The study of economic laws and dependencies at the economic level in the general sense of the word is possible only when their aggregates or aggregates are considered. Macroeconomic analysis in any case requires aggregation. The latter is a combination of individual components into a single whole, aggregate, unit. It is through aggregation that the main macroeconomic agents, markets, indicators and relationships are distinguished.
Key Agents
Aggregation, which is based on the identification of the most typical characteristics present in the behavior of economic agents, makes it possible to identify 4 macroeconomic agents. These are households, the state, firms and the foreign sector. It is advisable to consider each of the categories presented separately.
Household
So, households are macroeconomic agents that act rationally and are completely independent. Their key goal of economic activity is none other than maximizing utility directly to the owner of economic resources. Among the latter, it is advisable to single out labor, capital, land, as well as entrepreneurial abilities.
In the process of realization of economic resources, these independent rationally operating macroeconomic agents receive income. They spend most of them on consumption (this is called consumer spending), and they save the remaining money. That is why households are the main buyers of marketable products and services, as well as the main lenders or savers. In other words, they fully ensure the supply of credit plan funds in the economy.
State
The state also belongs to the main macroeconomic agents. It is a combination of state organizations and institutions with legal and political rights to influence processes in the economy, as well as the right to regulate the economy. The state is nothing more than a rationally functioning, fully independent macroeconomic agent whose main objective is the elimination of market failures. It is for this reason that the state acts as a buyer of goods and services for the full work of the public sector, a producer of public goods, a redistributor of national income (through transfers and the tax system), as well as a borrower or creditor in the financial market (depending on the state budget at the state level).
State functions
It is worth knowing what exactly the state organizes, and subsequently regulates the activities of a market economy. In other words, this macroeconomic agent forms and provides the institutional basis for the functioning of the economy (security system, legislative base, tax system, insurance system, and so on). That is, the state is the developer of the "rules of the game." It provides and fully controls the supply of funds in the country, as it has a monopoly on the issue of money. The state is pursuing stabilization (macroeconomic) policies, the key varieties of which are the following:
- Fiscal (in other words, fiscal). This is nothing but the government’s policy in the field of taxation, the state budget, as well as government spending aimed at balancing the balance of payments, employment and the growth of anti-inflationary GDP (GNP).
- Monetary (monetary). This is the macroeconomic policy of the authorities in terms of money. In other words, a set of measures aimed at controlling aggregate demand through money market factors (nominal exchange rate or liquidity level of banking institutions in the current period, as well as interest rates in the short term) to achieve a certain combination of outcome goals. As a rule, this group of goals includes price stability, maintaining a stable exchange rate, stability in terms of finances, as well as promoting balanced growth in the economy.
- Foreign trade policy - a component of economic policy that is implemented by the state, involving the impact on foreign trade through economic and administrative levers. It is advisable to single out such instruments as subsidies, tax payments, direct restrictions on exports and imports, lending, etc.
Thus, the state regulates the economy to ensure stable economic growth, the level of full resource employment, as well as a stable price level.
Firms as a macroeconomic agent
Firms are a rationally operating and completely independent macroeconomic agent whose goal of economic work is to maximize profits. They are the main producers of marketable products and services in the economy, as well as buyers of economic resources.
In addition, to expand production, as well as fully ensure the growth of the cash reserve and compensation for depreciation of capital, companies need investment goods (it is advisable to include, first of all, equipment). That is why they are investors, that is, buyers of investment commodity products and services. And since, as a rule, firms use borrowed money to finance their own investment costs, they are considered the main borrower in the economy, in other words, companies are in demand for credit money.
Category Combinations
It is worth noting that in the aggregate, firms and households form the private economic sector. In turn, the public and private sectors together comprise a closed economy.
Further, it is advisable to consider the foreign sector and the behavior of this macroeconomic agent.
Foreign sector
The foreign sector is considered an independent and rationally functioning agent of macroeconomics, which interacts with a country through international trade (import and export of goods and services) and the movement of capital, in other words, financial assets (import and export of capital). The foreign sector unites all other countries of the world. It should be added that the inclusion in the general analysis of macroeconomic agents of the foreign sector implies an open economy.
