The aggregate of final goods) that consumers, businesses and the government are ready to buy (for which there is demand in the country's markets) at a given price level (at a given time, under given conditions).

Aggregate demand () is the sum of the planned costs for the acquisition of final products; it is the actual output that consumers (including firms and government) are willing to buy at a given price level. The main factor influencing is the general price level. Their relationship is reflected by a curve that shows the change in the total level of all costs in the economy depending on changes in the price level. The relationship between the real volume of production and the general level of prices is negative or inverse. Why? To answer this question, it is necessary to highlight the main components: consumer demand, investment demand, government demand and net exports, and analyze the impact of price changes on these components.

Aggregate demand

Consumption: with an increase in the price level, real purchasing power falls, as a result of which consumers will feel less wealthy and, accordingly, will buy a smaller share of real output compared to what they would have bought at the previous price level.

Investments: an increase in the price level leads, as a rule, to an increase in interest rates. Credit becomes more expensive, and this keeps firms from making new investments, i.e. an increase in the price level, affecting interest rates, leads to a decrease in the second component - the real volume of investments.

Government procurement of goods and services: to the extent that expenditure items of the state budget are determined in nominal monetary terms, the real value of public procurement will also decrease with an increase in the price level.

Net export: with an increase in the price level in one country, imports from other countries will grow, and exports from this country will decrease, as a result, the real volume of net exports will decrease.

Equilibrium price level and equilibrium volume of production

Aggregate supply and demand affect the establishment of an equilibrium general level of prices and an equilibrium volume of production in the economy as a whole.

All other things being equal, the lower the price level, the more of the national product consumers will want to purchase.

The relationship between the price level and the real volume of the national product for which demand is presented is expressed by the graph of aggregate demand, which has a negative slope.

The dynamics of consumption of the national product is influenced by price and non-price factors. Effect of price factors is realized through a change in the volume of goods and services and is graphically expressed by movement along a curve from point to point. Non-price factors cause a change in in by shifting the curve left or right to or.

Price factors other than price level:

Non-price determinants (factors) affecting aggregate demand:

• Consumer expenses that depend on:
  • Consumer welfare. With an increase in welfare, consumer spending increases, that is, an increase in AD occurs
  • Consumer expectations. If an increase in real income is expected, then expenses in the current period increase, that is, AD increases
  • Consumer debt. Debt Reduces Current Consumption and AD
  • Taxes. High taxes reduce aggregate demand.
• Investment costs, which include:
  • Change in interest rates. An increase in the interest rate will lead to a decrease in investment costs and, accordingly, a decrease in aggregate demand.
  • Expected return on investment. With a favorable prognosis, AD increases.
  • Business taxes. When taxes go up, AD goes down.
  • New technologies. Usually lead to an increase in investment costs and an increase in aggregate demand.
  • Excess capacity. They are not fully utilized, there is no incentive to increase additional capacity, investment costs are reduced and AD is falling.
• Government spending
• Net export costs
• National income of other countries. If the national income of countries grows, then they increase purchases abroad and thereby contribute to an increase in aggregate demand in another country.
• Exchange rates. If the exchange rate for its own currency rises, then the country can buy more foreign goods, and this leads to an increase in AD.

Aggregate supply

Aggregate supply is the real volume that can be produced at a different (specific) price level.

The law of aggregate supply - with a higher price level, producers have incentives to increase production and, accordingly, the supply of manufactured goods increases.

The aggregate supply graph has a positive slope and consists of three parts:

• Horizontal.
• Intermediate (ascending).
• Vertical.

Non-price factors of aggregate supply:

• Change in resource prices:
  • Availability of internal resources
  • Prices for imported resources
  • Market dominance
• Change in productivity (production / total cost)
• Legal changes:
  • Business taxes and subsidies
  • Government regulation

Aggregate Supply: Classical and Keynesian Models

Aggregate supply() Is the total amount of final goods and services produced in the economy; it is the total real output that can be produced in a country at various possible price levels.

The main factor influencing is also the price level, and the relationship between these indicators is direct. Non-price factors are changes in technology, resource prices, taxation of firms, etc., which is graphically reflected by a shift of the AS curve to the right or left.

The AS curve reflects changes in the aggregate real volume of production depending on changes in the price level. The shape of this curve largely depends on the time interval in which the AS curve is located.

The difference between the short and long run in macroeconomics is associated mainly with the behavior of nominal and real values. In the short term, nominal values ​​(prices, nominal wages, nominal interest rates) under the influence of market fluctuations change slowly, are "rigid". Real values ​​(output, employment, real interest rate) vary significantly and are considered "flexible". V long term the situation is just the opposite.

Classic model AS

Classic model AS describes the behavior of the economy in the long run.

In this case, the AS analysis is built taking into account the following conditions:

• the volume of output depends only on the number of factors of production and technology;
• changes in factors of production and technology are slow;
• the economy is operating in full employment and the volume of output is equal to the potential;
• prices and nominal wages are flexible.

Under these conditions, the AS curve is vertical at the level of output at full employment of production factors (Fig. 2.1).

Shifts AS in the classical model are possible only with a change in the value of factors of production or technology. If there are no such changes, then the AS curve in the short term is fixed at a potential level, and any changes in AD are reflected only at the price level.

Classic model AS

• AD 1 and AD 2 - aggregate demand curves
• AS - aggregate supply curve
• Q * - potential production volume.

Keynesian model AS

Keynesian model AS examines the functioning of the economy in the short term.

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

• the economy operates under conditions of underemployment;
• prices and nominal wages are relatively tight;
• real values ​​are relatively mobile and react quickly to market fluctuations.

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

Thus, the volume of AS in the short term depends mainly on the value of AD. In the conditions of underemployment and price rigidity, fluctuations in AD cause, first of all, a change in the volume of output (Fig. 2.2) and only subsequently can they be reflected in the price level.

Keynesian model AS

So, we looked at two theoretical AS models. They describe quite possible in reality different reproductive situations, and if we combine the assumed shapes of the AS curve into one, then we get the AS curve, which includes three segments: horizontal, or Keynesian, vertical, or classical and intermediate, or ascending.

AS Curve Horizontal Segment corresponds to a recessionary economy, high unemployment and underutilization of production capacity. In these conditions, any increase in AD is desirable, since it leads to an increase in the volume of production and employment, without increasing the general level of prices.

Intermediate segment of the AS curve presupposes a reproduction situation in which an increase in the real volume of production is accompanied by a slight increase in prices, which is associated with the uneven development of industries and the use of less productive resources, since more efficient resources are already involved.

AS Curve Vertical Segment occurs when the economy is operating at full capacity and it is no longer possible to achieve further growth in production in a short time. An increase in aggregate demand in these conditions will lead to an increase in the general price level.

General model AS.

• I - Keynesian segment; II - classic segment; III - intermediate segment.

Macroeconomic equilibrium in the AD-AS model. Ratchet effect

The intersection of the AD and AS curves determines the point of macroeconomic equilibrium, the equilibrium volume of output and the equilibrium price level. A change in equilibrium occurs under the influence of shifts in the AD curve, the AS curve, or both.

The consequences of an increase in AD depend on which segment of AS it passes through:

• on the horizontal segment AS, the growth of AD leads to an increase in the real volume of output at constant prices;
• on the vertical segment AS, an increase in AD leads to an increase in prices with a constant volume of output;
• on the intermediate segment AS, the growth of AD generates both an increase in the real volume of output and a certain increase in prices.

Reducing AD should have the following consequences:

• on the Keynesian segment AS, the real volume of production will decrease, while the price level will remain unchanged;
• in the classical segment, prices will fall, and the real volume of production will remain at the level of full employment;
• in the middle, the model assumes that both real output and price levels will decline.

However, there is one important factor that modifies the effects of declining AD in the classical and intermediate segments. A reverse movement of AD from position b (Fig. 2.4) may not restore the initial equilibrium, at least for a short period of time. This is due to the fact that prices for goods and resources in a modern economy are largely inflexible in the short term and do not show a downward trend. This phenomenon is called the ratchet effect (a ratchet is a mechanism that allows the wheel to be turned forward, but not backward). Let us consider the effect of this effect using Fig. 2.4.

Ratchet effect

The initial growth of AD, up to the state, led to the establishment of a new macroeconomic equilibrium at the point, which is characterized by a new equilibrium level of prices and volume of production. A drop in aggregate demand from state to, will not lead to a return to the initial equilibrium point, since the increased prices do not tend to decline in the short term and will remain at the level. In this case, the new equilibrium point will move to the state, and the real level of production will drop to the level.

As we found out, the ratchet effect is associated with price inflexibility in the short run.

Why don't prices tend to go down?

• This is primarily due to the inelasticity of wages, which amounts to approximately of the costs of the firm and significantly affects the price of products.
• Many firms wield significant monopoly power to counter price declines when demand is falling.
• Prices for some types of resources (other than labor) are fixed by the terms of long-term contracts.

However, in the long run, when prices fall, prices will go down, but even in this case, the economy is unlikely to be able to return to its original equilibrium point.

Rice. 1. Consequences of AS growth

AS Curve Offset... With an increase in aggregate supply, the economy moves to a new equilibrium point, which will be characterized by a decrease in the general price level with a simultaneous increase in real output. A decrease in aggregate supply will lead to higher prices and a decrease in real NNP
(Fig. 1 and 2).

So, we examined the most important macroeconomic indicators - aggregate demand and aggregate supply, identified the factors influencing their dynamics, and analyzed the first model of macroeconomic equilibrium. This analysis will serve as a certain springboard for a more detailed study of macroeconomic problems.

Rice. 2. Consequences of the fall of AS

Keynesian model for determining the equilibrium volume of production, income and employment

To determine the equilibrium level of national production, income and employment in the Keynesian model, two closely interrelated methods are used: the method of comparing total expenditures and volume of production and the method of "withdrawals and injections". Consider the first cost-output method. For its analysis, the following simplifications are usually introduced:

• there is no government intervention in the economy;
• the economy is closed;
• the price level is stable;
• there is no retained earnings.

Under these conditions, total expenditures are equal to the sum of consumer and investment expenditures.

To determine the equilibrium volume of national production, the investment function is added to the consumption function. The total expenditure curve crosses the 45 ° line at the point that determines the equilibrium level of income and employment (Fig. 3).

This intersection is the only point at which the total costs are equal. No levels of PNP above equilibrium are sustainable. Stocks of unsold goods are rising to unwanted levels. This will push entrepreneurs to adjust their activities in the direction of reducing the volume of production to the equilibrium level.

Rice. 3. Determination of the equilibrium NPP by the "costs - volume of production" method

At all potential levels below equilibrium, the economy tends to spend more than entrepreneurs produce. This stimulates entrepreneurs to expand production to an equilibrium level.

Seizure and injection method

The method of determining by comparing costs and volume of production makes it possible to clearly represent the total costs as a direct factor that determines the levels of production, employment and income. While the “seizure and inject” method is less straightforward, it has the advantage of focusing on inequality and NPP at all but equilibrium levels of production.

The essence of the method is as follows: under our assumptions, we know that the production of any volume of products will give an adequate amount of income after taxes. But it is also known that households can save part of this income, i.e. do not consume. Saving, therefore, represents the withdrawal, leakage, or diversion of potential expenditures from the expense-income stream. As a result of savings, consumption becomes less than total production, or NPP. In this regard, consumption in itself is not enough to take the entire volume of production from the market, and this circumstance, most likely, leads to a decrease in the total volume of production. However, the business sector does not intend to sell all products only to end consumers. Part of the production takes the form of means of production, or investment goods, which will be sold within the business sector itself. Therefore, investment can be viewed as an injection of expenditure into an income-expenditure stream that complements consumption; in short, investments represent potential compensation, or reimbursement, withdrawals for savings.

If the withdrawal of funds for savings exceeds the injection of investment, then there will be less NNP, and this level of NNP is too high to be sustainable. In other words, any level of NNP where savings exceed investment will be above equilibrium. Conversely, if the injections of investment exceed the drain on savings, then there will be more than the NNP and the latter should rise. To reiterate, any size of NNP, when investment exceeds savings, will be below the equilibrium level. Then, when, i.e. when the drain on savings is fully offset by injections of investment, the total cost is equal to the volume of production. And we know that such equality determines the balance of the NNP.

This method can be illustrated graphically using savings and investment curves (Figure 3.6). The equilibrium volume of NPP is determined by the point of intersection of the curves of savings and investment. Only at this point does the population intend to save as much as entrepreneurs want to invest, and the economy will be in a state of equilibrium.

Change in equilibrium NNP and multiplier

In the real economy, NPPs, income and employment are rarely in a stable state of equilibrium, and are characterized by periods of growth and cyclical fluctuations. The main factor influencing the dynamics of NPP is investment fluctuations. At the same time, the change in investment affects the change in NNP in a multiplied proportion. This result is called the multiplier effect.

Multiplier = Change in real NNP / Initial change in cost

Or, transforming the equation, we can say that:

Change in NNP = Multiplier * Initial change in investment.

There are three points to make from the outset:

• The "initial change in spending" is usually caused by shifts in investment spending, for the simple reason that investment appears to be the most volatile component of total spending. But it should be emphasized that changes in consumption, government procurement or exports are also subject to a multiplier effect.
• "Initial change in expenditure" means an upward or downward movement of the aggregate expenditure schedule due to a downward or upward shift in one of the components of the schedule.
• From the second remark it follows that the multiplier is a double-edged sword that works in both directions, i.e. a slight increase in costs can give a multiple increase in the NNP; on the other hand, a small reduction in costs can lead, through the multiplier, to a significant decrease in NPI.

To determine the magnitude of the multiplier, the marginal propensity to save and the marginal propensity to consume are used.

Multiplier = or =

The value of the multiplier is as follows. A relatively small change in investment plans entrepreneurs or household savings plans can cause much larger changes in the equilibrium level of NPP. The multiplier amplifies the fluctuations in entrepreneurial activity caused by changes in spending.

Note that the more (less), the more the multiplier will be. For example, if - 3/4 and, accordingly, the multiplier is 4, then a decrease in planned investments in the amount of 10 billion rubles. will entail a decrease in the equilibrium level of NPP by 40 billion rubles. But if - only 2/3, and the multiplier - 3, then a decrease in investment by the same 10 billion rubles. will lead to a fall in the NPP by only 30 billion rubles.

The multiplier as presented here is also called a simple multiplier for the simple reason that it is based on a very simple economic model. Expressed in the 1 / MPS formula, the simple multiplier reflects only savings withdrawals. As discussed above, in reality, the sequence of income and spending cycles can fade due to tax and import exemptions, i.e. in addition to the drain on savings, one part of the income in each cycle will be withdrawn in the form of additional taxes, and the other part will be used for the purchase of additional goods abroad. Taking into account these additional exemptions, the formula for the multiplier 1 / MPS can be modified by substituting one of the following indicators instead of MPS in the denominator: "the proportion of changes in income that is not spent on domestic production" or "the proportion of changes in income that" flows out "or withdrawn from the stream of “income-expenses.” A more realistic multiplier, which is obtained by taking into account all these withdrawals - savings, taxes and imports, is called a complex multiplier.

Equilibrium output in an open economy

So far, in the aggregate spending model, we have abstracted from foreign trade and assumed the existence of a closed economy. Let's now remove this assumption, take into account the presence of exports and imports, as well as the fact that net exports (exports minus imports) can be either positive or negative.

What is the ratio of net exports, i.e. exports minus imports, and total costs?

Let's take a look at export first. Like consumption, investment, and government procurement, exports generate increases in production, income, and employment domestically. While goods and services that have costly to produce are going overseas, other countries' spending on American goods leads to expanding production, creating more jobs, and increasing income. Therefore, exports should be added as a new component to the total cost. Conversely, when the economy is open to international trade, we must recognize that a portion of the spending intended for consumption and investment will go to imports, i.e. goods and services manufactured abroad and not in the United States. Therefore, in order not to overestimate the value of the volume of production within the country, the sum of consumption and investment expenditures must be reduced by the part that goes to imported goods. For example, when measuring the total cost of domestically produced goods and services, it is necessary to deduct the cost of imports. In short, for a private, non-foreign trade, or closed, economy, total costs are, and for a trading, or open, economy, total costs are. Recalling that net exports are equal, we can say that the total costs for a private, open economy are equal
.

3.7. Impact of net exports on NMP

From the very definition of net exports, it follows that it can be either positive or negative. Consequently, exports and imports cannot have a neutral effect on the equilibrium NPP. What is the real impact of net exports on NPPs?

Positive net exports leads to an increase in total costs in comparison with their value in a closed economy and, accordingly, causes an increase in the equilibrium NPP (Fig. 3.7). On the graph, the new point of macroeconomic equilibrium will correspond to the point, which is characterized by an increase in real NNP.

Negative net exports on the contrary, it reduces domestic aggregate expenditures and leads to a decrease in domestic NNP. On the graph, the new equilibrium point and the corresponding volume of NNP -.

The main (basic) macroeconomic model is the model of "aggregate demand - aggregate supply" ( "AD - AS » ). It allows, firstly, to identify the conditions of macroeconomic equilibrium, to determine the value of the equilibrium volume of production and the equilibrium level of prices, secondly, to explain fluctuations in the volume of production and the level of prices in the economy, thirdly, to show the causes and consequences of these changes, and, finally, describe the various options for the economic policy of the state.

Aggregate demand(AD) Is the sum of the demands of all macroeconomic agents (households, firms, government and foreign sector) for final goods and services. The components of aggregate demand are: 1) household demand, i.e. consumer demand ( WITH); 2) the demand of firms, i.e. investment demand ( I); 3) demand from the state, i.e. government procurement of goods and services ( G); 4) the demand of the foreign sector, i.e. net exports ( Xn). Therefore, the aggregate demand formula is as follows:

AD = C + I + G + Xn.

This formula is similar to the formula for calculating GDP by spending. The difference is that the GDP formula is the sum actual the costs of all macroeconomic agents that they made during the year, while the aggregate demand formula reflects the costs that intend to do macroeconomic agents. The magnitude of these aggregate costs, that is, the magnitude of aggregate demand, depends primarily on the price level.

The value of aggregate demand is the amount of final goods and services for which demand will be presented by all macroeconomic agents at each given price level. The higher the general price level, the lower will be the value of aggregate demand and the less expenses will be made by all macroeconomic agents for the purchase of final goods and services. Consequently, the dependence of the value of aggregate demand on the general level of prices is inverse and graphically it can be represented in the form of a curve with a negative slope (Fig. 3.1). Each point of the aggregate demand curve (curve AD) shows the cost of the amount of final goods and services for which demand will be presented by all macroeconomic agents at each possible price level.

Rice. 3.1. Aggregate demand curve

In fig. 3.1 the abscissa represents real GDP (aggregate demand) Y, measured in monetary units (in dollars, marks, rubles, etc.), i.e., a value indicator, and on the ordinate is the general price level (GDP deflator), measured in relative terms. At a higher price level ( R 1) the value of aggregate demand ( Y 1) will be less (point A) than at a lower price level ( R 2), which corresponds to the value of aggregate demand ( Y 2) (point B).

The aggregate demand curve cannot be obtained by summing individual or market demand curves. This is due to the fact that the total values ​​are plotted along the axes. Thus, an increase in the general price level (GDP deflator) does not mean an increase in prices for all goods in the economy and can occur in conditions when the prices of some goods are decreasing, while prices for some remain unchanged. Accordingly, the negative slope of the aggregate demand curve also cannot be explained by the effects explaining the negative slope of the individual and market demand curves, that is, the substitution effect and the income effect. For example, the replacement of relatively more expensive goods with relatively cheaper ones cannot affect the value of aggregate demand, since it reflects the demand for all final goods and services produced in the economy for the entire real GDP, and a decrease in the value of demand for one good is compensated by an increase in the value of demand for another. Negative slope of the curve AD is explained by the following effects:

1) real wealth effect(the effect of real cash reserves), or Pigou effect(in honor of the famous English economist, colleague of J.M. Keynes at the Cambridge School, student and follower of Alfred Marshall, Professor Arthur Pigou, who introduced the concept of real money reserves into scientific circulation). Real wealth, or real money reserves, is understood as the ratio of the nominal wealth of an individual ( M), expressed in monetary terms, to the general price level ( R):

real money reserves = M/ R.

Thus, this indicator is nothing more than real purchasing power of nominal wealth a person, which can be represented by both cash (monetary financial assets) and securities (non-monetary financial assets, i.e., stocks and bonds) with a fixed par value. As the price level rises, the purchasing power of nominal wealth falls, that is, for the same amount of nominal stocks of money, fewer goods and services can be bought than before.

The Pigou effect is as follows: if the price level rises, then the amount of real money reserves (real wealth) decreases and people feel relatively poorer than before and reduce consumption, and since consumption (consumer demand) is part of aggregate demand, then the amount of real money reserves (real wealth) decreases and the amount of aggregate demand;

2) interest rate effect, or Keynes effect. Its essence is as follows: if the price level rises, then the demand for money increases, since people need more money to buy goods that have risen in price. People withdraw money from bank accounts, the ability of banks to issue loans is reduced, credit resources become more expensive, therefore, the “price” of money (the price of a loan), that is, the interest rate, grows. And since loans are primarily taken by firms, using them to purchase investment goods, the rise in the cost of loans leads to a reduction in investment demand, which is part of the aggregate demand, and, therefore, the value of aggregate demand decreases.

In addition, an increase in the interest rate also reduces consumer spending: on the one hand, not only firms but also households take out a loan (consumer credit), especially for the purchase of durable goods, and its rise in price leads to a reduction in consumer demand, and on the other hand, an increase in the interest rate means that savings are now paid a higher income, which stimulates households to save more and reduce consumer spending. The amount of aggregate demand, therefore, decreases even more;

3) effect of import purchases(net export effect), or the Mundell-Fleming effect: if the price level rises, then the goods of a given country become relatively more expensive for foreigners and therefore exports are reduced. Imported goods are becoming relatively cheaper for the citizens of a given country, so imports are increasing. As a result, net exports decrease, and since they are part of aggregate demand, the value of aggregate demand decreases.

In all three cases, the relationship between the price level and the value of aggregate demand is inverse, therefore, the aggregate demand curve (curve AD) must have a negative slope.

These three effects show the impact price factors (changes in the general price level) for magnitude aggregate demand and determine the movement along the aggregate demand curve. Non-price factors influence myself aggregate demand. This means that the amount of aggregate demand changes equally at each possible price level, which, in turn, determines shift crooked AD... If, under the influence of non-price factors, aggregate demand increases, the curve AD shifts to the right, and if it shrinks, then it shifts to the left.

The non-price factors of change in aggregate demand include all factors that affect the value of aggregate costs:

1) factors affecting total consumer spending, such as:

a) welfare(W). The higher the level of well-being, that is, the amount of wealth, the more consumer spending and the greater the aggregate demand - curve AD moves to the right. Otherwise, it shifts to the left;

b) current income level(Yd). An increase in the level of income leads to an increase in consumption and, accordingly, to an increase in aggregate demand (there is a shift in the curve AD to the right);

v) expectations... When analyzing their impact on aggregate demand, two types of expectations are taken into account. Firstly, expectations of changes in income in the future(Yde): if a person expects an increase in income in the future, then he increases consumption already in the present, which leads to an increase in aggregate demand (shift of the curve AD to the right). Secondly, expectations of price level changes: if people expect the price level to rise, then they increase the demand for goods and services, trying to buy them as much as possible at relatively low prices in the present (the so-called "inflationary psychology"), which also leads to an increase in aggregate demand;

G) taxes(Tx). An increase in taxes leads to a decrease in disposable income, of which consumption is a part, and, consequently, to a decrease in aggregate demand (a shift in the curve AD left);

e) transfers(Tr). An increase in transfers means an increase in personal, and with constant taxes (i.e., other things being equal) and an increase in disposable income. Consumer spending is increasing, aggregate demand is increasing;

e) household debt level(D). The higher the degree of indebtedness, the greater the share of income households are forced to use to pay off debts in the present or save as savings to pay off debts in the future, which leads to a decrease in consumption and, accordingly, aggregate demand (curve shift AD left);

g) consumer loan interest rate(R). The higher the rate of interest on a consumer loan that households take on the purchase of expensive durable goods, the lower consumer spending;

h) number of consumers(N). Obviously, this factor is directly related to aggregate demand;

2) factors affecting total investment costs. Among them are:

a) expectations(E). The expectations of investors (firms) are primarily associated with the expected internal rate of return on investment (expected rate of return), that is, with what JM Keynes called the marginal efficiency of capital. Keynes believed that the basis for making investment decisions is a subjective factor - "natural instinct", the mood of the investor. If the investor is optimistic about the future and expects a high rate of return on investment, he will finance the investment project. Investment demand will increase and the aggregate demand curve will shift to the right. If the economy is in crisis, then investors are pessimistic about their future income and investment costs are reduced;

b) interest rate(R). This factor is also important when making investment decisions: the higher the interest rate, i.e., the more expensive the credit resources, the less loans investors will take and the lower the investment costs, which will shift the curve AD to the left and vice versa.

Influence of the interest rate as a non-price factor of aggregate demand, shifting the curve AD, should be distinguished from interest rate effect, which is the price factor that determines the value of aggregate demand and movement along the curve AD... In the first case, the reason for the change in the interest rate will be any factor Besides changes in the general price level (for example, a change in the supply of money or a change in the demand for money, but not under the influence of a change in the price level). In the second case, the reason for the change in the interest rate will be a change in the demand for money only as a result of changes in the general price level (price factor);

v) amount of income(Y). Since firms can use a certain part of their income to purchase investment goods in order to expand production, the higher the level of firms' income, the greater the value of total investment costs. Investments that depend on the amount of total income are called induced;

G) taxes(Tx). The increase in taxes reduces the income (profit) of investors, which is the internal source of financing for firms and the basis of net investment. Consequently, investment costs are reduced by shifting the curve AD to the left;

e) transfers(Tr). Transfers to firms in the form of subsidies, subventions and a preferential tax credit stimulate investment demand;

e) technologies... The emergence of new, more productive, technologies leads to an increase in investment costs and a shift in the curve AD to the right;

g) overcapacity(Nexcess). The presence of excess capacity reduces the investment demand of firms, since an increase in the capital stock under conditions of underutilization of the amount of equipment already available to firms is meaningless;

h) capital stock of firms(TO 0). If firms have an optimal capital stock at which their profits are maximized, then they will not invest. The lower the value of the capital of firms in comparison with the optimal value, the greater the investment demand;

3) factors affecting public procurement of goods and services. The amount of government purchases of goods and services, as already noted, is an exogenous variable and is determined by state legislative bodies (State Duma, parliament, congress, etc.) when forming the state budget for the next financial year, i.e., it acts as a management parameter:

An increase in government procurement increases aggregate demand (a shift in the AD to the right), and their decrease - reduces;

4) factors affecting net exports, such as:

a) and national income in other countries(Yworld). The growth of GDP and personal income in the foreign sector leads to an increase in demand for goods and services of a given country and, consequently, to an increase in its exports, and, as a result, to an increase in net exports, which increases aggregate demand (curve shift AD to the right);

b) gross national product and national income in a given country(Ydomestic). If the GDP and personal income in a country increase, then its economic agents begin to present a greater demand for goods and services of other countries (foreign sector), which leads to an increase in imports and, consequently, to a decrease in aggregate demand in this country (curve AD moves to the left);

v) national currency exchange rate(e). The exchange rate is the price of a national monetary unit in the monetary units of another (or other) country, that is, the amount of foreign currency that can be obtained for one monetary unit of a given country. An increase in the exchange rate of the national currency reduces net exports and leads to a decrease in aggregate demand (curve shift AD left).

Change in net exports as a result of changes in the exchange rate as a non-price factor in the change in aggregate demand, shifting the curve AD, should be distinguished from the effect of import purchases, in which a change in net exports occurs as a result of the action of a price factor (i.e., a change in the price level), which changes the value of aggregate demand and causes movement along the curve AD.

Non-price factors that also affect aggregate demand and explain the shifts in the curve AD, are monetary factors... This is because the curve AD can be obtained from the equation of the quantitative theory of money (also called exchange equation, or Fisher's equation- in honor of the famous American economist Irving Fisher, who proposed a mathematical formula for the conclusion that followed from the quantitative theory of money, which appeared in the 18th century. and developed in the works of D. Hume, and later D. Ricardo, J. - B. Say, A. Marshall, etc.):

MV = PY,

where M- the mass (quantity) of money in circulation; V- the velocity of money circulation (a value that shows the number of revolutions that, on average, one monetary unit makes per year, or the number of transactions that, on average, one monetary unit serves per year); P- the level of prices in the economy (GDP deflator); Y- real GDP.

From this equation, we get the inverse relationship between the value of GDP and the price level:

Y = (MV) / P.

This means that price factors (price level changes) affect magnitude aggregate demand, causing movement along the curve AD... From the same equation, we obtain two non-price factors of aggregate demand, a change in which changes myself aggregate demand and shifts the curve AD:

1) amount of money in circulation... If the money supply in the economy increases, then all economic agents feel richer and increase their expenses. A rise in aggregate spending leads to an increase in aggregate demand and shifts the curve AD to the right. In addition, an increase in the supply of money in the economy lowers the interest rate (the price of money, that is, the price of credit), and the lower the interest rate, the more, as we have already noted, both consumer and investment costs and, therefore, the greater the total demand. Conversely, a decrease in the supply of money in the economy reduces aggregate demand, shifting the curve AD to the left.

The regulation of the money supply is carried out central bank country. This is what lies at the heart of monetary policy, with the help of which the state can carry out a stabilization policy, influencing the aggregate demand;

2) velocity of circulation of money... An increase in the velocity of money circulation leads to an increase in aggregate demand: if each monetary unit (with a constant quantity in circulation) will make more turnovers and serve more transactions, then this is equivalent to an increase in the value of the money supply, which leads to an increase in aggregate demand.

Aggregate supply(AS) is the value of the amount of final goods and services that all producers (private firms and state-owned enterprises) offer to the market (for sale). As in the case of aggregate demand, we are not talking about the actual volume of production, but about the amount of aggregate output that all producers ready(intend to) produce and offer for sale on the market at a certain price level.

The dependence of the value of the aggregate supply (aggregate output) on the price level in the short run is direct: the higher the price level, i.e., the higher prices producers can sell their products, the greater the value of the aggregate supply. This means that it is possible to plot the aggregate supply curve (the curve AS), each point of which shows the value of the aggregate supply at each given price level. In this way, price magnitude aggregate supply and explain the movement along crooked AS.

Non-price by itself aggregate supply and shifting curve AS, are all factors that change the cost per unit of production. So, if costs increase, then the total supply decreases and the curve AS moves up to the left. If costs decrease, then the total supply increases and the curve AS moves down to right.

Most non-price factors affect aggregate supply in the short run, but some of them can lead to long-term changes in aggregate supply.

Note that the concepts of short-term and long-term periods in macroeconomics differ from the corresponding concepts in microeconomics, where the criterion for dividing into short-term and long-term periods is change in the amount of resources, while in macroeconomics such a criterion is change in resource prices... In the short term, resource prices either do not change at all, or are disproportionate to the change in the general price level. In the long run, resource prices change, and in proportion to the change in the general price level.

Non-price factors affecting the aggregate supply include:

1) resource prices(R resources). The higher the prices for resources, the higher the costs and the lower the total supply. The main components of costs are, firstly, the prices of raw materials and materials, secondly, the wage rate (the price of labor) and, thirdly, the interest rate (payment for capital, that is, the price of renting capital). Thus, the interest rate is a non-price factor in both aggregate demand and aggregate supply. Rising resource prices shift the curve AS to the left upwards, and their decrease - to the shift of the curve AS right down. In addition, the value of prices for resources is influenced by:

a) amount of resources available to the country (the amount of labor, capital, land and entrepreneurial ability). The more resources a country possesses, the lower the prices of resources;

b) prices for imported resources... Since resources, especially natural resources, are unevenly distributed between countries, changes in prices for imported resources for a resource-importing country can have a significant impact on the aggregate supply. The rise in prices for imported resources increases costs, reducing the aggregate supply (curve AS moves up to the left). An example of the negative impact of rising prices for imported resources on aggregate supply is the oil shock of the mid-1970s. (a sharp increase in oil prices by oil-producing countries - members of the international OPEC cartel), which led to a sharp reduction in the aggregate supply in most developed countries and caused stagflation;

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

2) resource performance, that is, the ratio of total production to costs. Resource productivity is the reciprocal of the cost per unit of output: the higher the resource productivity, the lower the costs and the greater the total supply. An increase in productivity occurs if (a) the volume of output increases at the same costs, or (b) costs are reduced with the same volume of output, or (c) both occur.

The main reason for the growth of resource productivity is scientific and technological progress, which ensures the emergence and use in production of new, more advanced and productive technologies, more productive equipment and requires an increase in the level of qualifications and professional training of workers. Therefore, this factor affects the aggregate supply not only in the short term, but also in the long term, leading to a shift in the long-term curve. AS and ensuring economic growth. Technology (technological progress) affects both aggregate demand and aggregate supply;

3) business taxes(Tx). Firms consider business taxes (especially indirect ones) as part of the costs, so an increase in business taxes leads to a decrease in aggregate supply (changes in business taxes are also a non-price factor in aggregate demand). Changes in taxes, for example, on wages, influencing the aggregate demand, does not directly affect the aggregate supply, since it does not change the costs of the firm;

4) transfers to firms(Tr). Transfers to firms can be viewed as anti-taxes and have a positive impact on aggregate supply;

5) state regulation of the economy(Gmanagement). The degree of government regulation of the economy also has a significant impact on aggregate supply. The more the state interferes in the economy, the more institutions and organizations regulating the economy it creates, the heavier the burden of maintaining the state apparatus and, consequently, the more funds are spent manufacturing sector economy, which leads to a reduction in aggregate supply.

It should be noted that with regard to the concept of aggregate supply and the factors that influence it, representatives of different schools in macroeconomics have a unanimity of views. Disagreements concern the interpretation of the kind aggregate supply curve (curve AS). There are two approaches to solving this problem: classical and Keynesian. Accordingly, there are two macroeconomic models that differ from one another, firstly, in the system of prerequisites, secondly, in the system of equations of the model and, thirdly, in theoretical conclusions and practical recommendations.

Classic model. The foundations of the classical model were laid back in the eighteenth century, and its provisions were developed by such outstanding economists as A. Smith, D. Ricardo, J. - B. Say, J. - S. Mill, A. Marshall and others. the classical model is as follows.

1. Its main prerequisite is existence in all markets perfect competition, which corresponded to the economic situation of the late 18th - early 19th centuries. All economic agents are therefore "price takers", that is, they cannot influence the market situation and are guided by the price level that has developed in the market.

2. The economy is divided into two independent sectors: real and monetary. This division is called the "classical dichotomy". The monetary sector does not affect real indicators, but only fixes the deviation of nominal indicators from real ones, which in macroeconomics corresponds to the principle of money neutrality (this principle means that money does not affect the situation in the real sector and that all prices are relative). As a result, in the classical model, the money market is absent, and the real sector consists of three markets: the labor market, the capital market (borrowed funds or credit) and the commodity market.

3. Since there is perfect competition in all these markets, all prices (i.e., nominal values) are flexible... This applies to the price of labor - the nominal rate of wages, and to the price of capital (borrowed funds) - the nominal rate of interest, and the price of goods. Price flexibility means that prices change, adapting to changes in market conditions (i.e., changes in the ratio of supply and demand) and ensure the restoration of the disturbed equilibrium in any of the markets.

4. Since prices are flexible, equilibrium in the markets is established and restored automatically, that is, the principle of the “invisible hand” derived by A. Smith, the principle of self-balancing, self-regulation of markets, operates.

5. Since equilibrium is provided automatically by the market mechanism, then no external force, an external agent should interfere in the process of regulating the economy, and even more so in the functioning of the economy itself. This is how the principle was justified state non-interference in economic management, which was called "laissez faire, laissez passer", which translated from French means "let everything be done as it is done, let everything go as it goes."

6. The main problem in the economy is limitation resources, so all resources are fully used, and the economy is always in a state full employment resources, that is, the most efficient and rational use of them. (As is known from microeconomics, the most efficient use of resources of all market structures corresponds precisely to the system of perfect competition). Due to this, the volume of output is always at its potential level (level potential GDP, i.e. GDP at full employment of all economic resources).

7. Limited resources make the main thing in the economy production problem, i.e. aggregate supply... Therefore, the classical model is a model that studies the economy from the side of the aggregate supply (ie, the "supply-side" model). As a result, the main market is the resource market, and primarily the labor market. Aggregate demand always matches aggregate supply. The so-called "Say's law", proposed by the famous French economist of the early 19th century, operates in economics. Jean-Baptiste Say. He claimed that "Supply generates adequate demand", since each person is both a seller and a buyer at the same time, and his expenses are always equal to income... For example, a worker, on the one hand, acts as a seller of an economic resource, of which he is the owner (i.e., labor), and on the other, a buyer of goods and services that he acquires with the income received from the sale of labor. The amount that the worker receives in wages is equal to the value of the product he has produced. The firm is also both a seller (of goods and services) and a buyer (of economic resources). The income received from the sale of its products, she spends on the purchase of factors of production. Therefore, there can be no problems with aggregate demand, since all agents completely convert their incomes into expenses.

8. The problem of limited resources (increasing the quantity and improving the quality) is being solved slowly. Technological progress and an increase in production capabilities is a long, long-term process. All prices in the economy do not adapt immediately to changes in the ratio between supply and demand.

Therefore, the classical model is a model describing long term("long-run" model).

Since in the economy, due to price flexibility, there is always full employment and the volume of production is at the level of potential GDP, the aggregate supply curve (curve AS) is vertical, reflects the balance in long term period and is denoted LRAS(long-run aggregate supply) (fig. 3.2).

Real markets in the classical model can be represented as follows (Figure 3.3):

a) labor market. Since, in conditions of perfect competition, resources are fully used (at the level of full employment), the labor supply curve ( LS) is vertical and the amount of labor offered is LF... The demand for labor depends on the wage rate, and this dependence is inverse: the higher the wage rate, the higher the costs of firms and the fewer workers they hire. Therefore, the labor demand curve ( LD) has a negative slope.

Initially, equilibrium is established at the intersection of the labor supply curve ( LS) and the labor demand curve ( LD 1) and corresponds to the equilibrium rate of nominal wages W 1 and the number of employees LF... Suppose the demand for labor has decreased and the demand curve for labor LD 1 moved to the left (to LD 2). At a nominal wage rate W 1 entrepreneurs will hire (present demand) for a number of workers equal to L 2. The difference between LF and L 2 is nothing more than unemployment. Since in the nineteenth century. there were no unemployment benefits, then, according to representatives of the classical school, in these conditions, workers as rationally acting economic agents would prefer to receive a lower income than not receive any. The nominal wage rate will drop to W 2, and full employment will return to the labor market LF.

Rice. 3.2. Long-run aggregate supply curve
Rice. 3.3. Real markets in the classic model:

a) labor market; b) capital market; v) goods market

In this way, unemployment in the classical model has voluntary, since it is caused by the refusal of the worker to work for a given rate of nominal wage ( W 2), that is, the workers voluntarily doom themselves to an unemployed state;

b) capital market. It is a market for borrowed funds, a market for loans. Investments "meet" on it ( I) and savings ( S) and the equilibrium interest rate is set ( R). The demand for borrowed funds is presented by firms that use them to purchase investment goods, and the supply of credit resources is carried out by households that lend their savings. Investment negatively depends on the interest rate: the higher the price of borrowed funds, the less investment firms have and the investment curve therefore has a negative slope. The dependence of savings on the interest rate is positive, since the higher the interest rate, the greater the income received by households from lending their savings. Initial equilibrium (investment = savings, i.e. I 1 = S 1) is set at the value of the interest rate R 1. But if savings increase (savings curve S 1 shifts right to S 2), then at the same interest rate R 1 part of savings will not generate income, which is impossible provided that all economic agents behave rationally. Savers (households) will prefer to receive income on all their savings, even if at a lower interest rate. The new equilibrium interest rate will be set at the level R 2, in which all credit funds will be used in full, since at this lower interest rate, investors will take more loans and investments will increase to I 2 (i.e. I 2 = S 2). Equilibrium has been restored, and at the level of full employment of resources;

v) market of goods. In the commodity market, initial equilibrium is established at the intersection of the aggregate supply curve AS and aggregate demand AD 1, which corresponds to the equilibrium price level R 1 and the equilibrium volume of production at the level of potential GDP - Y*. Since all markets are interconnected, a decrease in the nominal wage rate in the labor market leads to a decrease in income levels, and an increase in savings in the capital market leads to a decrease in consumer spending and, consequently, in aggregate demand. Curve AD 1 moves left to AD 2. The price level decreases to R 2. At the same price level equal to R 1, firms will be able to sell not all products, but only a part of it, equal to Y 2. Since firms are rational economic agents, they would prefer to sell the entire output produced, even if at lower prices ( R 2). As a result, equilibrium will again be established at the level of potential GDP ( Y*).

Thus, the markets were balanced by themselves due to the flexibility of prices, and the equilibrium was established at the level of full employment of resources. Only the nominal indicators have changed, while the real ones remained unchanged (i.e., in the classical model flexible are nominal indicators, and real indicators - tough). This also applies to the real volume of output (which is still equal to the potential GDP) and the real income of each economic agent. The fact is that prices in all markets change. proportionally to each other, so the relation W 1 / P 1 = W 2 / P 2 is nothing more than the real wage rate. Consequently, despite the fall in nominal income, real income in the labor market remains unchanged. The real incomes of savers (real interest rate) also did not change, as the nominal interest rate fell in the same proportion as prices. The real incomes of entrepreneurs (sales proceeds and profits) did not decrease, despite the fall in the price level, since costs (labor costs, i.e., the nominal wage rate) fell to the same extent. At the same time, a drop in aggregate demand will not lead to a drop in production, since a decrease in consumer demand (as a result of a drop in nominal income in the labor market and an increase in the amount of savings in the capital market) will be offset by an increase in investment demand (as a result of a drop in the interest rate in the capital market).

From these considerations it followed that protracted crises in the economy are impossible, and only temporary imbalances can occur, which are gradually eliminated by themselves as a result of the action of the market mechanism - the mechanism of price changes. But at the end of 1929, a crisis broke out in the United States, which swept the leading countries of the world and was called the Great Depression (Great Collapse). The Great Depression lasted until 1933. This crisis was not just another economic crisis. He showed insolvency provisions and conclusions of the classical macroeconomic model, the inconsistency of the idea of ​​a self-regulating economic system, because, firstly, the Great Depression, which lasted for four years, could not be interpreted as a temporary disproportion, a temporary failure in the operation of the mechanism of automatic market self-regulation, and secondly, it was impossible was to talk about the limited resources as a central economic problem in conditions when, for example, in the United States the unemployment rate was 25%, that is, every fourth was unemployed (a person who wanted to work and was looking for work, but could not find it).

Keynesian Macroeconomic Model. The reasons for the Great Crash, possible ways out of it and recommendations for preventing similar economic catastrophes in the future were analyzed and substantiated in the book of the outstanding English economist J.M. Keynes, The General Theory of Employment, Interest and Money, published in 1936. the light of this book was that macroeconomics stood out as an independent section of economic theory with its own subject and methods of analysis. Keynes's contribution to economic theory was so great that the emergence of his macroeconomic model, an approach to analysis economic processes received the name "Keynesian revolution".

In fairness, it should be noted that the inconsistency of the provisions of the classical school was not that its representatives, in principle, came to wrong conclusions, but that their conclusions were developed in the 19th century. and the provisions of the classical model reflected the economic situation of that time, that is, the era of perfect competition. However, they no longer corresponded to the economy of the first third of the twentieth century, a characteristic feature of which was imperfect competition. J.M. Keynes refuted the basic premises and conclusions of the classical school, building his own macroeconomic model. Its main provisions are as follows.

1. All markets have imperfect competition.

2. The real and monetary sectors are closely interconnected and interdependent. The principle of money neutrality, characteristic of the classical model, is replaced by the principle of “money matters”, which means: money affects real performance... The money market becomes a macroeconomic market, a part (segment) of the financial market along with the securities market (borrowed funds).

3. Since there is imperfect competition in all markets, prices are inflexible, they tough, or, in Keynes's terminology, sticky, that is, sticking at a certain level and not changing over a certain period of time. So, in the labor market, the rigidity (stickiness) of the labor price (nominal wage rate) is due to the fact that:

a) acts contract system... The contract is signed for a period of one to three years, and during this period the nominal wage rate stipulated in the contract cannot change;

b) act unions who sign collective agreements with entrepreneurs, negotiating a certain amount of the nominal wage rate, below which entrepreneurs are not allowed to pay workers. Thus, the wage rate cannot be changed until the terms of the collective agreement are revised;

c) the state establishes minimum wage That is, entrepreneurs are not allowed to hire workers at a rate below the minimum. Due to this, on the labor market graph (Fig. 3.3, a) with a decrease in the demand for labor (shift of the curve LD 1 to LD 2) the price of labor (nominal wage rate) will not decrease to W 2, but will remain ("stick") at the level W 1.

In the commodity market, price rigidity is explained by the fact that there are monopolies, oligopolies or firms - monopolistic competitors that have the ability to fix prices. Therefore, on the graph of the market for goods (Fig. 3.3, v) with a decrease in demand for goods, the price level will not decrease to R 2, but will remain at the level R 1.

Interest rate, according to Keynes, is formed not on the capital market(borrowed funds) as a result of the ratio of investments and savings, and in the money market- by the ratio of the demand for money and the supply of money. Keynes justified this position by the fact that at the same level of interest rates, actual investments and savings can be unequal, since they are made by different economic agents with different goals and motives of behavior. Firms make investments, and households save. According to Keynes, the main factor that determines the value of investment costs is not the level of the interest rate, but the expected rate of internal return on investment, what Keynes called marginal capital efficiency.

The investor makes an investment decision by comparing the value of the marginal efficiency of capital (which is the investor's subjective assessment) with the interest rate. If the first value exceeds the second, then the investor will finance the investment project regardless of the absolute value of the interest rate. So, if the investor's assessment of the marginal efficiency of capital is 101%, then the loan will be taken at an interest rate equal to 100%; and if this estimate is 9%, then he will not take a loan at a rate of 10%. The factor determining the amount of savings is also not the interest rate, but the amount of disposable income.

Keynes believed that savings do not depend on the interest rate and even noted (using the argument of the 19th century French economist Sargan, which is called the "Sargan effect" in economic literature) that there can be an inverse relationship between savings and the interest rate if a person wants to accumulate a fixed amount by a certain date.

So, if a person wants to provide an amount of 10 thousand dollars for his pension, then at a rate of 10% he must accumulate 100 thousand dollars, and at a rate of 20% - only 50 thousand dollars.

Graphically, the ratio of investment and savings in the Keynesian model is shown in Fig. 3.4. Since savings do not depend on the interest rate, their graph is a vertical curve, and investments are weakly dependent on the interest rate, therefore, they can be depicted as a curve with a slight negative slope. If savings increase to S 1, then the equilibrium interest rate cannot be determined, since the investment curve I and a new savings curve S 2 have no intersection point in the first quadrant. Hence, the equilibrium interest rate ( Re) should be sought in another, namely, the money market (according to the ratio of the demand for money MD and money offers MS) (fig. 3.5).

4. Since prices are rigid in all markets, the equilibrium of the markets is established not full-time resources. So, in the labor market (Fig. 3.3, a) the nominal wage rate is fixed at the level W 1, in which firms present a demand for a number of workers equal to L 2. The difference between LF and L 2 are the unemployed. Moreover, in this case, the cause of unemployment is not the refusal of workers to work for a given nominal wage rate, but the rigidity of this rate. Unemployment from voluntary turns into forced: workers would agree to work at a lower rate, but employers have no right to reduce it. Unemployment is becoming a serious economic problem.

Rice. 3.4. Investment and savings in the Keynesian modelRice. 3.5. Money market

In the commodity market (Fig. 3.3, v) prices also "stick" at a certain level ( R one). A decrease in aggregate demand as a result of a decrease in income due to the presence of unemployed (note that unemployment benefits were not paid) and therefore a decrease in consumer spending leads to the inability to sell all manufactured products ( Y 2 < Y*), giving rise to a recession (decline in production). A downturn in the economy affects investor sentiment, their expectations about future internal return on investment, and leads to their pessimism, which causes a decrease in investment spending. Aggregate demand falls even more.

5. Since private sector spending (consumer spending by households and investment spending by firms) is not able to provide the amount of aggregate demand corresponding to potential GDP (i.e., such a value at which it would be possible to consume the volume of output produced under the condition of full employment of resources) , then an additional macroeconomic agent should appear in the economy, either presenting its own demand for goods and services, or stimulating the demand of the private sector and thus increasing aggregate demand. This agent, of course, should be the state. This is how Keynes justified the need for government intervention and state regulation economy.

6. The main economic problem (in conditions of underemployment of resources) becomes the problem aggregate demand, and not aggregate supply, that is, the Keynesian model studies the economy from the side of aggregate demand.

7. Since the stabilization policy of the state, that is, the policy of regulating aggregate demand, affects the economy in the short term, the Keynesian model also describes the behavior of the economy in short term("Short-run"). Keynes did not consider it necessary to look far into the future, to study the behavior of the economy in the long run, wittily remarking that "in the long run we are all dead."

In the short run, the aggregate supply curve SRAS(short-run aggregate supply), if the economy has a large number of unoccupied resources(as, for example, it was during the Great Depression), has horizontal view. This is the so-called "extreme Keynesian case" (Fig. 3.6, a). When resources are not limited, prices for them do not change, so costs do not change and there are no prerequisites for a change in the level of prices for goods. However, in modern conditions, the economy has an inflationary character, the rise in prices for goods does not occur simultaneously with an increase in prices for resources (as a rule, there is a lag, i.e., a time lag, therefore, an increase in prices for resources occurs disproportionately the growth of the general price level) and the expectations of economic agents are becoming increasingly important, then in macroeconomic models (both neoclassical and neo-Keynesian) the curve short-term aggregate supply ( SRAS) is graphically depicted as a curve having positive slope(fig. 3.6, b).

Long-run aggregate supply curve ( LRAS) is depicted as vertical curve (fig. 3.7, a), since in the long run the markets come to mutual equilibrium, the prices of goods and resources change proportionally to each other(they are flexible), agents' expectations change and the economy tends to the potential volume of production. At the same time, the real volume of output does not depend on the price level and is determined by the country's production potential and the amount of available resources. Since the value of the aggregate supply does not change with a change in the price level, the price factors do not render influence on the value of aggregate supply in the long run (movement along the vertical curve of long-term aggregate supply from point A to point B). When the price level rises from R 1 to R 2, the output remains at its potential level ( Y*).

Rice. 3.6. Short-run aggregate supply curve

Basic non-price factor which changes by itself aggregate supply in the long run and determines shift crooked LRAS(fig. 3.7, b), Is a change in the quantity and (or) quality (productivity) of economic resources, which underlies changes in the production potential of the economy and, consequently, changes in the value potential output(from Y 1 * up Y 2 *) at each price level. An increase in the quantity and (or) improvement in the quality of economic resources shifts the curve LRAS to the right, which means economic growth. Accordingly, a decrease in the quantity and (or) a deterioration in the quality of economic resources leads to a decrease in the production potential of the economy, a decrease in the value of the potential volume of output (a shift in the curve LRAS left).

The value of the aggregate supply in the short run depends on the price level. The higher the price level ( R 2 > R 1), i.e., the higher the price at which producers can sell their products, the greater the value of the aggregate supply ( Y 2 > Y 1) (fig. 3.7, v). The dependence of the value of the aggregate supply on the price level in the short run is straight, and the short-term aggregate supply curve has a positive slope. In this way, price factors (general price level) affect magnitude short-term aggregate supply and explain the movement along crooked SRAS(from point A to point B).

Rice. 3.7. The impact of price and non-price factors on the aggregate supply.

Factors: a, in- price, b, d- non-price

Non-price factors affecting by itself aggregate supply in the short run and shifting the aggregate supply curve, as already discussed earlier, are all factors that change the cost per unit of production. If costs rise, the aggregate supply shrinks and the aggregate supply curve shifts upward to the left (from SRAS 1 to SRAS 2). If costs decrease, then the aggregate supply increases and the aggregate supply curve shifts to the right and down (from SRAS 1 to SRAS 3) (fig. 3.7, G).

Equilibrium in the model "AD - AS" is set at the intersection of the aggregate demand curve and the aggregate supply curve. The intersection coordinates give the value of the equilibrium output (equilibrium GDP) and the equilibrium price level. Changes in either aggregate demand or aggregate supply (curve shifts) lead to changes in the equilibrium and equilibrium values ​​of GDP and the price level.

Rice. 3.8. Consequences of increasing aggregate demand in the "AD - AS" model

In fig. 3.8 shows that the consequences of change (in this case, growth) aggregate demand depends on of the kind the aggregate supply curve. So, in the short run, if the curve AS horizontal, growth AD leads only to an increase in the equilibrium volume of output ( Y 1 increases to Y 2) without changing the price level (Fig. 3.8, a). If the curve of short-term aggregate supply has a positive slope, then an increase in aggregate demand results in an increase in the equilibrium value of output (from Y 1 to Y 2), and the equilibrium price level (from R 1 to R 2) (fig. 3.8, b). In the long run, a change in aggregate demand does not affect the equilibrium value of output (the economy remains at the level of potential GDP - Y*), but only affects the change in the equilibrium price level (from R 1 to R 2) (fig. 3.8, v).

The change aggregate supply has the same consequences whatever from the type of curve AS... As seen from Fig. 3.9, an increase in aggregate supply in all three cases (if the aggregate supply curve is horizontal, has a positive slope and is vertical) leads to an increase in the equilibrium level of output (from Y 1 to Y 2) and a decrease in the equilibrium price level (from R 1 to R 2). The difference is that in the short run (with a shift SRAS) the value of actual GDP grows (Fig. 3.9, a and fig. 3.9, b), while in the long run (with a shift LRAS) the potential GDP increases ( Y*), i.e. the production capabilities of the economy (Fig. 3.9, v).

Consider the economic mechanism for changing the equilibrium in the model "AD - AS" in the short and long term (Fig. 3.10). Suppose that the economy is initially in a state of short-term and long-term equilibrium (point A), where all three curves intersect: AD, SRAS and LRAS... If the aggregate demand increases, then the curve AD shifts right to AD 2 (fig. 3.10, a). The growth in aggregate demand leads to the fact that entrepreneurs begin to sell off stocks and increase production, attracting additional resources, and the economy gets to point B, where the actual volume of production ( Y 2) exceeds potential GDP ( Y*). Point B is a point short-term short-term of the aggregate supply).

Attracting additional resources (above the level of full employment) requires additional costs, so the costs of firms grow and the total supply decreases (curve SRAS gradually moves up to SRAS 2), as a result of which the price level rises (from R 1 to R 2) and the value of aggregate demand decreases to Y*. The economy returns to the long-term aggregate supply curve (point C), but at a higher than the original price level. Point C (like point A) is a point long-term equilibrium (intersection of the aggregate demand curve with the curve long-term of the aggregate supply). Therefore, one should distinguish between equilibrium GDP and potential GDP. On our chart equilibrium GDP corresponds to all three points: A, B and C, while potential GDP corresponds only to points A and C when the economy is in a state long-term balance. At point B, actual GDP, i.e. equilibrium GDP in short term period.

Rice. 3.9. Consequences of Aggregate Supply Growth in the "AD - AS" Model

Similarly, you can consider the establishment of long-term and short-term equilibrium in the economy, if the curve AS has a positive slope (fig. 3.10, b). The difference here is that when justifying the transition of the economy from point A to point B, it must be borne in mind that with an increase in aggregate demand, firms not only sell stocks and increase production (which for some time is possible without raising prices for resources), but and increase the prices of their products. So first the economy moves along crooked SRAS, since only price factor and grows magnitude aggregate supply. As a result, the economy gets to the point short-term equilibrium (point B), which corresponds not only to a higher than at point A, the volume of output ( Y 2), but also a higher price level ( R 2). Since resource prices have not changed and the price level has increased, real incomes (for example, real wages) have decreased ( W/ P 2 < W/ P one). The owners of economic resources begin to demand higher prices for resources (for example, nominal wages), which leads to higher costs (impact non-price factor) and a reduction in aggregate supply ( shift left up curve SRAS), which leads to an even greater increase in the price level (from R 2 to R 3). As a result, the economy gets to point C, corresponding to long-term equilibrium and potential GDP.

Rice. 3.10. Shifting from short-term to long-term equilibriumAggregate demand and aggregate supply shocks.

A shock is an unexpected sudden change in either aggregate demand or aggregate supply. Distinguish between positive shocks (unexpected sharp increase) and negative shocks (unexpected sharp decline) AD and AS.

Positive shocks aggregate demand shift the curve AD to the right. Positive shocks aggregate supply shift the curve AS: down if it has a horizontal form ( SRAS); right down if it has a positive slope ( SRAS); to the right if it is vertical ( LRAS).

Negative shocks aggregate demand shift the curve AD to the left, and negative shocks aggregate supply shift the curve AS depending on its type up(SRAS), left up(SRAS) or to the left(LRAS).

The reasons for positive shocks in aggregate demand can be either a sharp unexpected increase in the supply of money, or an unexpected sharp increase in any of the components of aggregate spending (consumer, investment, government or foreign sector). The mechanism and consequences of the impact of a positive shock in aggregate demand on the economy are actually considered above (Fig. 3.10), and in the short term are manifested in the form inflationary gap output when actual GDP exceeds potential ( Y 2 > Y*), which ultimately leads to an increase in the price level (inflation).

The opposite are the consequences of a negative shock (sharp reduction) in aggregate demand (Fig. 3.11), the reasons for which can be either an unexpected reduction in the supply of money (compression of the money supply), or a sharp reduction in aggregate spending. In the short term, this leads to a decrease in the volume of output and means a transition of the economy from point A to point B - a point of short-term equilibrium (a decrease in aggregate demand, that is, aggregate costs, causes an increase in firms' inventories, overstocking, the inability to sell manufactured products, which is the reason curtailment of production). Appears recession gap output - a situation when the actual GDP is less than the potential ( Y 2 < Y*). In conditions of perfect competition, entrepreneurs will begin to reduce prices for their products, the price level will decrease (from R 1 to R 2), i.e. deflation will occur (in the economic literature, therefore, one can find the concept deflationary gap), the value of aggregate demand will increase (movement along crooked AD), and the economy will get to point C - point long-term equilibrium, where the volume of production is equal to the potential.

Such a situation can only take place in conditions of perfect competition. In case of imperfect competition, the so-called "Ratchet effect"(A ratchet in technology is a mechanism that allows the device to move only forward).

Rice. 3.11. Negative Aggregate Demand Shock

In macroeconomics, the "ratchet effect" is manifested in the fact that prices easily rise, but it is practically impossible to reduce them, which is primarily due to the rigidity of the nominal wage rate (in modern conditions, neither workers nor trade unions will allow it to decrease), which constitutes a significant part of the costs firms and, therefore, the prices of goods.

Negative aggregate supply shocks (Figure 3.12, a) are usually called price shocks because they are caused by changes leading to higher costs and therefore price levels. These reasons include:

1) rise in prices for raw materials being one of the main cost components;

2) union struggle for an increase in the nominal wage rate (if the struggle is successful and wages increase significantly, then the resulting increase in costs leads to a reduction in the aggregate supply);

3) state environmental measures(laws on environmental protection require firms to increase their costs for the construction of treatment facilities, the use of filters, etc., which affects the volume of production);

4) natural disasters leading to serious destruction and damaging the economy, etc.

A negative shock to aggregate supply affects the economy only in the short term, since, as a rule, the government takes measures to stimulate aggregate supply in order to prevent a decrease in the country's productive potential, i.e., a decrease in GDP in the long run (potential GDP). This is precisely the situation that took place in the mid-1970s. due to the oil shock.

The sharp rise in the prices of oil and other energy resources increased costs and led to a reduction in aggregate supply in the short run (curve shift SRAS left up to SRAS 2). As a result simultaneously there was a serious decline in production, i.e., a recession, or stagnation (GDP decreased from Y* before Y 2 and was at this low level for a fairly long time), and the rise in the price level (from R 1 to R 2), i.e. inflation (point B in Figure 3.12, a). This situation in the economic literature is called "stagflation" (from the merger of the words "stagnation" and "inflation"). The governments of developed countries, fearing a reduction in economic potential due to high unemployment, have done everything possible to increase aggregate supply (return the curve SRAS, ensuring GDP growth and inflation reduction). If the government does not take any measures, then they say that it adjusts to the shock, hoping that the aggregate supply will gradually increase and the economy itself, with the help of the market mechanism, will overcome the consequences of the negative supply shock and return to its original position (from point B to point And in Fig.3.12, a).

Rice. 3.12. Aggregate supply shocks:

a) negative; b) positive

Positive an aggregate supply shock (Figure 3.12, b) are usually called technological shock, since a sharp increase in aggregate supply, as a rule, is associated with scientific and technological progress, and above all with the improvement of technology. Technological changes lead to an increase in resource productivity, which is one of the most important factors in increasing aggregate supply. The emergence of technological innovation leads first to growth short-term aggregate supply (curve SRAS 1 moves right down to SRAS 2). The volume of issue in the short term increases to Y* 2, and the price level decreases to R 2. But as changes in technology increase the productive capacity of the economy, there is a shift to the right of the long-run aggregate supply curve. Therefore, point B also becomes a point of long-term equilibrium. Potential GDP increases (from Y* 1 to Y* 2). The economy is experiencing economic growth.

Aggregate demand is the sum of all expenditures on final goods and services produced in the economy.

It reflects the relationship between the volume of aggregate output for which demand is presented by economic agents and the general level of prices in the economy.

The structure of aggregate demand can be distinguished:

Demand for consumer goods and services;

The demand for investment goods;

State demand for goods and services;

Net export demand is the difference between foreign demand for domestic goods and domestic demand for foreign goods.

Aggregate demand curve AD(from the English aggregate demand) shows the amount of goods and services that consumers are willing to purchase at each possible price level.

The aggregate demand curve outwardly resembles the demand curve in a separate market, but it is built in a different coordinate system (Fig. 12.1). The abscissa shows the values ​​of the real volume of national production, denoted by the letter Y... The ordinate is not the absolute price indicators (for example, in billion rubles), but the price level (R), or deflator.

Rice. 12.1. Aggregate demand curve.

Moving along a curve AD reflects the change in aggregate demand depending on the dynamics of the general price level.

The simplest expression for this relationship can be obtained from the equation of the quantitative theory of money:

from here or where M - the amount of money in the economy; V - the speed of money circulation; R - the level of prices in the economy; Y - the real volume of output for which the demand is presented.

Negative slope of the curve AD is explained as follows: the higher the price level R, the less real stocks Money M / P(curve HELL built on the condition of a fixed supply of money M and the speed of their circulation V), and, consequently, there is less quantity of goods and services for which demand is presented.

The downward trajectory (negative slope) of the aggregate demand curve is also determined by:

Interest rate effect;

Wealth effect, or the effect of cash balances;

The effect of import purchases.

Interest rate effect manifests itself through the impact of the changing price level on the interest rate, and, consequently, on consumer spending and investment. If the money supply is considered constant, then an increase in the price level automatically increases the demand for money, which means that the interest rate rises. In turn, the higher the interest rate, the more consumers start to save money and make fewer purchases. As a result, private savings are growing. The rise in the cost of credit is forcing entrepreneurs to cut investments - production purchases. Thus, the demand from both private consumers and entrepreneurs is reduced, which leads to a decrease in the aggregate demand for a real national product. Curve AD becomes descending and approaching the abscissa axis.

Wealth effect or real cash balances, manifests itself in the negative impact of inflation on household income. The wealth of people in the form of fixed incomes during inflation decreases in inverse proportion. These are urgent accounts, bonds, wages, annuities, pensions, benefits. The residual purchasing power of people, individuals and legal entities is called real cash balances. By cutting their consumer spending in this way, they directly affect aggregate demand downward.

Effect of import purchases means that when the price level in the country rises, foreign-made goods and services become relatively cheaper (all other things being equal). The population will buy less domestic goods and more imported ones. Foreigners will reduce their demand for goods and services of a given country due to their rise in prices. Consequently, there will be a decrease in exports and an increase in imports, and in general, net exports will decrease, reducing the total volume of aggregate demand.

These effects affect the aggregate demand through prices, so the point moves along the aggregate demand curve. Under the influence of all non-price factors, the curve AD moves left and right depending on the direction of the factor (Fig. 12.2). On the graph, the increase in aggregate demand is represented by the deviation of the curve to the right - from AD1 To AD2. This bias shows that at different price levels, the desired volume of goods and services will increase. The decrease in aggregate demand is represented by the deviation of the curve to the left - from ADX To ADy This shift suggests that people will buy less product than before at different price levels.

Within the framework of macroeconomic analysis, the national market is studied as an organic unity of its components. It cannot be represented as a simple sum of the terms of the markets of individual goods, individual industries or regions of the country. This is a qualitatively new formation, which is expressed in superiority over the sum of its constituent elements.

The national market is the entire system of socio-economic relations in the field of exchange, in which goods and services are sold, the nature of the use of national resources is determined, information is generated about the state of affairs in sectors and spheres of economic life, the adaptation of social production and its structure to the volume and structure social needs in the country.

Demand and supply in the national market

The fundamental elements of the market mechanism are price, supply and demand. In demand, the willingness of society to purchase goods and services is manifested, and in supply, the production of goods and services ready for sale at prevailing prices. At the national market level, we are talking about aggregate demand and aggregate supply. However, the price cannot be an expression of the summands of the prices of the whole mass of dissimilar and diversified goods. To express it, price indices are used, i.e. price levels as an aggregated expression of the dynamics of the entire set of prices in the country.

Aggregate demand is the demand for the total volume of goods and services that can be realized at an appropriate price level within the national economy.

The aggregate supply is the total amount of goods and services that are produced in the country and presented for sale at the prevailing price level.

In both cases, the number of requested and offered goods and services cannot be understood as their expression in natural-material form, since they cannot be added, summed up. It is impossible to add meters of fabrics with tons of cast iron, the number of machines, kilowatt-hours of energy generated. But all these goods can and should be reduced to a common denominator, which is their value expression.

Aggregate demand and aggregate supply, the price level are attributes of the process of social reproduction of any country. There are none economics school that would neglect these categories. Attempts to attribute a secondary role to them in the labor theory of value indicate either economic ignorance or scientific quackery. Suffice it to mention that K. Marx called supply and demand "social driving forces."

Supply and demand functions

Let us dwell briefly on the functions of aggregate demand and aggregate supply.

1. They serve as a kind of barometer of proportional, balanced development of the national economy (passive function), since any process in it will immediately manifest itself on the market in changing the ratio between supply and demand.

2. Having fulfilled the noted passive function, they immediately begin to perform an active function of correcting the imbalances that have arisen and, through market prices, set capital in motion, ensuring their overflow from one industry to another.

3. They represent two aspects of the process of social reproduction - consumption and production, although they do not coincide with them.

4. All socio-economic contradictions in the economic life of society find their expression in them.

Aggregate demand

Let's take a closer look at aggregate demand. Let's turn to fig. 26.1, which shows the curve of aggregate demand (C C), and on the horizontal and vertical axes, respectively, the real volume of social production (Q) and the price level (C ′) are plotted.

Rice. 26.1. Aggregate demand curves

The graph clearly shows the inverse relationship between the price level and the real volume of production: the "negative" slope of the curve. Note that the aggregate demand curve deviates downward and to the right, i.e. the same as the demand curve for an individual product, but the reasons for this deviation are different.

When considering a partial market (market for one product), the negative slope of the curve is predetermined by one independent variable - the price of the product, in which the income effect and the substitution effect are manifested. For aggregate demand, the situation becomes more complicated, since many variables interact at the level of the national market. First of all, one cannot assume that income is given. Total income changes. The use of the substitution effect is also unacceptable, since we are not talking about a choice between goods, but about the demand for all goods, which does not allow making any “castling” of them.

Among the many factors affecting aggregate demand, it is necessary to distinguish between price and non-price factors.

Price Demand Factors

To price factors, i.e. factors that are associated with price dynamics and, therefore, do not change the position of the С С curve, should be attributed, first of all, to the effects of the interest rate, real cash balances (wealth effect) and import purchases.

The effect of the interest rate is manifested in the change in its level under the influence of the dynamics of the price level, which directly affects consumer spending. If the price level rises (falls), then interest rates rise (fall), and this in turn leads to a reduction (increase) in consumer spending and investment. Why is this happening? If we assume that the volume of money supply in the economy remains unchanged, then with an increase in prices, the demand for money from both buyers and entrepreneurs increases to cover growing costs. The consequence of this is an increase in the level of interest rates, which in turn will affect the reduction in expenditures and aggregate demand.

Another factor determining the downward trajectory of the aggregate demand curve is the wealth effect, which manifests itself in the fact that with an increase in the price level, the purchasing power of accumulated financial assets of time deposits and bonds decreases. This forces their owners to cut their costs. Conversely, when the price level decreases, the purchasing power of assets increases, and costs, and therefore aggregate demand, increase.

Finally, the effect of import purchases is associated with the ratio of prices within the country and abroad. An increase in the price level in the country will cause an increase in imports and a decrease in exports, which will predetermine a reduction in the foreign trade balance in the aggregate demand of the country, a drop in demand for domestic goods and services. Conversely, a decrease in the level of prices in the country contributes to an increase in the balance of foreign trade, demand for domestic goods and services.

Changes in the price level lead to changes in the level of costs of consumers within the country, enterprises, government, foreign buyers and, accordingly, to fluctuations in demand for real output. These changes are triggered by prices, and the aggregate demand curve on the chart remains unchanged.

Non-price factors of demand

A change in one or more “other conditions” causes a shift in the aggregate demand curve. Such conditions represent non-price factors of aggregate demand.

Non-price factors include changes in consumer, investment, government and foreign trade spending. Changes in consumer spending depend on the level of wealth, expectations and indebtedness of consumers, as well as on the level of taxation, which affects the amount of disposable income. It must be remembered that these are changes in consumer spending that have nothing to do with lower or higher prices.

Other non-price factors are changes in investment costs, which are determined by the level of interest rates, the expected level of future investment returns, taxes on enterprises, their level of technical equipment and the extent of excess production capacity. In this case, we are talking about the dynamics of demand for goods and services for industrial purposes, for means of production. The dominant role here is played by the business sector with its demands for investment goods.

When considering the interest rate, it is necessary to take into account only those changes that are not related to the effect of the interest rate already discussed above as a consequence of changes in the price level. Therefore, an increase or decrease in the interest rate caused by any factor other than a change in the price level leads to a decrease or increase in investment costs, aggregate demand.

With rising incomes in foreign countries the demand for goods of domestic and imported production is increasing. Therefore, raising the level of national income for our trading partners increases our export opportunities. A decrease in national income abroad has the opposite effect. In the first case, the aggregate demand curve shifts to the right, in the second - to the left.

Changes in the ruble exchange rate against other currencies are another factor affecting the foreign trade balance and aggregate demand. When the ruble depreciates, its price in dollars falls. This means that the dollar is appreciating. As a result of the new relationship between the two national currencies, American consumers will be able to get more rubles for a given amount of dollars, and consumers in Russia will receive less dollars for each ruble. As a result, for American consumers, Russian goods will become cheaper than domestic ones, and for consumers in Russia, American goods will become more expensive. This should help to increase our foreign trade balance, which in turn will lead to an increase in aggregate demand in Russia.

Before we move on to considering the aggregate supply curve (P C), let us once again turn our attention to the aggregate demand curve (C C), which expresses the possible relationship between the variables. To determine the level of prices and the volume of production, it is necessary to construct the curve of the aggregate supply (PS), which also shows only the relationship between the level of prices and the volume of production. And only the combination of the curves С С and П С in one figure makes it possible to determine the general national level of prices and the so-called equilibrium volume of national production (product).

Aggregate supply

Rice. 26.2. Aggregate demand curve

The aggregate supply is shown in Fig. 26.2 curve P S, which shows the correspondence of one or another level of real volume of domestic production to each of the possible price levels. Higher price levels retain incentives to produce more goods and offer them for sale. Lower price levels cause a reduction in the production and supply of goods. The relationship between the price level and the volume of the national (domestic) product is direct ("positive").

Curve PS reflects the change in costs per unit of output with an increase or decrease in the volume of national production. The cost per unit of production can be calculated, of course, only conditionally, by dividing the value of the total resources used by the value of the volume of national production. In other words, the unit cost for a given level of output will represent the national average cost.

Short Term Offer

The horizontal segment of the P S curve characterizes the state of national production in the short run, when prices for many goods are inflexible. This is due, firstly, to the dissemination of information on list prices in the near future. Secondly, it is assumed that there are unused both human and material resources, i.e. labor and capital. The availability of resources indicates that it is possible to expand production at an established price level without putting any pressure on them. If in this segment the volume of the national product begins to increase, then neither a deficit, nor "bottlenecks" in production, causing an increase in prices, do not arise. Entrepreneurs can purchase labor and other resources at fixed prices, which allows them to keep production costs at the same level and, therefore, do not raise the prices of goods. If the real volume of production begins to decline, then the prices of goods and resources will remain at the same level. This means that with a reduction in the real volume of national production, the prices of goods and wages will remain unchanged.

The horizontal segment of the PS curve is called Keynesian - after the famous English economist J.M. Keynes, who for the first time against the background of the "Great Depression" of the 30s. proved the possibility and necessity of expanding social production while the level of prices for

resources and products. In addition, Keynes argued that declines in prices and wages did not diminish the decline in real output and employment.

However, let us return again to the P S curve and assume that significant previously unused resources at fixed prices were used to achieve the maximum volume of national production on the horizontal segment of this curve. A further increase in national production is possible only if additional available free resources are attracted, which have a lower degree of return, productivity, and efficiency. This will cause an increase in production costs, which will certainly require an increase in the price level so that the use of these resources is profitable.

Mid-term supply

It is necessary to take into account the fact that the national market includes many markets for goods and resources, and full employment is not formed simultaneously and far unevenly. This can give rise to deficits and other "bottlenecks" in social production, which often have to be "embroidered" by means of additional costs and efforts. At the same time, the rise in prices to a new higher level opens up the possibility of using less and less efficient resources, which will obviously lead to a decrease in the national economic level of profitability of social production. Therefore, on the intermediate segment of the P S curve, an increase in real domestic (national) product in the medium term is accompanied by an increase in prices.

Long-term offer

Finally, we come to the point where all available resources are fully utilized and the workforce is fully employed. Consequently, a further increase in social production is impossible due to the fact that the available limited resources have been exhausted. This position of the national economy from the side of the aggregate supply in Fig. 26.2 is characterized by a vertical segment of the P S curve in the long run. This means that national production and aggregate supply have acquired a fixed character and do not depend on the price level.

The vertical segment of the P S curve corresponds to the views of the classical economic school and its followers, the neoclassicists, from the point of view of which the market economy has sufficient internal mechanisms of self-regulation to ensure permanent full employment. Consequently, this segment of the P S curve symbolizes the complete independence of the aggregate supply from the level of prices and aggregate demand and the complete predetermination of the technical and production capabilities of the national economy.

Nevertheless, the proposed logic of changes in the conditions of social production in the process of transition from the short-term period (horizontal segment) to the medium-term (intermediate segment) and then to the long-term period (vertical segment) testifies to one degree or another about the functional dependence of the aggregate supply on the price level at the invariability of all other circumstances, factors.

Non-price supply factors

The entire set of factors affecting the change in aggregate supply belongs to non-price factors and, therefore, causes a shift in the P C curve. This shift indicates changes in production costs per unit of national product. At the same time, an increase in production costs per unit of product causes a shift of the P C curve to the right, and their reduction - to the left.

The most significant non-price factors of the aggregate supply include changes in the prices of resources, changes in their productivity, in legal norms.

As for the change in the domestic resources available to society, an increase in their supply entails a decrease in production costs and, accordingly, an increase in the volume of the national product. And vice versa, their reduction causes a decrease in the supply of resources, an increase in their prices, which affects a decrease in the volume of national production. Therefore, in the first case, the curve P S shifts to the right, and in the second - to the left. If a country uses imported resources, then the latter, through the level of prices for them, have the same effect on the aggregate supply as the dynamics of prices for domestic resources. However, in this case it is necessary to make an adjustment for the ruble exchange rate. If it falls, then the prices of imported resources for domestic producers will rise. This will cause an increase in production costs - the P S curve will shift to the left.

As you know, the main resources (factors) of production are labor, capital and land. Labor has the most significant impact on national production, since it accounts for 3/4 of all costs of producing the national product. Therefore, the social costs of production and the possibility of increasing the volume of social production largely depend on the state of the labor market, the level of prices on it.

The impact of capital on the aggregate supply is determined by the level of savings, the scale of capital accumulation, its technological and reproductive structure, and quality condition. The growth in savings and capital accumulation creates favorable conditions for investment, production growth and aggregate supply. The qualitative state of capital is characterized by the level of advanced techniques and technologies used in social production.

Another situation arises if one of the non-price factors changes, causing an increase in aggregate supply and a shift in the P S curve to the right. In fig. 26.5 it can be seen that the shift of the P S curve to the P S position indicates an increase in the real volume of national production from Q K to Q M, which is accompanied by a simultaneous decrease in the price level from C K to C M.

The shift of the Pc curve to the right indicates economic growth, an increase in the real volume of national production and employment.

conclusions

1. The national market is a system of socio-economic relations mediated by exchange within the national economy of the country. It is characterized by aggregate demand and aggregate supply. Aggregate demand represents the demand in a country for the entire mass of goods and services at an appropriate price level. The aggregate supply is the entire mass of goods and services that can be presented for sale at the prevailing price level.

2. Aggregate demand and aggregate supply perform the function of identifying imbalances in social production, since the latter will immediately affect the change in the ratio between them in the market, and this will certainly set in motion capital and other resources.

3. The specificity of aggregate demand lies in the simultaneous demand for all goods, which does not allow either the invariability of incomes or the manifestation of substitution effects, and this complicates the analysis. The price factors affecting aggregate demand include the effects of interest rates, real cash balances (wealth effect), and import purchases. The non-price factors of aggregate demand include changes in consumer, investment, government spending, as well as in costs associated with foreign trade activities.

4. With regard to the aggregate supply, there are three points of view: it does not depend on the price level; is in direct proportion to the price level; the price level remains unchanged with an increase or decrease in aggregate demand. Therefore, the graph of the aggregate demand curve has three sections: vertical, flowing into a smooth curve of positive slope, which transforms into a horizontal line. The most significant non-price factors affecting the aggregate supply include changes in the prices of resources and their productivity, the level of interest rates, and legal regulations governing economic activities.

5. An increase in aggregate demand has a different effect on aggregate supply: in the Keynesian segment of the supply curve, it increases by the same amount, in the intermediate segment, supply increases to a lesser extent due to an increase in the price level; in the classical segment, there are no changes in the aggregate supply, since all resources are involved, but the price level rises sharply.

Aggregate demand (AD) is the total amount of goods and services that households, firms, the state, and abroad are willing to purchase at different price levels in the country.

The differences between supply and demand in individual markets and aggregate demand and aggregate supply should be understood. Market demand and market supply do not depend on each other, as they are determined by different factors. It is a different matter when it comes to aggregate demand and aggregate supply.

On a social scale, income is equal to spending. This implies that aggregate demand and aggregate supply will change simultaneously and unidirectionally: along with an increase in income, demand will increase, and vice versa. An increase or decrease in all prices will simply mean that money has fallen in price or has risen in price. This will not affect the reactions of consumers and producers. But the awareness of market agents and their expectations are important here: they may believe that prices have changed for "their" product, that is, relative prices have changed, and then they will adjust their economic behavior. Hence, analyzing aggregate supply and demand is important for understanding the fluctuations of an economy over short periods of time. State policy, especially monetary policy, and the expectations of sellers and buyers are essential here.

The AD curve shows the change in the total (total) level of expenditures of households, firms and organizations, the state and foreign agents, depending on the price level. The graphical representation of this curve says that with an increase in the price level in the country, the volume of real GDP, for the amount of which demand is presented, will be low and, accordingly, with a decrease in the price level in the country, the volume of real GDP will be high.

Aggregate demand (AD) reflects the relationship between the volume of national production and the general level of prices in the economy. It represents the sum of all planned expenditures on final goods and services produced in the economy. Aggregate demand is an abstraction, the result of aggregating demand for individual goods.

Therefore, it does not have natural meters and includes four components:

1. Consumer expenses (C). If there is an increase in the general level of prices, then there will be a decrease in real expenditures of the population (in physical terms), and vice versa.
2. Investment demand from firms (I). An increase in the general price level leads to an increase in the interest rate, and hence to a decrease in investment, and vice versa.
3. Government purchases (G), which represent all government spending on the army, health care and education, various social programs, construction of housing, roads, government investment programs, etc. If the country has an approved budget for these purposes, then in conditions of price increases purchases will decrease, and vice versa.
4. Net export (Nx), that is, the difference between exports and imports. If imports exceed exports, then the aggregate demand includes the demand of national consumers for imported goods; if exports exceed imports, then net exports will be equal to the excess of demand for domestic goods by foreign consumers over the demand of national consumers for foreign goods. An increase in prices in a given country at a constant exchange rate will lead to an increase in demand for imported goods and to a decrease in net exports, and vice versa.

Aggregate Demand Curve Equation

In this way, aggregate demand is equal to:

AD = C + I + G + Nx.

Factors influencing aggregate demand

The negative slope of the aggregate demand curve is usually associated with the action three important effects in a market economy:

1. interest rate effect;
2. real wealth effect;
3. effect of import purchases.

The interest rate effect shows the interdependence between the price level in the country, the interest rate and the aggregate demand of the population for goods and services, and firms for investment goods. In the case when the price level in the country increases, the interest rate on loans also increases. In the case when the interest rate increases, buyers and organizations are not interested in obtaining loans at fairly high interest rates. Therefore, consumer and investment demand will decrease, as a result of which, the demand for real GDP will also decrease.

The wealth effect (wealth effect) explains the retention of the value of stocks during inflation. In the case when the depreciation of the monetary unit in the country occurs over a certain period of time, the value of financial assets, expressed in certain goods, decreases. Consequently, when the price level in the country is higher, the population will be able to purchase fewer goods with funds set aside for purchases, and hence the volume of aggregate demand will decrease.

The effect of import purchases shows that there is an inverse relationship between fluctuations in the price level in one country compared to others and fluctuations in the volume of net exports in the structure of its aggregate demand. Consumers will prefer the cheapest imported goods over the more expensive national ones.

These are all price factors of aggregate demand. They change the amount of aggregate demand during the cyclical fluctuations of the economy. But the aggregate demand curve can shift under the influence of non-price demand factors, the so-called exogenous factors. These include:

1. Changes in consumer spending influenced by consumer expectations, changes in their income and tax rates etc.
2. Changes in investment costs influenced by the expectations of entrepreneurs, changes in technology, tax rates, etc.
3. Changes in net export expenditures as a result of the effects of exchange rate fluctuations.
4. Changes in government spending.