.
To determine the amount of GNP loss as a result of unemployment, the so-called Okun's law(was formulated American economist Arthur Oaken).
Okun's Law: an excess of the actual rate of unemployment of its natural level by 1% leads to a lag in the volume of the actual GNP in comparison with the potential GNP by 2.5%.
Assessing unemployment as a social economic phenomenon, it is impossible to say unequivocally whether this is good or bad. From the point of view of a person without a job, this can be a tragedy. It is no coincidence that Americans say: "Unemployment is 100%, if you are unemployed, you yourself." And from the point of view economic dynamics unemployment is an objective necessity.
Moreover, frictional unemployment is a means of more efficient allocation of society's labor resources, and structural unemployment, if, of course, the benefits from retraining of workers exceed the costs of it, brings a net benefit to society.
However, given the negative consequences that cyclical unemployment brings to society, and frictional and structural ones to people who find themselves out of work, employment needs targeted government regulation.
Areas of labor market regulation:
- 1) employment of the unemployed population and assistance in vocational training and retraining (labor exchange);
- 2) creation of a flexible labor market, legal support of labor relations;
- 3) social protection of people affected by unemployment (assistance system).
In the world experience, two main types of impact on the level of employment have been developed:
- 1) active type includes measures to create new jobs and to maintain and increase employment in enterprises;
- 2) passive type includes payments of all kinds of benefits to the unemployed.
In this way, market system arithmetic “full employment” and too high an unemployment rate are equally contraindicated. When the level of unemployment is equal to its natural rate, one speaks of effective full employment, which means a certain ratio between employment and unemployment.
Already in the 50s. many economists and politicians have suggested that the rate of unemployment can be reduced by being patient with higher inflation.
From the previous topic, you know that the fight against inflation inevitably leads to a decrease in investment in the economy, since it requires limiting the money supply by reducing government investment and raising the lending rate.
In turn, the reduction in investment leads to a decrease in the demand for labor and, accordingly, an increase in cyclical unemployment. Attempts to reduce the number of unemployed by increasing the number of jobs require increased investment by expanding government investment programs and policies of low interest rates. This inevitably raises the rate of inflation. The same result is obtained when trying to mitigate unemployment through a system of benefits to the unemployed.
This relationship was discovered by the Australian economist Arthur Phillips using the example of the English economy. This phenomenon, Phillips found statistically, has existed in the English economy for nearly 100 years.
Phillips curve
Segment of the Phillips curve to the left of the point M characterizes the inflation of demand, which can arise as a result of government attempts to establish an artificially high level of employment. Segment to the right of the point M reflects the fall in prices during the crisis.
During the period of stagflation, there is not a movement along the Phillips curve, but a series of shifts of the curve itself to the right and upward, which indicates the growth of both inflation and unemployment at the same time.
Un- natural level of unemployment;
Рп - the rate of price growth at a natural level of unemployment.
Until the mid-70s. many economists still believed that A. Phillips' hypothesis continues to work. However, the real Phillips curve, drawn on the basis of the real relationship between inflation and unemployment in the United States over 25 years (1961 - 1986), turned out to be a twisted broken line.
The point is that inflation is growing much more steadily than it is falling. A rise in aggregate demand almost always leads to faster inflation and lower unemployment. But a drop in aggregate demand does not always give symmetrical opposite results. Even, most likely, the economy will not give these results.
Therefore, the relationship between inflation and unemployment is clearly traced only in the short term, and it was precisely the opportunity to choose a relatively long-term fiscal and monetary policy that economists hoped for, having received the discovery of A. Phillips in 1958.
In the short run, the steeper the Phillips curve, the more significant the reduction in the inflation rate due to the more modest decline in employment. The quantitative estimates are as follows: to reduce inflation by 1%, unemployment during the year must be 2% higher than its natural level. According to Okun's Law, this means a decrease in real GNP by 5% of potential.
The problem of the need to pay with unemployment to reduce inflation is being resolved ambiguously. This is a dilemma. Some economists argue that quantitatively such a fee is not large, while others speak of the moral and psychological inadmissibility of even a slight increase in unemployment. In any case, no one has proven that dismissing a person is more profitable for the economy than providing him with work and ultimately getting more product.
D.Kennedy "We believe that if people have the talent to invent machines that push people into the ranks of the unemployed, then people have enough talent to find new jobs for the unemployed."
CONTROL QUESTIONS
- 1. Give the definition of a cycle.
- 2. Name the external and internal causes of the cycle.
- 3. Describe how the phases of the cycle proceed. Why does each phase of the cycle contain the possibility of getting out of it?
- 4. Describe the different types of cycles according to their duration.
- 5. What are the main directions of countercyclical policy?
- 6. What is meant by the purchasing power of money?
- 7. Explain the essence of inflation and name its main types.
- 8. What are the signs and negative effects of suppressed inflation?
- 9. What is called demand inflation and cost inflation?
- 10. What indicators can be used to measure the rate of inflation?
- 11. What are the main economic and social consequences of inflation.
- 12. Name the main measures of adaptation and anti-inflationary policy.
- 13. Give a definition of unemployment and name the reasons giving rise to this phenomenon.
- 14. What are the main types of unemployment.
- 15. How do they differ from the point of view of the cause and methods of partial overcoming?
- 16. What does economics call full-time employment?
- 17. Why is the corresponding level of unemployment called natural?
- 18. What are the main indicators of employment.
- 19. What are the economic and social consequences of unemployment?
- 20. Formulate Okun's Law.
- 21. What are the main directions and types of state regulation of the labor market?
- 22. How is unemployment and inflation interconnected?
- 23. What is the essence of the Phillips curve? What are the limits of its practical application?
OBJECTIVES AND EXERCISES
- 1. Suppose the inflation rate was 0 and the real interest rate was 5%. What size of the nominal interest rate can guarantee the same real interest rate subject to an increase in inflation to 15%?
- 2. The inflation rate is 100% per year. What will be the consequences of inflation for the following individuals:
- a) a lender who provided a loan for a period of one year at 50% per annum?
- b) a borrower who took out a loan for a period of 1 year at 50% per annum?
- c) a person with a fixed income?
- d) the tenant, if the rent has increased by 70% over the year?
- 3. If prices rise by 15% per month, how much will they increase over the course of the year?
- 4. Try to determine the status in the workforce of the following people:
- a) a qualified mechanic who cannot find a job that matches his level and expects a general improvement in economic affairs in order to find a job again;
- b) full-time student;
- c) a temporarily laid off worker of a bearing plant (due to the lack of demand for certain types of bearings) and awaiting return;
- d) a woman who has left work and is expecting a child;
- e) a woman who has left work on maternity leave;
- f) an engineer who was dismissed due to the liquidation of the office, working
a janitor in housing and communal services;
- g) an engineer who was dismissed due to the liquidation of an office and did not find work.
- 5. If the official unemployment rate is 10% and the number of people employed is 90 million, how many are unemployed?
- 6. Below are conditional data on the dynamics of unemployment and price index:
Unemployment rate,% |
|||||
Price index |
Draw a graph representing the Phillips curve.
- 7. In 1994, the employed population in Russia was 68.5 million, and the economically active population was 73.96 million. What was the number of unemployed, and what was their share in the economically active population?
- 8. Using Okun's Law, calculate the absolute loss of production associated with unemployment:
Actual unemployment rate = 9.5%.
Natural unemployment rate = 6%.
Nominal GNP = 3,300 billion rubles.
9. Establish a correspondence between the phases of the cycle and their content:
10. Establish a correspondence between the forms of unemployment and their content:
SEMINAR TASKS
- 1. List your own portfolio of assets. What part of it do you store in the form Mr Do you have any assets in the form M 2, like savings deposits? Do you have securities or real estate? Does the portion of your asset portfolio stored in the form change over time Mr If so, what are the reasons for these changes? Does your personal demand for money have a stable relationship with your income and current interest rates? Discuss these issues.
- 2. Try to find reasons why government price and wage controls may be ineffective in suppressing inflation.
- 3. During the New Year's festivities in all Christian countries, the population's demand for cash increases. How should the Central Bank react to this if it wants to maintain the money supply as a constant? What will happen to the monetary base and the money multiplier?
- 4. You already know the views of Keynesians and monetarists on how to maintain macroeconomic stability. Compare their advice on regulation money circulation and curbing inflation. Record the results of the comparative analysis in the form of a table.
- 5. Despite the fact that money is more convenient for making transactions than barter, the latter has not disappeared from the modern economic system. Give an example of barter from your personal experience and explain why barter was used in this case.
- 6. What rates of inflation do you expect this year? To what extent are your expectations influenced by the experience of the previous year? Have your expectations for future inflation been influenced by economic forecasts or policy reviews?
TESTS
- 1. When the economy goes through a recovery phase:
- a) inflation starts to grow;
- b) real GNP does not change;
- c) frictional unemployment disappears;
- d) cyclical unemployment is growing.
- 2. Expected inflation is harmful:
- a) holders of money;
- b) people with fixed income;
- c) restaurant owners;
- d) all of the above.
- 3. External signs of inflation are as follows:
- a) the price of labor rises, the supply of goods decreases;
- b) the prices of goods rise, real wages fall;
- c) prices for goods are falling;
- d) real incomes of the population are growing.
- 4. The inflation rate indicator is:
- a) foreign trade price index;
- b) consumer price index;
- c) nominal exchange rate;
- d) purchasing power parity of currencies.
- 5. Economists believe that cyclical unemployment:
- a) a temporary phenomenon;
- b) is capable of self-regulation;
- c) is not a serious problem;
- d) occurs during recessions.
- 6. Full employment is associated with:
- a) complete absence of the unemployed;
- b) hyperinflation;
- c) the concept of the natural rate of unemployment;
- d) cyclical unemployment.
- 7. Stagflation refers to a combination of:
- a) inflation and unemployment;
- b) growth of aggregate production and inflation;
- c) rapid economic growth and unemployment;
- d) rapid economic growth and inflation.
- 8. Cyclical unemployment is associated with:
- a) with a decrease in the level of economic activity;
- b) with an increase in labor productivity;
- c) with a recovery phase in the economic cycle;
- d) with the division of labor.
- 9. Over time, the natural rate of unemployment:
- a) should decrease;
- b) must grow;
- c) may change;
- d) may decrease, but cannot increase.
- 10. When the inflation rate is below the expected rate:
- a) unemployment is changing;
- b) unemployment should rise;
- c) unemployment should decrease;
- d) unemployment is constant.
- 11. With full employment, but high inflation, which policies are most likely to reduce its rate:
- a) increase government spending;
- b) reduction of government spending;
- c) tax cuts;
- d) increase in taxes.
BLITZ SURVEY
- 1. The cyclical nature of the economy is the continuous fluctuations in the market environment.
- 2. Periods of increased economic activity are characterized by intensive development.
- 3. The economic cycle includes four phases.
- 4. Investment fluctuations do not affect the economic crisis.
- 5. Government regulation can prevent an economic crisis.
- 6. Structural crises are short-lived.
- 7. Inflation is usually not related to the money supply.
- 8. Inflation is impossible in the absence of money.
- 9. Even with 1000% per annum on bank deposits the real interest rate can be negative.
- 10. Inflation is in any case tantamount to a decline in real incomes.
- 11. A 10% drop in prices with constant income means a 10% increase in real income.
- 12. The population quickly rebuilds its behavior in the course of inflation.
- 13. The whole society suffers from inflation in equal measure.
- 14. Income indexing is a very effective way to combat inflation.
- 15. Full employment means no unemployment at all.
- 16. The simultaneous existence of inflation and unemployment is called depression.
- 17. Frictional unemployment is viewed by economists as a completely unacceptable phenomenon.
- 18. The Phillips curve describes the positive relationship between inflation and unemployment.
- 19. When the economy goes through the recovery phase, inflation starts to rise.
- 20. Excessive unemployment is a situation when the official rate of unemployment is higher than the natural one.
- 21. The cause of structural unemployment is the decline in general economic activity.
- 22. An active type of employment impact is the payment of unemployment benefits.
BASIC CONCEPTS
Adaptation policy
Anti-inflationary policy
Anti-cyclical politics
Unemployment
Hyperinflation
Gradualism
Depression
Natural unemployment rate
Okun's law
Long-term unemployment
Excessive unemployment
Inflationary Psychology
Inflation
Cost inflation
Demand inflation
Phillips curve
A crisis
Revitalization
Official unemployment rate Suppressed inflation Rise
The purchasing power of the currency
Full-time
Productive employment
Seasonal unemployment
Stagflation
Structural unemployment Structural crises Inflation rate Frictional unemployment Cyclical unemployment Economic cycle
LITERATURE
- 1. Blaug M. Economic thought in retrospect. M .: Delo, 1995.
- 2. Bogdanov I. Ya. Economic security of Russia: theory and practice. Moscow: ISPI RAN, 2004.
- 3. Gershaft M. Remuneration, employment and social protection. // RER. № 3. 2002.
- 4. Grebnev L.S., Nureev R.M. Economy. Basics course: Textbook for universities. M .: VITA, 2005, Ch. fourteen.
- 5. Monetary policy in the context of inflation. // Money and credit. No. 6. 2005.
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ABSTRACT TOPICS
- 1. Features of inflation in Russia.
- 2. Methods of fighting inflation: Western experience.
- 3. The picture of Russian unemployment.
In a market economy, cyclical development is characterized by economic instability, which manifests itself in an increase in unemployment
Unemployment as an economic phenomenon arises as a result of self-regulation of the market economy, covers a certain part of the able-bodied population, temporarily does not have the opportunity to work. have earnings or earned income, are registered with the public employment service as job seekers. They are capable of work and are ready to work, but this service does not provide proper work, that is, such a workplace that corresponds to the professional training of a citizen, his seniority and experience, age and transport accessibility.
A citizen of Ukraine receives the status of an unemployed if an employment contract with him is terminated due to production changes and he has registered with the employment service within the next 10 days. For the first three months, the worker retains the average monthly wage so that he can look for a new job. If the worker did not find this period of proper work, and the services and employment also did not offer him anything, he receives the status of unemployed. In Ukraine, unemployment assistance is paid from the eleventh day after the registration of a citizen with the state employment service and, but not more than 12 months for the next three years, and for persons of pre-retirement age - 18 months. The amount of the allowance is guaranteed not less than 50% of the average wage at the previous place of work, but not lower than the minimum wage established by law. Citizens who are looking for work for the first time or after a break of more than one year receive an allowance of at least 75% of the minimum wage.
The following phenomena can be the reasons for unemployment:
1) the rate of population growth exceeds the rate of growth of production (T. Malthus, XVIII century);
2) the relative lag in the demand for labor from the rate of capital accumulation, the growth of the technical and organic construction of capital (K. Marx, XIX century);
3) in conditions of imperfect competition in the labor market, prices increase and demand for labor decreases (A. Pigou, 1923);
4) with an increase in income, people tend to increase their consumption, but not to the extent that income grows; the propensity of the population to consume decreases, and to save increases (J. Keynes, 1936);
5) the cyclical development of the economy at the stage of an economic crisis, a decline in production leads to a decrease in the aggregate demand for goods and services, to a decrease in the level of employment of the able-bodied population;
6) the development of scientific and technological progress predetermines structural changes in the economy, the emergence of new industries that require skilled workers and more time for vocational training and retraining of workers in old sectors of the national economy
7) seasonal changes in production levels reduce the demand for labor in agriculture, construction, etc .;
8) the growth of the working-age population, youth, increases the supply of labor;
9) the economic policy of the government to increase the minimum wage leads to an increase in production costs and a decrease in demand for workers
Experts classify unemployment for reasons of its existence:
1. Frictional unemployment is associated with constant movement, search or expectation of work by the population as a result of a change of place of residence, profession, because of the birth of a child and caring for him. Such unemployment is natural and should not be too long.
2 structural unemployment arises under the influence of scientific and technological progress and covers those workers whose labor cannot be used in new jobs and who require a certain amount of time for additional training and retraining.
3. Cyclical unemployment is due to a shortage of demand during the economic crisis, production decline and stagnation
4. SEASONAL unemployment applies to workers employed only at certain times of the year
5. Institutional unemployment arises as a consequence of the low efficiency of the work of the organizational structures of the labor market, public services employment (lack of information about vacant jobs, working conditions, etc.).
6. Hidden unemployment exists in conditions of incomplete use of the resources of the enterprise, while workers are forced to work a shorter working day, switch to temporary work or go on additional unpaid leave.
7. Voluntary unemployment is created by individuals who do not want to work and for a long time have lost this opportunity and connections with working life
8. Natural unemployment constantly occurs in conditions of economic equilibrium between the demand for labor and the supply of jobs. It is equal to the sum of the levels of frictional and structural unemployment. The level of natural unemployment should not exceed 4-5% of the employed population. The content and significance of natural unemployment in modern conditions developed countries were identified by representatives of the monetarist model of the labor market - American economists, laureates. Nobel Prize. M. Friedman (1976),. F. Hayek (1974) and 4) et al.
Unemployment as a factor in economic instability causes certain negative consequences that should be taken into account in order to develop an effective system of measures to regulate the development of this phenomenon. The state will take measures to reduce the level negative consequences unemployment.
Unemployment creates losses in production. A. Oaken discovered the mathematical relationship between the unemployment rate and the volume. GNP: if the actual unemployment rate exceeds the natural level by 1%, the general lag. GNP is 2-2.55%.
Unemployment reduces consumer demand, savings of the population, investment demand, the number of jobs and significantly reduces the volume of production. Unemployed people lose their professional skills for work, and it does not negatively affect demand. Unemployment reduces the standard of living of the population, is a factor contributing to the growth of social tension in society, an increase in crime.
The state and government regulate the level of unemployment, develop programs to ensure effective employment of the able-bodied population, eliminate the reasons for the existence of this phenomenon
For example, the state takes the following measures: it limits the birth rate, the level of wages, spending on social needs of the population, the budget deficit, and reduces the duration of working hours, i.e. uses part-time employment policy, increases the discount rate; organizes a system of institutions in which workers who are temporarily not working undergo retraining and advanced training, develops programs to combat marginalism and crime, and etc.
Unemployment is linked to inflation. English economist. O. Phillips (1950s) discovered a nonlinear relationship between the dynamics of nominal wages and the unemployment rate: an increase in the unemployment rate is accompanied by a decrease in the inflation rate and vice versa. Awareness of this dependence allows the state to choose a certain economic policy: either increase wages and unemployment or stable prices and wages in the context of stabilization of the unemployment rate.
The dynamics of the unemployment rate in the modern conditions of economic development in Ukraine has specific features: firstly, hidden unemployment prevails among the forms of unemployment, and secondly, the economy simultaneously increases unemployment and the price level, a decline in production occurs, that is, stagflation occurs, thirdly, there are shifts in the social, professional and gender and age structure of the unemployed (specialists, managers, youth.
Economic instability is also accompanied by inflationary processes
- in unemployment;
- in inflation;
The capitalist law of population (reserve army).
The growth of production under capitalism is accompanied by an increase in the organic composition of capital. The demand for labor is determined not by the total capital, but only by its variable part. But the variable part of capital in the process of technical progress relatively, in comparison with constant capital, decreases. Therefore, with the accumulation of capital, with the growth of its organic structure, the demand for labor hands decreases relatively, although the total number of the proletariat grows with the development of capitalism.
As a result, a significant number of workers cannot find employment for their labor. Part of the working population turns out to be superfluous ”, the so-called relative overpopulation is formed. Thus, in bourgeois society, as social wealth grows, one part of the working class is doomed to more and more difficult, excessive work, and the other part to forced unemployment.
The workers displaced from production make up the industrial reserve army - the army of the unemployed. This army is a necessary part of the capitalist economy, without which it can neither exist nor develop. During periods of industrial growth, when a rapid expansion of production is required, a sufficient number of unemployed are at the services of entrepreneurs. As a result of the expansion of production, unemployment is temporarily reduced. But then a crisis of overproduction sets in, again significant masses of workers are thrown into the streets and replenish the reserve army of the unemployed.
The unemployed have to accept the most difficult working conditions. The presence of unemployment creates an unstable situation for workers in production and sharply lowers the standard of living of the working class as a whole.
Marx discovered the capitalist law of population, which is that in bourgeois society, in parallel with the accumulation of capital, with the growth of social wealth, part of the working population is inevitably surplus, pushed out of production and doomed to the torments of poverty and hunger. The capitalist law of population is engendered by the relations of production in bourgeois society.
Forms of the reserve army of labor (unemployment).
According to Marxist theory, the main forms of unemployment are:
1) Fluid unemployment - workers are attracted, then repelled by capital, moving from one workplace to another, in some cases changing their profession and qualifications. To a large extent, the concept of fluid unemployment coincides with the frictional and structural forms of unemployment.
2) Long-term unemployment. It means that workers only occasionally find work, but mostly remain deprived of it.
3) Latent - workers are only formally employed, but in essence are not provided with work that gives sufficient income. They do not pass into the category of “open” unemployed, because they either do not dare to leave their existing field of activity, or hope for changes for the better.
4) Cyclical - caused by regular recurrence of crises in the economy.
5) Seasonal - associated with seasonal fluctuations in labor demand.
Impact of unemployment on the economy and labor force.
Unemployment has negative economic and social consequences:
o Underutilization of the economic potential of society, when the real GNP is significantly less than the potential
o Decrease in the standard of living of the population: prerequisites for a reduction in the income of employees; those who have lost their jobs receive only unemployment benefits; consumer demand is decreasing, the level of savings
o Loss of professional knowledge and skills, making it difficult to find a job
o Moral trauma leading to alcoholism, drug addiction, suicide, increased crime
Some researchers note that moderate unemployment has a number of positive consequences:
o A mobile "reserve" of labor is formed, which can be used when expanding production
o Restrained union demands for higher wages, lowering the anticipated inflation rate
The labor motivation of workers is increasing, as job security and the fear of losing a job begin to act as an independent incentive to work.
The general law of capitalist accumulation.
The general law of capitalist accumulation is the economic law of capitalism, according to which the growth of functioning social capital, an increase in the size and energy of its growth, and, consequently, an increase in the total number of the proletariat and the productive power of its labor are accompanied by an increase in relative overpopulation and an increase in the degree of exploitation of the working class.
The accumulation of wealth at one pole of capitalist society leads to the accumulation of unemployment and poverty at the other extreme, which is expressed in a relative deterioration in the position of the proletariat, and sometimes in an absolute deterioration in the position of the proletariat. The operation of this law causes an increase in antagonism between labor and capital, which inevitably leads to the revolutionary collapse of capitalism.
Operation of the general law of capitalist accumulation in Russia.
With the transition to a post-industrial society with its sharp increase in the trend of maximizing profits, the collapse of the USSR, the decline of the Russian economy as a result of mediocre reforms, world capitalism provides massive examples of the operation of the law of absolute impoverishment, or, more precisely, the absolute deterioration of the material well-being of workers.
Features of economic cycles after World War II
Wars (50-60)
After the Second World War, significant changes took place in the mechanism of cyclical market fluctuations. During the post-war period of relative isolation national economies When the victorious states for some time "parted" from the defeated states, a certain asynchrony of cycles appeared in the world. At a time when some countries, whose economies were little affected by the war, were naturally drawn into the crisis phase, others - in need of restoration of the destroyed economy - entered a period of many years of economic growth. This asynchrony allowed large private corporations to maneuver their production resources between countries for about two decades (gradually “blowing up the interstate barriers artificially erected by politicians), which helped smooth out cyclical booms and bumps in the global economy - and the subsequent restoration of synchronicity of cyclical fluctuations.
After the Second World War, a rapid economic upturn began, associated with economic recovery, overcoming the destruction caused by the war. However, the potential for recovery was exhausted quite quickly, and already in 1957-1958. a new global crisis broke out, affecting the United States the most. For the first time in the post-war period, total exports fell finished products, the series has begun structural crises(in the raw materials industries, shipbuilding, etc.).
Crises of the XXI century
In 2007, the US suffered a mortgage economic crisis. It was accompanied by an increase in outstanding funds for mortgage loans... The mortgage crisis escalated into the 2008 financial crisis. Initially in 2007, mortgage companies were affected.
The emergence of the economic crisis in 2008, which began with the global financial crisis, in addition to the general cyclical nature of economic development, was due to the following factors: overheating of commodity markets (including the oil market); overheat stock market; overheating of the credit market and the resulting mortgage crisis.
The crisis that began in mid-2014 and continues to the present is, on the one hand, the continuation of the 2008-2009 crisis, from which Russia emerged only thanks to the rise in oil prices from the end of 2009 to 2014, on the other hand, it is political the consequences of those events in which Russia became an active participant, which aggravated the position of its economy.
The key event in the list of "force majeure" events was the introduction of sanctions against Russia for the annexation of Crimea and assistance in the Donbass. If we analyze sectoral structure sanctions, it can be found that the sanctions are directed against key sectors of the Russian economy: the oil, gas, nuclear and military industries of the Russian Federation, as well as against Russian banking capital.
Default 1998 in Russia
The 1998 economic crisis in Russia was one of the most severe economic crises in the history of Russia.
The crisis occurred against the backdrop of a difficult economic situation in a country aggravated by ineffective macroeconomic policies pursued by the authorities in the mid-1990s. In those years, a tight monetary policy (curbing inflation by refusing to finance the state budget with emission and by keeping the ruble overvalued) was combined with a soft budget policy (unreasonably inflated budgets adopted by the State Duma and signed by President Yeltsin). The impetus for the emergence of the crisis was given by two external factors: a sharp decline in world prices for goods of the fuel and energy complex (the main article of Russian export) and the crisis in Southeast Asia that broke out in mid-1997. On August 17, 1998, a technical default was announced on the main types of government debt. At the same time, it was announced that it would refuse to maintain a stable ruble against the dollar, which had previously been artificially supported (upwardly) by massive interventions by the Central Bank of Russia.
The consequences of the crisis had a serious impact on the development of the economy and the country as a whole, both negatively and positively. The ruble exchange rate fell more than 3 times in six months - from 6 rubles per dollar before the default to 21 rubles per dollar on January 1, 1999. The negative results were that public confidence was undermined and foreign investors to Russian banks and the state, as well as to the national currency. A large number of small businesses went bankrupt. The banking system was in collapse for at least six months, several banks declared bankruptcy.
Crisis 2008-2009. in Russia.
The financial crisis and recession of 2008-2009 in Russia as part of the global financial crisis became possible, according to A. Dvorkovich, aide to the President of Russia, due to the integration of the Russian economy into world economy, when "any event abroad affects the value of Russian bonds and shares, liquidity, incomes of citizens and economic growth."
According to the World Bank, Russian crisis 2008 "began as a private sector crisis triggered by excessive private sector borrowing amid a deep triple shock: terms of trade, capital outflows and tightening external borrowing conditions."
External causes of the financial crisis in Russia: a sharp drop in oil prices from almost $ 150 to $ 40 per barrel. Financial disaster in the United States and the resulting chain reaction around the world. The global liquidity crisis, which limited the access of Russian companies to cheap foreign loans.
Internal causes of the financial crisis in Russia. Strong dependence of the Russian economy on energy prices (oil and gas).
The authorities' actions in relation to business (Mechel, TNK-BP) and Russia's intervention in the Georgian-Ossetian conflict added fuel to the fire. Sharp outflow of foreign capital in August-September 2008. Also, the situation was complicated by the weak banking system which caused a liquidity crisis and banking crisis in Russia. After that, enterprises stopped getting access to cheap loans.
The essence and function of money.
The essence of money is manifested in their functions:
1. The measure of value - consists in the fact that with the help of money, the value of all other goods is determined. The value of a commodity, expressed in monetary terms, acts as a price.
2. Means of circulation. Money - plays the role of an intermediary in the exchange of goods and ensures their turnover in conditions of developed commodity circulation (C - M - T). Money performs the function of a medium of exchange in the form of coins and paper money.
3. Means of payment. This function manifests itself in connection with the need to sell goods and services with a deferred payment (credit) and is caused by the time difference between the production and sale of goods or the need to purchase goods in the absence of cash. In this case, the seller acts as a creditor, the buyer acts as a debtor.
The expansion of the function of money as a means of payment is caused, in turn, by the need to use credit money... Credit money is paper tokens of value that have been substituted for gold on the basis of credit. In the role of credit money, bills of exchange, banknotes, money orders, checks.
A bill of exchange is a promissory note that specifies who must pay the specified amount of money, the due date and where it must occur.
On the basis of bill circulation, bank obligations arise - banknotes. This is, in fact, a bank bill.
Check is a bill of exchange presented to the bank and payable at sight.
With the development of commodity-money relations, the function of money as a means of payment increasingly displaces the function of a medium of circulation.
4. A means of accumulation. This function is associated with the presence of high-grade money outside the sphere of circulation. Money falls out of the sphere of circulation, accumulates and turns into treasures. Thus, commodity producers and consumers are protected from various accidents of the spontaneous market.
5. World money - serves interstate market relations... World money is used primarily as a means of payment.
The law of money circulation
The essence of the law of money circulation
The law of money turnover shows how much money must be put into circulation in order for them to perform their functions, namely: money as a means of payment, money as a means of circulation.
Total amount money, which is necessary for their normal functioning, depends on several circumstances:
· The amount of goods and services to be sold. As this value increases, the required amount of money increases;
· The level of prices for goods and tariffs for services. The higher the price, the more money is required;
· Speed of money turnover. As the money turnover accelerates, the required amount of money decreases.
The conditions of production are quite an important factor, since the high level of development of the division of labor leads to a large number of products sold. Also, labor productivity has an inverse relationship with pricing, since its increase leads to a decrease in the cost of production.
The total amount of funds is determined by the formula:
D = (T * C) / V
where D is the mass of funds;
T - commodity weight;
V is the speed of money circulation.
This law can be written by the Fisher equation:
where MV is the monetary part obtained when taking into account the amount of money in circulation and the speed of their circulation;
PQ - commodity part.
If the money part prevails in the economy, inflation occurs, otherwise - a crisis of overproduction, when the money supply on hand does not allow purchasing all the goods and services produced. Fisher's equation is the simplest, which reflects the essence of money circulation. But there is one more, more complicated one: Karl Marx's law of money circulation.
where M is the value of the money supply in circulation;
P unrealized. Is the sum of the prices of unsold goods;
P credit - the sum of the prices of goods sold on credit;
V is the velocity of money circulation in the economy.
The amount of money required for circulation can be expressed by the formula:
KD = SC - K + P - VP / V
where KD is the amount of money required in circulation; SC - the sum of prices of goods sold;
K - the sum of the prices of goods sold on credit, for which the due date of payment has not come;
P - the amount of payments on debt obligations, the due date for which has come;
VP - the amount of mutual payments;
V - velocity of circulation (turnover) of funds.
Types and types of inflation.
Inflation- This is the depreciation of money, manifested in an increase in prices for goods and services, not due to an increase in their quality.
According to the form of manifestation, there are three types of inflation.
1.Suppressed inflation- prices do not rise with a sharp increase in demand dissatisfaction. There is a shortage, goods go to the black market, their assortment is reduced.
2.Hidden inflation: a) the quality of goods and services decreases at a constant price level; b) official statistics do not reflect the growth in the level of state retail prices due to an arbitrarily chosen consumer basket; c) inflation also captures the investment sphere - the estimated cost of fixed assets is growing.
3.Open inflation- an increase in the price level, a fall in the purchasing power of a monetary unit, an increase in the cost of a consumer basket.
Depending on the rate (rate of flow), the following types of inflation are distinguished:
§ Creeping(moderate) - price increases of no more than 10% per year.
§ Galloping(intermittent) - price growth from 10-20 to 50-200% per year.
§ Hyperinflation- price increase of more than 50% per month.
Depending on the causes of inflation, there are:
§ Demand inflation (It is generated by an excess of aggregate demand, which for certain reasons does not keep pace with production. Excess demand leads to an increase in prices)
§ Inflation of costs (means the rise in prices provoked by an increase in production costs in conditions of underutilization of production resources).
Anti-inflationary policy.
Inflation can be fought with monetary reform or anti-inflationary policies.
Methods for conducting monetary reform include the following:
§ Zeroing - announcing the cancellation of a depreciating currency and the introduction of a new one;
Devaluation - a decrease in the gold content of monetary units or a depreciation national currency to gold, silver and foreign currency;
§ denomination (the method of striking out zeros) - the enlargement of the currency and the exchange according to the established ratio of old banknotes to new ones. In the same ratio, prices, tariffs, wages, cash balances on accounts, balance sheets of enterprises are recalculated.
Anti-inflationary policy is a set of measures to government regulation economies aimed at suppressing inflation.
Anti-inflationary policy can be implemented in the following ways:
1. Deflationary money-credit policy(demand regulation) is carried out by limiting money demand by the following methods: increasing taxation in order to increase budget income and reducing the purchasing power of the population; reducing government spending, increasing discount rate banks, reduced demand for credit and increased savings; an increase in the required reserves ratio; implementation by the Central Bank of state valuable papers generating a fixed income.
2. Income policy means the establishment of parallel control over the growth of prices and wages by freezing them completely or setting limits on their growth.
3. Indexing policy means indexing the losses of economic entities due to the depreciation of money. The government of the Russian Federation periodically indexes pensions, scholarships, allowances, and wages, but due to the lack of funds, this is carried out without the necessary linkage with price increases both in time and in the amount of compensated losses. Therefore, the indexation carried out does not always have a significant impact on the standard of living.
Globalism and poverty
Globalization is the worldwide dependence of countries, enterprises and people among themselves in an open system of political, financial, economic and cultural ties based on modern information and communication technologies.
Economic globalization is the most important part of this process.
The level of globalization of the economy depends on the level of development of the productive forces, modern technologies.
Human problems and globalization are interconnected. These are military-political, scientific-technical, financial-economic, environmental, demographic problems, the fight against high mortality, hunger, poverty in developing countries and other problems.
To address these global problems states should unite their efforts. This is due to the activities of existing and creation of new international organizations, bilateral and multilateral agreements, etc.
Recently, it has become clear to mankind that the openness of societies and economies is necessary not only for progress, but also for survival. But in the modern world, nationalism, extremism and other problems are still present. They significantly hinder the development of international economic relations... The processes of globalization do not affect a huge part of the world's population in backward countries. Nevertheless, globalization is the main development trend today's world, its economy and international economic relations.
The globalization of markets is the free international movement of services, goods and mobile factors of production with the formation of prices justified by competition on a global scale (for example, the oil market).
In recent years, there has been a globalization of financial markets, i.e. capital markets in its monetary form. This process requires liberalization, that is, the abolition of restrictions on the movement of capital in its main forms.
Macroeconomic instability concept.
Macroeconomic instability is a violation of macroeconomic equilibrium, manifested by:
- in unemployment;
- in inflation;
- in the cyclical nature of economic development;
- in persistent deficits in the balance of payments.
The progressive evolution of the economy is based on productive forces, scientific and technological progress, improving the organizational structure of production, and developing the intellectual potential of society. Economists from different times have proposed different theories of fluctuations in the economy. Some authors associated this with innovations in the national economy, arguing that from time to time large-scale measures are carried out, such as construction railways, production of synthetic fibers, aerospace production, etc., which require large investments, long payback periods and have a significant impact on employment and price levels. Since such large-scale actions are carried out on an irregular basis, they contribute to the emergence of instability in the economy.
Other researchers associate instability with political events or natural phenomena in nature. Wars, for example, bring about structural shifts in production. Demand for military products is sharply increasing, but with the end of the war, many industries fall into decay, and some of the industries are ruined. The consequences of droughts and floods are just as catastrophic.
To eliminate the damage caused, it is necessary to redesign many industries, reorient material resources and financial resources. All this affects the mechanism of functioning of economic structures, is reflected in the pace of development, and as a consequence, fluctuations in the market situation.
There are speculations that macroeconomic instability is caused by the monetary policy of the state. At a time when the government puts a lot of money into circulation, inflation occurs, causing a decline in production. If there is little money in circulation, this causes a decrease in investment, a limitation in production and an increase in unemployment.