Almost any economic system has its advantages and disadvantages. As a result, it determines a number of macroeconomic problems. Some of them appeared a long time ago. Mankind has been struggling with them for many centuries. However, modern farming systems have identified new problems. The global economic problems and the main ways to solve them will be discussed later.
Macroeconomics
One of the main sections of economic theory is macroeconomics. She deals with the global development of a single country or the world as a whole. In contrast to microeconomics, macroeconomics studies a number of specific indicators, for example, the level of GDP, unemployment, inflation, etc. These are the most basic parameters of the degree of development of society, the effectiveness of its system of national economy.
In other words, microeconomics studies the tree, and macroeconomics studies the entire forest. This allows you to look at world problems from the side. The macroeconomic system is a combination of certain economic phenomena. Within a single country or the whole world, trade, production relations, decision-making features of participants, etc. are studied.
All components of this system are considered as a whole. In this case, it turns out to identify certain problems inherent in the country or the world. Their solution is the main goal of the modern economy. The welfare of citizens of different countries and humanity as a whole depends on this.
Problems and their causes
Macroeconomic planning and forecasting makes it possible to identify problems even before they arise and to solve existing problems in the development of society. However, the emergence of such a need is caused by a number of reasons. Problems at the macroeconomic level are explained by macroeconomic theory. In this case, the researchers build a global model. This allows you to identify a certain relationship between macroeconomic variables.
Economic theory allows you to form a certain regularity of the studied processes. The appearance of such problems is explained by many well-known economists. They look at the problem from different angles. The causes of problems at the macro level is the limited resources with unlimited demand.
It is worth noting that both macro- and microeconomics study the economic behavior of people. The same approach to the study in these two systems. It is called the equilibrium analysis of all processes in the system. However, unlike microeconomics, macroeconomics is trying to solve global problems. They allow you to look at the situation from the side, in general. Each particular component of this global system is studied by microeconomics.
Macroeconomic equilibrium
The solution of macroeconomic problems is made by achieving equilibrium of the system. To do this, a search is made for such a position of all indicators that will suit everyone. In this case, limited resources (land, labor and capital) are distributed among each member of the public in a balanced manner. In this case, it turns out to achieve universal proportionality.
Economic categories
Macroeconomic planning and forecasting takes into account that a balance is established between certain economic categories. The ideal solution to problems at the macro level is the proportionality between supply and demand, resources and their use, production and consumption. Factors of production with its results, as well as material and financial flows should also be harmoniously correlated.
The government of each country seeks to achieve a macroeconomic balance between these categories. This is a key problem of economic policy of states, as well as theory.
Main problems
There is a certain list of basic macroeconomic problems. They are considered by almost every state on the planet. Common issues at the global economic level are employment issues. Unemployment negatively affects the development of any society.
Also a negative phenomenon is inflation. The depreciation of the money supply is happening at different rates in different states. Also, one of the main global problems is the deficit of state budgets. The imbalance of foreign trade is a macroeconomic problem.
These difficulties include instability of cycles, as well as their other complications, instability of exchange rates. This also includes the accumulation and scale of investments at the national level, the external interaction of the economies of different states and so on.
Analysis of global indicators
Macroeconomic analysis allows you to assess the state of the economy, as well as to predict its future development. On the basis of such studies, the governing bodies of the state decide to maintain a competent economic policy. Constraining development factors are determined, and then measures are developed to eliminate their negative impact on the system.
Various economic indicators allow us to judge the degree of development of a country. They are reflected in the statistical reporting. There are a lot of indicators that are used for analysis. Data is collected from various official reports on unemployment, economic transactions, etc. This allows you to perform macroeconomic analysis.
The main macroeconomic indicators include the volume of GDP, as well as its growth dynamics, the scale of consumption and its relationship with accumulation, expenditures and budget revenues. The sizes of export and import, statistics of price indices are also estimated. They also study national currency rates. Separate consideration in the analysis requires statistics on unemployment.
Types of equilibrium
Considering the models of macroeconomic equilibrium, it is necessary to highlight the ideal and real balance. In the first case, it is achieved in the economic behavior of the participants with the complete satisfaction of their interests in all sectors and structures of the national economy.
Such an equilibrium is possible under a number of conditions. First of all, all participants must find commodities in the market. In this case, all manufacturers must find the necessary factors of production. The entire amount of products of the past period should be fully implemented. This implies the establishment of perfect competition in the market. In this case, there are no side effects. However, this is practically impossible.
In conditions of imperfect competition, a real macroeconomic balance is established.
Equilibrium can also be full or partial. In the first case, the balance is established in all markets. In partial form, the balance is established only in one industry.
Classic model
The classical model of macroeconomic equilibrium represents the views of representatives of this economic school, who did not consider this balance as a separate problem. It is based on the basic tenets of this concept.
In this model, the economy is built on perfect competition. It is self-regulatory. This means that the equilibrium in each market is established by itself. Any deviations are caused by random, temporary factors. In the classical model, the unit of account is money. However, they do not have independent value. Therefore, markets for money and material goods are not interconnected.
Self regulation
Macroeconomic problems in classical theory are considered from the perspective of an ideal model of the economy. Employment from her point of view is full. This is ensured by market self-regulation. Unemployment can only be natural. The labor market plays a major role in shaping a market equilibrium. The balance here means that firms were able to fulfill their plans for production volumes, and households received the necessary level of income.
Features of establishing equilibrium according to the classical model
The classical model of macroeconomic equilibrium suggests that it is set automatically in all markets. If two of them have a similar situation, then the third will determine the balance. This rule applies to three interdependent markets (capital, labor and goods).
Such price flexibility also extends to factors of production. They are interdependent according to the theory presented. The macroeconomic equilibrium model of the classical school provides the same mechanism for nominal wages. At the same time, real wages always remain unchanged.
According to the presented theory, prices, factors of production vary in equal proportions. Moreover, the equilibrium model is considered by representatives of the classical school only in the short term.
The produced volume of production provides income automatically. It is equal to the value of all goods and services. How many products were produced, so many were sold.
Keynesian Theory Balance
Keynesian model of macroeconomic equilibrium has become an alternative to classical theory. In the process of its creation, the acute problems that were characteristic of the capitalist economy of that time were taken into account. Then the volume of production was extremely low. Unemployment was massive, production capacities were not fully utilized.
In his work, The General Theory of Employment, Interest, and Money, J. Keynes tries to solve two problems at once. He explores the causes that led to the crisis and massive unemployment. He also wanted to develop a program to restore the former positions of production, the standard of living of the population.
Keynes was one of the first to recognize the crisis and unemployment issues that were inherent in capitalism. He insisted that capitalism was unable to regulate processes in the economy automatically. Keynes believed that the state should intervene in the processes taking place in the economy. Thus, he rejected the allegations of the neoclassical and struck in this direction.
Keynesian Economics Definition
Keynesian model of macroeconomic equilibrium identified the lack of aggregate demand as the main problem. This phenomenon occurs for two reasons. The first of these is the fact that, with rising incomes, consumers tend to consume even more. However, their increase is disproportionate. Consumption is growing faster than income. This leads to insufficient aggregate demand, which leads to imbalances in the economy. This reduces the incentive for further investment.
This forces the capitalists to keep their resources in cash. They do not invest in production. After all, money is liquid. This further reduces aggregate demand. Employment in society is also significantly reduced. Unemployment appears.
Keynes has built a chain of actions that lead to a crisis. At first, people start spending less money since they spent it earlier. Because of this, production begins to decline. Investment in a business that is not growing is reduced. This leads to unemployment, as well as an even greater decrease in the purchasing power of the population. The economic equilibrium is collapsing.
