Macroeconomic equilibrium and its characteristics
Theme 11. Macroeconomic equilibrium
The problem of maintaining economic stability and full employment is reduced to an economic policy which is based on the balance between supply and demand. All social production consists of thousands, millions of different goods and services, producers and consumers. We need to organize their relationships, that is, to reduce the number of separate in a single market.
In the common market is formed by the demand for a wide variety of goods and services.
На общем рынке формируется спрос на самые разнообразные товары и услуги.
Price AD
|
P1
|
P2
Q1 Q2 Q
Fig. 20. Aggregate demand curve
- Aggregate demand (AD) - represented as a curve that shows the amount of goods and services that consumers, businesses, the government is ready to buy at any possible level of prices.
- Curve downward, has a negative slope, expresses an inverse relationship between the price level and the amount of the national product.
- Curve AD, as the curve D, shows that, other things being equal, the price reduction makes preferable for the buyer, the state; enterprises purchase large quantities of goods or services. Increase in the price level - leads to a backlash.
What factors determine a curve AD?
1. The effectiveness of the wealth (solvency of buyers).
2. The effective interest rate method.
3. The effectiveness of foreign purchases.
Changing these cost factors leading to displacement of the point on the graph, ie changing the value of the aggregate demand for domestic product, all other things being equal.
If you change at least one "other condition" that there is a change in demand for GDP (AD schedule shifts to the left or to the right).
Non-price factors affecting the change in demand (AD schedule shifts to the left or to the right):
1. Change in consumer spending.
2. The change in investment costs.
3. The change in government expenditure
4. The change in the cost of net exports.
The market generates the formation of aggregate demand aggregate supply.
Aggregate supply (AS) - this is a curve that shows the actual cash amount produced, for any given price level.
Relation between the volume of production and costs - direct, positive:
- Higher prices provide an incentive to increase production of PPR (real domestic product) and increase its offer.
- Low prices - reduce production PPR.
P AS
P3
P2
P1 1
