In the circular flow model, firms are sellers. Model of economic circulation: from simple to complex, types, models, scope
The household is one of the most important market institutions. The role of households in development market relations relatively large and is determined by the following points:
First, households provide the necessary level of consumer demand, without which the functioning of the market mechanism is impossible.
Secondly, household savings are a source of savings and investment, which is very important in a developing economy.
Thirdly, households are the subjects of supply in the market for factors of production (entrepreneurial ability and labor).
Fourthly, it is the household that is the basis for the formation of production and the implementation of human capital.
Fifth, the ability of households to establish a family business contributes not only to the growth of personal wealth, but also to the development market economy generally.
We know that one of the subjects of the market economy is the household, which mainly represents the natural sector of the modern economy. Along with firms and the state, it is an economic unit consisting of one or more individuals who take financial solutions and supply the economy with inputs of production. The funds received for the resources are used to purchase goods and services that satisfy the immediate material, spiritual and social needs of a person. Thus, households are organized entities that conduct economic activities to meet needs.
Interactions of households with other market entities are described using a model of circular flows of their expenses and incomes, presented both in material and in monetary form.
Rice. one
Source: Nureev R. M. Course of microeconomics. M., 2002. S. 53.
Essence this approach is best seen in the simplest model used in microeconomics. On fig. 1 clearly shows that the expenses of one subject are the income of another. Household expenditures made in the product market become income for firms. The expenditures of firms on the purchase of inputs are incomes for household owners. Household demand is expressed in terms of expenditures made in the markets for consumer goods and services. The sale of these goods and services is the revenue of firms. Buying the resources needed to do this means a cost to the firm. Households supplying necessary resources(labor, land, capital, entrepreneurial abilities), receive cash income ( wages, rent, interest, profit). Thus, the real flow of economic benefits is supplemented by a counter cash flow of income and expenses.
But there is also a counter material and material circulation "resources - products". Consumer goods are produced by enterprises but consumed by households. They are the basis of the physical existence of the people who make up the household. However, the opportunity to produce these goods arises only because households provide firms with the resources they own.
The state also participates in the circular flow model, which provides households and firms with its services through the country's national defense system, education and medical care, etc. To ensure the production of these services, the state collects money from households and firms in the form of taxes. From them, the state buys the resources, goods and services necessary for its business activity.
In addition to providing services, the state carries out various cash payments firms and households. Mainly we are talking on transfer payments. An important part of transfer payments is state cash payments for social needs - pensions, benefits and other types of assistance to the disabled, unemployed and other low-income strata of the population. The second direction of transfer payments is grants and subsidies (cash payments provided by the state to firms to encourage the production of certain goods and services). Subsidies and grants can be provided both to producers of goods and services and their consumers, including households.
Rice. 2
The circuit model in fig. 2 clearly illustrates the relationship of all participants in market activity. They are interested in each other, the well-being of one market participant depends on the well-being of others. Even the same market entity can be in the household, And public institution, and a business participant. For example, while employed by a government official, he is a representative of a government organization; owning the securities of a corporation, he represents the business; spending his income for personal consumption, he is a member of the household.
All participants in market relations are real owners and have their own economic interests, which may coincide or conflict with the interests of other entities. Households try to satisfy their wants and needs as much as possible; firms - to get the maximum profit, the state - to achieve the maximum welfare of society. Each of them occupies a certain place in the system of social division of labor and, in order to realize their economic interests, must offer what is necessary for other subjects - carriers of market relations.
Model economic circulation is important not only for understanding the mechanism of the functioning of a market economy, but also for studying the specifics of the functioning of various economic systems, as well as the income and expenditure flows of these systems. Consider the main types of household income and expenditure.
The circulation of income, resources and products is a diagram reflecting the key areas of material and financial flows in economics. It shows the relationship between markets and economic agents.
Key elements
Households (families) and enterprises can act as economic agents in the model of economic circulation. The former possess all the production resources of society, the latter use them in the production process. Resources are divided into 4 groups: capital, labor, land, entrepreneurial abilities. Let's briefly consider their characteristics.
Description of production factors
Labor is the physical or intellectual activity of a person carried out in the course of production.
Capital is money created by people. This resource includes not only finances, but also machines, construction projects, buildings, structures, equipment, raw materials, transport, semi-finished products, etc.
TO natural resources include not only the earth, but everything natural objects, in the occurrence (creation) of which a person did not participate. We are talking, in particular, about subsoil, forests, etc.
Entrepreneurial ability is a specific production factor. Peculiarity entrepreneurial activity is that the economic entity assumes a certain risk of loss. The fact is that the receipt of income from the commission of certain operations is not guaranteed.
When the owners of these factors unite, an enterprise arises.
Types of income
The four production factors described above also correspond to 4 types of remuneration:
- Labor is wages.
- Capital - interest.
- Land is rent.
- Entrepreneurship is profit.
The most important circumstance follows from the latter. IN economic theory normal profit is not seen as the difference between revenue and expenses, but as a necessary reward for entrepreneurial activity.
Model of the circulation of economic goods
Households sell their inputs to various businesses through markets. Companies, in turn, turn the acquired funds into finished goods. Their businesses sell to households in commodity markets. Thus, moves in the model of economic circulation.
In a market economy, however, there are always 2 streams. Money moves towards goods. IN economic model circular income businesses pay households money. The incoming amounts are incomes expressed in the form of wages, rents, interest, profits. Accordingly, households spend the money received on the purchase necessary services and goods.
Specific Features of the Simple Circular Economic Model
Enterprises (firms) are producers of consumer goods. However, they need resources to produce products.
Households in the economic circulation model act as economic units consisting of one (or more) persons supplying enterprises with the means of production and using the money received for them to purchase services and goods that satisfy the spiritual and material needs of a person. These subjects indirectly or directly possess all resources. However, they also need consumer goods, since they are consumers, not producers.
In the economic model of the circulation of income, the most important link is the resource market. Here, households offer the means of production to enterprises that demand them. When supply and demand interact, the cost of resources is formed. The means of production thus go to enterprises, and money flows to households. Firms pay the cost of resources in the form of production costs.
In addition, in the model of economic circulation there is a market for goods. Here, businesses offer their products to households in demand. Accordingly, the interaction of supply and demand in the market forms the cost of consumer products. Items are thus transferred from firms to households. The latter pay the cost of goods in the form of consumer spending, and enterprises receive income from the sale of their products.
This scheme is a model of economic circulation, since there is a circular movement of goods - products and resources. At the same time, it is accompanied by a counter cash flow, in which the incomes and expenses of households and enterprises move. It must be said that the uninterrupted functioning of the economic circulation model is ensured by the equality of cash income and expenditure flows.
Participation of financial institutions
The above model of economic circulation greatly simplifies the real state of affairs, since it is assumed that all household income received is spent on current consumption. In reality, people tend to save part of the funds.
Saving income can be done in different ways. In a market economy, the most common situation is when shares of enterprises are purchased with the funds received, the amounts are placed on bank accounts, which, in turn, then provide loans to enterprises. Stock exchanges and banks are financial market institutions. Through these platforms, household savings enter enterprises in the form of investments or capital investments. Companies use money to increase their capital: to purchase equipment, machines, machines, etc. In any scheme, there are counter flows. In the situation under consideration, households that save money in banks receive interest transferred by enterprises for the use of money.
Accordingly, it is possible to determine which model is not a business circuit model. It cannot be recognized as a scheme in which one of the two flows is missing.
Nuances
The most important conclusion follows from the above information. Investment activity cannot be carried out without household savings. Funds allocated for the purchase of new capital are a prerequisite for long-term economic growth. Accordingly, the higher the volume of savings in household income, the higher the rate of economic growth (ceteris paribus). China is proof of this. In this country the share of savings is very high. This volume also leads to large investments. Accordingly, they lead to intensive economic growth.
Meanwhile, it happens that the share of household savings is relatively small, while investment activities carried out very intensively. This is possible if the state attracts external savings.
State involvement
In a complete model of the economic cycle, the most important place is occupied by state power. Her tasks include:
- Collection of taxes.
- Redistribution of income through transfer payments.
- Payment of salaries to civil servants.
- Acquisition in the markets of products and resources.
- Production of public goods, services, goods.
Circuit complication
The model with participation of the state and taking into account investments reflects the process in which production expands. In this case, households do not spend all their income on consumption, but save a part of it. The redistribution of these funds that are not involved in the acquisition of goods, their transformation into investments takes place with the participation of banks, which act as intermediaries.
After collecting taxes, the state purchases the resources and goods necessary for its activities from the relevant markets. They provide services to both households and businesses. Examples include national defense, standards development, judiciary, etc.
Budget deficit
It occurs when government spending exceeds its revenues. Since taxes and other revenues are approved, the deficit can be covered by borrowing. The main sources of funds in this case will be loans from the Central Bank and loans in the financial markets, the latter concentrate the savings of the population of this country and foreign citizens.
Loans at the Central Bank involve additional issue (issue) of money. This, in turn, can lead to inflation. If the borrowing is financial market inflation may or may not occur. In particular, it can be avoided if the savings of the population are directed to the purchase of government bonds, and the owner of the money changes for a while before redemption. In this regard, this source of financing the deficit is called non-inflationary.
Important point
The inflation-free approach entails negative consequence is the so-called crowding out effect. The bottom line is that the state, in an attempt to attract financial resources, begins to raise the rate on loans. Accordingly, many enterprises are unable to take money under the new conditions. They are left without investments, they cannot buy equipment and other production means. Thus, there is a crowding out of private investment by public spending.
The whole picture can be described as follows. Household savings flows are channeled into the investment field of enterprises. Suddenly, a dam and a channel appear in their path, where the main part of the flow goes. There is very little money left for investment. In the long term, all this will lead to a slowdown in economic growth. The problem can be solved by attracting capital from abroad.
Key features of the participants in the circuit
The model of the counter movement of material and monetary income reflects the complex interweaving of interrelated activities: management and production. It should be noted that both households and businesses operate in two main markets, but on opposite sides in each case. In the resource market, firms are buyers. That is, they act on the demand side. Households, in turn, are the owners of resources. They work on the supply side. In the commodity market, their positions are changing. Households now act as consumers, i.e. buyers, and businesses as sellers. At the same time, each subject both sells and buys.
All transactions made by households and businesses have a rarity feature. The fact is that individuals have at their disposal only a limited amount of resources to supply firms. Accordingly, their income is also limited. This means that the profit of each consumer is within certain limits. This limited financial resources does not allow buying all the services and goods that the consumer would like to have. It follows from this that the production of finished products is also rare, since resources are limited.
Conclusion
The economic cycle, therefore, is the movement of income and expenses, resources, money, products in the sphere economic activity. In his scheme, the monetary and real sectors are distinguished.
The movement of finance and products covers 4 key areas: production, consumption, exchange and distribution. The first involves the transformation and adaptation of materials to meet human needs. Exchange is the movement of goods and services from one market participant to another. Distribution involves the identification of quantitative parameters of resources and indicators economic activity. Consumption is considered the final act of the economic process. It is the ultimate goal of production. Households demand consumer products, while businesses demand investment products.
Investment resources are used to expand and upgrade production. They are directed to the composition of financial assets, at the expense of them stocks are replenished, fixed capital is increased.
end result economic process is the emergence of a real flow of resources counterclockwise and cash flow with consumer spending - clockwise. They are simultaneous, endlessly repeating.
Economic goods do not move by themselves, they act as a means of communication between economic agents.
Economic agents– subjects economic relations involved in the production, distribution, exchange and consumption of economic goods. The main economic agents are individuals (households), firms, government and its divisions.
Modern economic theory proceeds from the premise of the rational behavior of agents. It means that the goal is maximizing results for a given cost or minimizing costs for a given result .
Economic agents communicate with each other with the help of economic goods. Their movement forms a kind of circulation.
economic circuit- this is a circular movement of real economic benefits, accompanied by a counter flow of cash income and expenses.
The main subjects of the market economy are households and firms.
Households make demand for consumer goods and services, being at the same time suppliers economic resources.
Firms demand resources by offering consumer goods and services.
In a market economy, there is a constant interaction of supply and demand: Demand creates supply, and supply develops demand.
The cycle of supply and demand can be specified taking into account the movement resources, consumer goods and income .
Household demand is expressed in terms of expenditures made in the markets for consumer goods and services. The sale of these goods and services is the revenue of firms.
Buying the resources needed to do this means a cost to the firm.
Households, supplying the necessary resources (labor, land, capital, entrepreneurial ability), receive cash income (wages, rent, interest, profit).
Thus, the real flow of economic benefits is supplemented by a counter cash flow of income and expenses (Fig. 2-3).
Figure 2. Circulation of supply and demand (simple model, micromodel).
Figure 3. The role of the state in the circulation (macromodel).
Households and firms pay taxes to the state, receiving from it, in turn, transfer payments and subsidies. In addition, the government carries out large purchases in all markets, both consumer and industrial.
The model of economic circulation is important: not only for understanding the mechanism of the functioning of a market economy, but also for studying the specifics of the functioning of various economic systems.
6. In a simple model of the circulation of resources, products, income within the framework of pure capitalism, the state:
a) mediates the turnover in the product market;
b) mediates the turnover in the resource market;
c) the answers "a" and "b" are correct;
d) not included in the model.
7. In the household circuit model:
a) act as subjects in the resource market;
b) act as subjects in the product market;
c) act as subjects in the income market;
d) Answers "a" and "b" are correct.
4. Economic systems.
Economic systems is a set of interrelated economic elements that form a certain integrity, the economic structure of society.
In other words, economic systems represent the unity of relations that develop over the production, distribution, exchange and consumption of economic goods.
Economic systems have gone through three stages in their development(Table 2).
Table 2. Historical development economic systems.
1. Pre-industrial society. In the pre-industrial era, subsistence agriculture dominated. Man was included in the biological cycles of nature, was forced to adapt to them. Production was limited, local.
The absence of a social division of labor, isolation, self-sufficiency in resources, as well as the satisfaction of all needs at the expense of one's own resources, are the main features of the natural form of economy. Technical inventions and advanced manufacturing skills were extremely slow to spread, as under the dominance of subsistence farming, the level of labor productivity of one farm did not affect the other. Manufacturers relied on the power of tradition, so this economic system is called traditional.
2. Industrial society . The industrial revolution meant a qualitative leap in the development of productive forces, the replacement of natural productive forces by social ones as the leading and determining type. In the process of the development of manufactory production into factory production, profound changes took place in the content and nature of labor. Industrial labor has supplanted agrarian labor, the city has supplanted the countryside. Commodity-money relations have acquired a universal character.
The division of labor deepens, its specialization, cooperation and combination develop. This creates the prerequisites for weakening dependence not only on external nature, but also on the limited biological capabilities of the person himself (his physical strength, speed of movement, hearing, etc.). All this imposes new requirements on the forms of business organization, the rational use of all resources, the development of the scientific organization of labor, production and management.
Frederick W. Taylor(1856-1915) develops the foundations of the scientific organization of labor, Henry Ford(1863-1947) introduces mass production, Elton Mayo(1880-1949) creates scientific prerequisites for the development of a system of human relations.
3. Post-industrial society. In the course of the scientific and technological revolution, science turns into a direct productive force, and a post-industrial economy emerges. The center of gravity is transferred to the non-productive sphere (service sector). In the modern economic system, information and accumulated knowledge become the limiting factor.
Scientific and technological revolution creates the prerequisites for the development of relations of free individuality. Personality acts as an end in itself of human development, at the same time being an instrument of progress.
IN modern world exist three main types of economic systems: market, command and mixed. Let's get to know them in more detail.
Market economic system is based on the fact that households own the factors of production, and the decision-making system is transferred mainly to individuals and firms, which in their actions are guided by market information signals.
In other words, market economy characterized as a system based on private property, freedom of choice and competition, it relies on personal interests, limits the role of government.
In the process of the historical development of human society, prerequisites are created for strengthening economic freedom -individual's ability to realize his interests and capabilities through vigorous activity in the production, distribution, exchange and consumption of economic goods.
The market economy guarantees, first of all, consumer freedom, which is expressed in the freedom of consumer choice in the market of goods and services. Voluntary, non-coercive exchange becomes a necessary condition for consumer sovereignty. Everyone independently distributes their resources in accordance with their interests and, if desired, can independently organize the process of production of goods and services to the extent that their abilities and available capital allow. This means that there is freedom of enterprise.
The individual himself determines what, how and for whom to produce, where, how, to whom, how much and at what price to sell the produced products, how and on what to spend the received proceeds. Therefore, economic freedom presupposes economic responsibility and relies on it.
personal interest acts as the main motive and the main driving force of the economy. For consumers this interest is utility maximization, for producers it is profit maximization. freedom of choice becomes the basis of competition.
According to the founding father of modern economics, Adam Smith, the market is run by "invisible hand" ("Invisible hand") : despite the fact that each market participant pursues his own benefit, as a result of market activity, the needs of the whole society are satisfied.
The issue of distribution (For whom?) is determined by the capabilities of consumers.
Goods are received by people who WANT and CAN ALLOW to buy them. Transactions reflect the distribution of income and wealth in society.
Even such an efficient system as the market one is not free from shortcomings:
Instability and the possibility of crises.
The danger of the formation of monopolies.
Neglect of social problems.
command economy- This is a system dominated by public ownership of the means of production, collective economic decision-making, centralized management of the economy through state planning.
A characteristic feature of the command economy is the monopoly of production, which ultimately slows down the scientific and technological progress. State regulation of prices, the monopoly of production naturally give rise to an economy of scarcity. The paradox is that shortages occur in conditions of general employment and full capacity utilization. Long-term state planning cannot respond flexibly to the changes taking place in society.
In a command economy dominated by redistributive principle of product distribution . Participation in power also means participation in distribution. The vertical, center-dependent form of product distribution is embodied in the nomenclature levels of distribution, trade is combined with distribution, becoming not a form of exchange, but a form of redistribution (special stores, special buffets, special canteens, etc.).
Therefore, the main form of social struggle is not the struggle for ownership of the factors of production, but the struggle for access to the key levers of distribution, for control over distribution channels. Income in society depends primarily on the status, rank and position. Under these conditions, the proclaimed universal equality more and more turns into a fiction.
mixed economy- this is a type of society that synthesizes elements of the first two systems. The main role is assigned to the market, which is influenced by the vigorous activity of the state, as well as the experience and traditions of the country.
Currently in its pure form, a market or command system cannot be found. Most economic systems are mixed. In such systems, free enterprise is combined with collective decision-making. The state provides legal regulation of economic relations, and also deals with social problems.
When economic problems are decided partly by the market, partly by the government, then the economy:
a) command.
b) market.
c) natural.
d) mixed.
Problems of "what, how and for whom to produce" can be related to:
a) only to totalitarian systems or societies dominated by central planning.
b) only to a market economy.
c) only to a backward economy.
d) to any society, regardless of its socio-economic and political organization.
economic circuit
Economic goods do not move by themselves. They act as a means of communication between economic agents.
Economic agents(economic agents) - subjects of economic relations involved in the production, distribution, exchange and consumption of economic goods. The main economic agents are individuals (households), firms, the state and its subdivisions. In turn, among the firms, first of all, individual business enterprises, partnerships and corporations are distinguished. Modern economic theory proceeds from the premise of the rational behavior of agents. This means that the goal is to maximize results for a given cost or minimize costs for a given result. Individuals strive for the maximum satisfaction of needs at given costs, the state - for the highest growth of social welfare with a certain budget. For example, trade unions also act as economic agents, the purpose of which is to increase wages and improve social conditions the lives of their members, the means is the struggle for profitable terms conclusion of collective agreements.
In modern theories that develop the principles of classical liberalism, the individual is recognized as the only real economic agent. All other agents are regarded as derivative forms of it: firms as legal fictions, and the state as an agency for the specification and protection of property rights. The bifurcation into the theory of individual behavior and the theory of the firm, traditional for microeconomics, is thereby overcome, and the principle of maximizing utility acquires universal significance. In the theory of property rights, the firm is considered primarily as a certain form, a network of contracts, according to which bundles of powers are transferred, the firm arises as a necessary reaction to the high cost of market coordination, as a kind of way to minimize transaction costs.
In the theory of public choice, the principles of methodological individualism are brought to their logical conclusion: the state is considered exclusively as a set of individuals pursuing personal goals. That's why public policy, according to supporters of this theory, is determined not so much by public needs, but by the endlessly changing leapfrog of private interests. Absenteeism of voters is explained by the principle of rational ignorance, decision-making in the interests of the minority - by lobbying, corruption and unscrupulous deputies - by the practice of logrolling, corruption of the bureaucracy - by the search for political rent.
Economic agents communicate with each other with the help of economic goods. Their movement forms a kind of circulation.
economic circuit(circular flow) is a circular movement of real economic benefits, accompanied by a counter flow of cash income and expenses.
The main subjects of the market economy are households and firms. Households present demand for consumer goods and services, being at the same time suppliers of economic resources. Firms demand resources by offering consumer goods and services. The behavior of the main economic agents can be expressed by the circulation of supply and demand (see Fig. 3).
Rice. 3. Circulation of supply and demand.
For all the conventionality of the circuit scheme, it reflects the main thing - in a developed market economy there is a constant interaction of supply and demand: demand creates supply, and supply develops demand.
The cycle of supply and demand can be specified taking into account the movement of resources, consumer goods and incomes. Household demand is expressed in terms of expenditures made in the markets for consumer goods and services. The sale of these goods and services is the revenue of firms. Buying the resources needed to do this means a cost to the firm. Households, supplying the necessary resources (labor, land, capital, entrepreneurial ability), receive cash income (wages, rent, interest, profit). Thus, the real flow of economic benefits is supplemented by a counter cash flow of income and expenses (Fig. 4).
Rice. 4. A simple circuit model
This model can be refined by including turnovers within sectors. Emphasizing the main thing, the simple model of the circuit somewhat idealizes the reality.
Firstly, it does not take into account the accumulation of both economic benefits and monetary resources, as well as the fact that some resources may fall out of the turnover process. For example, if consumers start saving a portion of their income, the impact of aggregate demand decreases. Such circumstances can further significantly modify the elementary circuit model. The most important of their consequences is the development of the credit system.
Second, the schema abstracts from the role of the state. The role of the state in the modern world is very diverse, as it affects both the agents of the market economy and the markets for products, factors of production, and credit. If we abstract from the role of credit, then the functions of the state in the circuit can be represented as follows (see Fig. 5).
Rice. 5. The role of the state in the circulation
Households and firms pay taxes to the state, receiving from it, in turn, transfer payments and subsidies. In addition, the government carries out large purchases in all markets, both consumer and industrial.
Thirdly, the circuit model can be refined by including international trade.
The model of economic circulation is important, but only for understanding the mechanism of the functioning of a market economy, but also for studying the specifics of the functioning of various economic systems. To approach their analysis, let us briefly dwell on the main economic goals that individuals, firms and society as a whole strive for.
When studying economic processes, macroeconomics relies on principles and uses tools that are characteristic of economic theory as a whole: the principle of rational behavior of economic agents, a combination of positive and normative analysis, empirical and theoretical levels of research, the method of scientific abstraction, the principle "ceteris paribus", economic-mathematical modeling and graphical expression of theoretical models.
Unlike microeconomics, macroeconomics uses in its analysis aggregated quantities that characterize the movement of the economy as a whole: GDP (and not the output of an individual firm), the average price level (and not prices for specific goods), the market interest rate (and not the interest rate of an individual bank), inflation, employment, unemployment.
latin word "aggregatus"- "aggregate", in our case, best of all corresponds to the concept of "set".
In this way,
aggregation is a method of macroeconomic analysis based on the derivation and study of the dynamics of aggregate indicators.
When aggregating, individual economic agents or processes are combined according to certain qualitative characteristics into aggregates (sets), which are considered as a single whole. In this case, the features of the individual elements included in the unit are not considered. The national economy in the macroeconomic approach appears as if it consisted of one aggregate consumer, investor, one firm producing the aggregate product.
Aggregation applies to all key elements of the economic system: economic entities, markets, economic relationships, commodity and cash flows, economic indicators. The use of the aggregation method inevitably leads to the loss of some information, simplifies the economic reality, but at the same time allows you to explore global economic patterns that cannot be explained from the standpoint of the behavior of individual economic agents and their interaction in the markets of individual goods.
The obvious costs of macroeconomic aggregation are the partial loss of information and the increase in the level of abstraction. economic research. At the same time, thanks to aggregation, it is easier to identify the essence of the most complex national economic processes. So that aggregated indicators are not lost economic sense and scientific value, certain aggregation rules must be followed.
Presented in an aggregated, generalized form, the national economy remains a complex system, the study of which is carried out using macroeconomic modeling.
Any model (theory, equation, graph, etc.) is a simplified, abstract reflection of reality, since all the variety of specific details cannot be simultaneously taken into account when conducting a study. Therefore, none macroeconomic model not absolute, not exhaustive, not comprehensive. It does not give the only correct answers, but with the help of such generalized models, a set of alternative ways to control the dynamics of employment levels, output, inflation, investment, consumption, interest rates, exchange rate and other endogenous economic variables, the probabilistic values of which are established as a result of solving the model.
In macroeconomic analysis, the functioning of the national economy is represented as the economic activity of aggregated economic agents interacting with each other in national markets.
From a macroeconomic point of view, only four macroeconomic entities :
Household sector;
Entrepreneurial sector;
Government sector;
Foreign sector (foreign economic sector).
So, macroeconomics studies the patterns of behavior of macrosectors in the process of production, distribution, exchange and consumption of economic goods. Take a closer look at these sectors and the links between them.
Sector "Households » – unites all families leading an autonomous family budget. In a market economy, this sector owns most of the national resources (labor resources, entrepreneurial ability, land and its subsoil are mostly privately owned by families). This sector performs the function of final consumption and accumulation of savings, and also provides resources for productive use for income in the form of wages, profits, rents and interest.
Sector "Firm » - unites enterprises of all forms of ownership (including state-owned) and all fields of activity and industries that operate on a commercial basis, i.e. finance their costs at the expense of proceeds from the sale of products (services) and seek to make a profit. In a broader sense, this sector also includes financial institutions(banks, funds, Insurance companies), which, like other firms, convert resources into final products (in this case, special Financial services) and sell them on the market. In this way, main function sectors of firms - production by attracting resources and offering their products on the market.
Sector "State" (government) - includes government authorities at all levels (local, regional, federal) and all branches of government (executive, legislative, judicial), as well as all other budget organizations financed mainly or completely from the budget, i.e. operating on a non-commercial basis (for example, police, fire department, public educational institution, etc.). The functions of this sector in a market economy have been defined above.
Sector "External world" – a set of links between our three domestic sectors and the macro-sectors of other countries. These links include trade relations (export and import of goods and services), transnational movement of mobile resources (labor, capital, entrepreneurial ability, information) and income from them, as well as transnational transfers (transfers, aid, grants, etc.). There is a constant “exchange of substances” between the macrosectors, i.e. movement of resources and final products, accompanied by a counter flow Money.
The behavior of the main macroeconomic actors, the decisions they make and the corresponding actions determine the state of national economy, short-term market changes and long-term economic growth trends. Therefore, in order to explain how the economy works, it is necessary first of all to find out the nature of the behavior of economic entities and describe it theoretically. For these purposes, the aggregation method is also used. The behavior of each sector is described using generalized indicators and functional dependencies. The study, for example, uses a single consumer function that links total consumer spending, national income, and other macroeconomic indicators. Aggregate functions of savings, investments, production function, etc. are also used.
Finally, in macroeconomics, the system of economic relations, which are predominantly of a market nature, is also considered in an aggregated form. The whole variety of market relations comes down to the functioning of four national markets, which include:
market for goods and services (final product), which sells both consumer and investment goods;
factor market (resource market) (labor, land, capital). In short-term models, it is represented by the labor market, since the stock of other factors (capital, land) is considered unchanged in the short term;
financial market, uniting the securities market and the loan capital market. In open economy models, there is also currency market. The main macroeconomic function of this market is the transformation of national savings into investments;
money market, on which the money supply interacts (i.e. actually in circulation money supply) and the demand for money, which is the amount of money supply that economic agents want to have at a given level of income.
The interaction of supply and demand in the four national markets is the mechanism by which the decisions made within each sector collectively determine the values of the main macroeconomic parameters (output volumes, employment price levels and unemployment).
IN general form the system of interconnections between various sectors of the national economy is presented in business cycle models (Fig. 25).
Rice. 25. Economic Circular Model
So, households provide their resources to the resource market (and not only to the internal, but also to the external) in order to obtain cash income (wages, profits, rents or interest), and firms that need resources to produce products present demand for them and pay for these resources. But what is the income of suppliers of resources, for the sector of firms, is the cost of production, which must be reimbursed by the proceeds from the sale of products in the market of final products.
Thus, firms offer goods and services in this market, and households make demand for consumer goods and services and buy back part of the final product. Households, therefore, use the received factor incomes in two ways - part of the income turns into consumer spending, and the unspent part becomes the savings of the household sector and flows out of the circuit. It should be noted that part of the final product in the form of investment goods (elements of real capital) is offered to the market by some firms, and is bought out on the basis of investment costs by other firms, and this process is not shown in the diagram. If we consider the circulation only between two private sectors - firms and households, then it is called simple and completely closed. But it has a significant corrective influence on the state sector within the framework of its functions. Above, the diagram shows two of its most important functions:
1) reallocation of resources to create public and quasi-public goods that private firms do not produce at all (lighthouses, road signs, basic science) or produce insufficiently (education and health services);
2) redistribution of income for social purposes.
So, the state collects net taxes from the sector of firms and households, generating income state budget. Net taxes are the difference between gross tax revenues and transfers (taxes in reverse, i.e. pensions, scholarships, subsidies that the state will return to private sector representatives who need its support). At the expense of the income received, the state purchases resources in the resource market, diverting them from the production of private goods and directing them to the creation of public goods, which it provides “free of charge” (but in fact - for taxes) to firms and households. At the same time, to perform these functions, the state carries out public procurement of end products of a consumer and investment nature (for example, medicines and equipment for public hospitals, office equipment for state institutions).
In addition, the diagram shows that all three domestic sectors can offer and purchase resources and final products from external markets for resources and final products and, therefore, receive income or sales proceeds from the outside world for this (except for the state, which collects taxes only from their sectors).
Thus, the model becomes a complex circuit and describes the functioning of an open market economy with state participation. Based on this model, it is concluded that there is a general interdependence at the macro level, since a change in the behavior of one sector will affect all the others and, ultimately, on itself, since the expenses of one sector are the incomes of another. Money in this model plays a passive role, mediates the movement of resources and products, performing the functions of a means of circulation, payment and savings. At the same time, if we sum up the annual cash flows in this scheme in a certain way, we can obtain the most important macroeconomic indicators, which are divided into indicators of flows, stocks and economic conditions.
Macroeconomic indicators of flows reflect the processes of value transfer from one economic entity to another over a certain period.
economic circuit
Households present demand for consumer goods and services, being at the same time suppliers of economic resources.
Mixed Economy Circular Model
Firms demand resources by offering consumer goods and services. The behavior of the main economic agents can be expressed by the circulation of supply and demand.
expenses revenue costs income
state
subsidies (subsidies), and tax incentives.
transfer payments
Institutes
Publication date: 2014-10-20; Read: 2247 | Page copyright infringement
The division of labor causes specialization, and that leads to a constant exchange between economic agents. Exchange is the basis for permanent economic ties, relations between them.
Before describing these connections, a number of initial concepts should be clarified.
1. Production, exchange and distribution.
Production- it is the process of creating and consuming economic goods to meet human needs.
Manufacturing and its sectors.
Production is divided into industries, that is, groups of enterprises (firms) that produce homogeneous products. Industries, on the one hand, are divided into sub-sectors, and on the other hand, they are grouped into national economic complexes: fuel and energy, agro-industrial, etc.
In economic theory, the division of the economy into sectors is very common: primary, secondary and tertiary.
The primary sector includes agriculture, forestry, hunting and fishing; secondary - industry and construction; tertiary - production of services (trade, transport, etc.). The primary and secondary sectors are often combined into the sphere of material production.
There are also real and financial (monetary) sectors. In the real sector, goods and services are created, and the financial sector serves the real sector.
This division is conditional. Sectors differ in goals, nature of operations, technical features.
Distribution.
Distribution in the narrow sense means sizing income received by individual participants in economic activity and social groups. Incomes are different (high, medium, low). The difference in the level of income is determined primarily by what factors of production this or that economic agent owns. The distribution of income by factors of production is called the functional distribution.
The primary distribution of income is not always efficient, so it is supplemented by secondary distribution (redistribution) through a system of taxes, subsidies and insurance premiums. Primary distribution is carried out through the mechanism of the market, redistribution - with the participation of the state.
The concept of exchange.
Exchange - it is the process of movement of consumer goods and production resources from one participant in economic activity to another. It connects producers and consumers, connects members of society. Through exchange, a system of economic relations is formed.
The exchange can be done through barter or indirectly through money, be free or strictly regulated.
The exchange is made on the basis of the usefulness of the goods for the subjects involved in the exchange process. The process of exchange is accompanied by the transfer of ownership of the object of exchange.
2.Consumption, savings, investment.
The concept of consumption.
The final act of economic activity - consumption. It is the use of goods and services to meet current and future needs. Consumer goods (food, clothing) account for approximately 2/3" consumer basket”, the rest is investment goods (machines, equipment).
Each household has to constantly make decisions about how much of the income to spend today, and how much to put aside (save) for the future - in case unforeseen situation, diseases, etc.
Savings - income not spent on the purchase of goods and services within the framework of current consumption. The amount of savings is inversely proportional to the amount of consumption.
The level of consumption characterizes such indicators as the average propensity to consume and the marginal propensity to consume.
Surzhik Eduard Nikolaevich, swindlers, crimes, money.
Average propensity to consume is the share of income (Y) spent on consumption (C), expressed as C/Y. marginal propensity to consumption characterizes the dynamics of consumption as a result of income growth. It is calculated as the ratio of the increase in consumption (DC) to the increase in income (DY). That is Mc=DC/DY.
Investments.
Investments - these are costs directed to increase or replenish capital, that is, to make a profit or obtain a beneficial effect.
They are divided into three parts: investments in financial assets ( securities, loans); investment in inventories (raw materials, finished products); investment in fixed assets, i.e.
into machines, buildings, or, indeed, capital that lasts longer.
In turn, these capital investments include the cost of both reimbursement and capital appreciation.
Depreciation is an investment expense that is used to replace worn-out machines, equipment, to replenish obsolete buildings. These expenses are cash that characterize the transfer of the cost of labor to the product created with their help.
Net investments are resources for the construction of new enterprises, the creation of new equipment, etc. Gross investment minus depreciation give the value of the net investment.
3. Circulation of goods and services
The Russian economy is more than two million enterprises, institutions, various organizations, tens of millions of households. There is a complex system of connections between them, which is not easy to imagine, even with detailed data. statistical guides.
All this extraordinarily ramified and heterogeneous economic activity, which is in constant motion, is difficult to understand for an experienced specialist, and even more so for an ordinary participant. Hence the need to make hidden connections transparent, complex - simple, group v enlarge, or, as economists say, aggregate, homogeneous and similar relationships. The aggregation of economic relations is one of the tasks of macroeconomics.
To begin with, let's present the simplest picture of economic ties - an enlarged scheme for the movement of goods and income, products and money.
Simplified circuit diagram
Initially, there will be only two main economic units: households and enterprises. We abstract from external relations. Only later will we involve the state and the banking system as participants in the economic process.
In a simplified scheme, we aggregate “streams” and “rivers” of various goods and services, expenses and incomes into homogeneous “streams” flowing between enterprises and households, uniting them into an economic system (Fig. 1).
Rice.
In our (simplified) circuit diagram, all resources are owned by households. They provide labor, capital, natural and other resources. Enterprises, when offering factor services, act as households.
The diagram clearly shows the main connections.
Households demand and consume consumer goods (bread, clothing, consumer electronics) and services (laundry, transport). They pay for them at the expense of the income they receive by providing enterprises with labor, capital, land, and other factors of production.
Enterprises incorporate factors of production into the production process and supply finished consumer goods and services to households. Bread, clothes, consumer electronics, transport and other services consumed by households end their movement, and the circuit process begins again.
As can be seen in Fig. 1, the movement of flows of goods and funds is carried out constantly. The flows of goods and money are calculated for a certain period of time, for example, for a year. One million cars produced in a year is an annual flow, while 15 million cars in stock on a given date (say December 1999) is a stock. The number of machine tools or the value of household property of the population - stock; annual production of machine tools or computers is a stream.
Of all the flows, we are interested in the entire product produced by the country in a year (more often it is called gross domestic product or gross national product). It is an aggregate stream, i.e. expresses the value of all goods and services produced in a year. Gross domestic product includes final products (completed and ready for consumption), excluding intermediate products intended for processing and manufacturing final products. It is also the total income of all owners of economic resources. In this (simplified) scheme of economic circulation, the indicators of gross domestic product and national income are equal to each other.
Let's pay attention to the next point. Gross domestic product can be calculated as total income from the production of goods and services (a straight line with an arrow at the bottom of the diagram). It can also be calculated in another way - as a total expenditure on the purchase of goods and services produced (a straight line at the top of the figure).
Money in both the upper and lower parts of Fig. 1 moves in the opposite direction to the movement of goods. At the same time, total income is equal to total expenses.
Equality of income and expenditure is in line with the principle of dual accounting used in economic statistics. The economic cycle is a set of transactions for the purchase and sale of bread and clothing, payment for transport and household services. In each individual case, the paid part of the income corresponds to the spent part of the expenses: The same equality is preserved in the resulting turnover indicator, in which all transactions for the year are summed up.
Economic agents interact with each other, exchanging their goods. The movement of goods forms a kind of circulation (Fig. 2-4).
economic circuit- this is a circular movement of real economic benefits, accompanied by a counter flow of cash income and expenses.
Households present demand for consumer goods and services, being at the same time suppliers of economic resources. Firms demand resources by offering consumer goods and services.
Economic Circular Model
The behavior of the main economic agents can be expressed by the circulation of supply and demand.
For all the conventionality of the circuit scheme, it reflects the main thing - in a developed market economy there is a constant interaction of supply and demand: demand creates supply, and supply develops demand.
Household demand is expressed as expenses carried out in the markets of consumer goods and services. The sale of these goods and services is revenue firms. Buying the resources needed to do this means costs firms. Households, supplying the necessary resources (capital, labor, land, entrepreneurship), receive cash income(wages, rent, interest, profit). Thus, the real flow of economic benefits is supplemented by a counter cash flow of income and expenses.
Rice. 2-4. economic circuit
The movement of expenses and income is significantly influenced by state. It is for its business activities (on state enterprises) makes purchases from firms, purchases factors of production from households, paying accordingly.
The state provides some firms with various subsidies (subsidies), that is, grants issued on an irrevocable basis to compensate for losses in cases where the prices of manufactured products are below costs, and tax incentives.
For individual households, the state provides transfer payments (disability benefits, unemployment, scholarships, pensions, etc.), that is, payments not contingent on their provision of goods and services. The state levies direct and indirect taxes from households and firms.
The flows of goods, resources, income and expenses are in constant motion and reflect the total volume of production, total income and general employment.
2.3 MAIN ECONOMIC INSTITUTIONS
Institutes call sustainable forms (including norms and rules) of human interaction.
The main economic institutions are economic agents, property, market. Each of these institutions is a complex entity with a long history of formation and development. Moreover, all economic institutions in life are interconnected, partly complement each other, partly replace each other.
⇐ Previous23242526272829303132Next ⇒
Publication date: 2014-10-20; Read: 2248 | Page copyright infringement
Studopedia.org - Studopedia.Org - 2014-2018. (0.001 s) ...
Model of simple economic circulation- a model of a market economy that illustrates the main functions performed by households and enterprises as the main economic agents in the markets of goods and resources, as well as the relationship between these agents.
On fig. 2.1 the elementary model of economic circulation is presented.
Rice. 2.1. The simplest model of economic circulation
The model consists of the following elements:
1. The household - An economic unit consisting of one or more persons that supplies the economy with resources and uses the money received for them to purchase goods and services that satisfy the material and spiritual needs of a person. Households directly or indirectly own all economic resources but need commodities (because they are consumers, not producers).
2. Firms produce commodities, but for this they need economic resources.
3. resource market- it is here that households offer their resources to firms that demand these resources. As a result of the interaction of supply and demand in the market, resource prices are formed, resources are transferred from households to firms (counterclockwise lines at the top of the figure show this movement). In turn, from firms to households moves cash flow– firms pay resource prices in the form of production cost expenditures that households receive as factor incomes (clockwise lines)
Product market - this is where firms offer manufactured products (consumables) to households that demand them. As a result of the interaction of supply and demand in the market, product prices are formed, products (consumables) move from firms to households (counterclockwise lines at the bottom of the figure). Households pay the prices of products in the form of consumer spending, which firms receive in the form of income from the sale of their products (clockwise lines).
The model represents the economic cycle, since there is a circular movement of real economic benefits - resources and products (counterclockwise lines), accompanied by a counter-movement of cash flows - expenses and incomes of firms and households (clockwise lines). It should be emphasized that the continuity of this circuit ( macroeconomic balance) is ensured by the fact that cash flow flows are equal to cash income flows.
On fig. 2.2 the model of economic circulation with participation of the state is presented.
Rice. 2.2. Model of economic circulation with the participation of the state
The circular model (resources, products and income) demonstrates the complex, interconnected interweaving of decision-making processes and economic activity. Let us pay attention to the fact that both households and enterprises operate in both major markets, but in each case on opposite sides of them. In the resource market, enterprises act as buyers, i.e. on the demand side, and households as resource owners and suppliers act as sellers, i.e. on the supply side. In the product market, they change positions: households as consumers find themselves in the camp of buyers, i.e. on the demand side, and enterprises are already in the sellers' camp, i.e. on the supply side. At the same time, each of these groups of economic units both buys and sells.
This means that the income of each consumer has its own limit.
3. Economic circulation.
A limited amount of money obviously does not allow for the purchase of all the goods and services that a consumer wishes to purchase. Equally, since resources are scarce, the production of finished goods and services is also limited.
So, households, as owners of resources, sell their resources to enterprises, and as consumers, they spend their money income received from the sale of resources on the purchase of goods and services. In order to produce goods and services, businesses must buy inputs; their finished products are then sold to households in exchange for the latter's consumption expenditures or, from the point of view of enterprises, in exchange for the revenue they receive. The end result of this process is the real flow of economic resources counter-clockwise, and the cash flow of income and consumer spending - clockwise. These streams are simultaneous, and they repeat indefinitely.
⇐ Previous3456789101112Next ⇒
Publication date: 2014-10-23; Read: 5551 | Page copyright infringement
Studopedia.org - Studopedia.Org - 2014-2018. (0.001 s) ...