Equilibrium in macroeconomic models and its types
Equilibrium is the main problem of macroeconomic modeling, the solution of which is related to the modeling of equilibrium in individual markets and general macroeconomic equilibrium.
The modeling of equilibrium in individual macroeconomic markets can be represented by the following types of real financial and labor market.
Equilibrium on the real market takes place if the amount of outflows from the real market is equal to the amount of inflows. Outflows from the market of goods are formed under the influence of demand for real benefits from households, entrepreneurs, the state and the rest of the world. Households demand in the real market for consumer goods. Entrepreneurs - for investment goods to replace and increase production capacity. The state - for real benefits for the production of public goods. Demand of the rest of the world in the market of real goods is expressed by the export of national real goods. Inflows to the market of real goods are determined by the supply of real benefits from entrepreneurs and the rest of the world.
Equilibrium on the financial market corresponds to the situation when the amount of outflows from the financial market is equal to the amount of inflows. Outflows from the financial market determine the demand for financial resources from households for cash and securities. Inflows in the financial market are formed under the influence of the supply of money from the state and the supply of securities by entrepreneurs and the state.
Equilibrium in the market labor will exist in the event that the amount of outflows from the labor market will be equal to the sum of the inflows. Outflows from the labor market are determined by the demand for labor services from entrepreneurs and the state. Inflows to the labor market - the supply of labor services by households.
There are different models of macroeconomic equilibrium.
The widely known model of the general economic equilibrium in the history is F. Quesnay's macroeconomic table, where the product and income are created and run between peasants, landowners and artisans. Macroeconomic table in the simplest form determines the conditions for the balance of macroeconomic markets:
• the owners of the land spend all the incomes of the previous year on purchasing agricultural products and artisans' products this year;
• craftsmen spend money received from landowners to buy food from farmers;
• Peasants return money received from artisans, paying for the purchase of agricultural equipment;
• craftsmen pay for the purchase from peasants of raw materials necessary for the continuation of production;
• Peasants use part of their production to continue production, and pay the remaining part to landowners as a rent.
The author of the next model of macroeconomic equilibrium is J.-B. Say. The meaning of his model is as follows:
• Production creates products for exchange and generates incomes of participants in production, corresponding to the value of output;
• All products are exchanged for income;
• Everything that is produced always finds its buyer, and macroeconomic equilibrium is always set automatically.
Another model of macroeconomic equilibrium can be represented by schemes of simple and expanded reproduction of Marx's aggregate social product. The conditions of macroeconomic equilibrium here are as follows:
• the conformity of the value and natural-material structures of the aggregate social product
• the amount of income from labor and capital in the production of means of production must be equal to the material costs in the production of consumer goods;
• the value of the created consumer goods is equal to the sum of factor incomes, to which these benefits are consumed;
• the value of the produced means of production is equal to the value of the consumed means of production in the production of the means of production and production of consumer goods.
The result of a later simulation of macroeconomic equilibrium is the neoclassical and Keynesian models of general economic equilibrium.
The specific neoclassical model of the general economic equilibrium is as follows:
• Macroeconomic balance depends on the equilibrium state of labor markets, capital (securities) and benefits;
• Within the labor market, capital and goods, two macroeconomic entities interact: households and entrepreneurs;
• Equilibrium in the capital market corresponds to the situation of equality of the volume of supply of capital (savings) and the volume of demand for capital (investments), as a result of which an equilibrium interest rate is established;
• Equilibrium in the labor market is possible with equal supply of labor and the volume of demand for labor (households fully realize their plans for the sale of labor services, and entrepreneurs - for his hire);
• The equilibrium in the market of goods corresponds to the situation of equal supply of products produced by entrepreneurs, and the volume of consumer demand for households and the investment demand of entrepreneurs;
• Harmonization of plans of households and entrepreneurs is achieved due to the flexibility of prices in each of the markets;
• The flexibility of the nominal wage rate and the nominal interest rate is constantly contributing to the state of macroeconomic equilibrium;
• Consider an economy that does not trade with the outside world.
Features of the Keynesian model of the general economic equilibrium can be represented by the following provisions:
• Macroeconomic balance is determined by the state of equilibrium of three markets: goods, capital and labor;
• Within the labor market, capital market and benefits, four macroeconomic entities interact: households, entrepreneurs, the state and the external economic sector;
• Equilibrium in the market of goods is identified with the situation when there is equality of planned expenditures (aggregate demand) and national product (aggregate supply);
• The main components of planned expenditures are consumer spending, investment, government purchases and net exports (the difference between exports and imports);
• any change in investment costs causes a corresponding change in planned expenditures and a multiple change in the national product;
• Macroeconomic balance is formed not only by the mechanism of flexible prices;
• The rigidity of the nominal wage rate and the nominal interest rate constantly contributes to the state of macroeconomic equilibrium;
• Consider an economy that trades with the outside world.
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