If we turn again to Fig. 1.1, then it will now become clear that the missing link in the circuit of the circulation of economic goods is the phase of need, connecting consumption and production.  

Such a systematic approach is required, for example, when covering the circulation of economic goods (question 2), features of the structure of production at the turn of the 20th - 21st centuries (question 6), the modern market system (question 22), forms of remuneration (question 35), types of banks ( question 42), a system of macroeconomic indicators (question 48), a mixed type of regulation of the national economy (question 61).  

The circulation of economic goods and how it occurs  

When studying in depth the circulation of economic goods, the following questions arise:  

Comment for the graphic task. The circulation of economic goods can be graphically depicted in three versions in the form of a vicious circle, spin-  

SECTION h. Circulation of economic goods  

Macroeconomic circulation refers to the circulation of real economic goods, accompanied by a counter flow of cash expenses and income. The level of complexity of macroeconomic circulation models can be different, as it depends on the type and number of initial premises (conditions) included in a particular model. Thus, there are models of supply and demand circuits: a simple circuit model, a circuit model with the participation of the state, more complex models constructed by including in them, for example, the external market, financial market, etc.  

Let us next turn to the specific characteristics of the various types of goods thus defined. It is obvious that both competitive and excluded goods have properties that make them maximally suitable for circulation in the market circuit. That is why such goods are called private. The consumption of a given private good by any economic entity makes it practically impossible for all other entities to consume the same good in the same ratio without the permission of its owner. More con-  

Macroeconomics and microeconomics are branches of a unified economic theory. In both micro- and macroeconomics, the type of need determines the type of benefit. Thus, the division of needs into primary (food, clothing, housing, etc.) and secondary (spiritual, cultural, etc.) makes it necessary to use the division of the entire set of goods produced in the macroeconomy into primary ones (as a rule, non-substitutable with each other) and secondary (usually replaced by each other). The division of needs into elastic and inelastic leads to the structure of the totality of goods that are interchangeable and rigid (they practically cannot be replaced by others in consumption). In macroeconomics, benefits can also be unlimited (the air mass as such, the totality of the waters of the World Ocean, etc.) and limited (they are called economic benefits). According to their material form, the totality of economic goods is divided into things (products presented in objective form) and services (presented in the form of a beneficial effect, intangible or, as is often said, infrastructural). The set of economic goods is also divided into long-term (reusable goods, for example, houses, cars, household appliances, etc.) and short-term (one-time goods that disappear at the time of consumption, for example, bread, meat, matches, etc. ). Macroeconomic goods are divided into interchangeable (substitutes) and complementary (complementary goods) present (economic goods, the effect of the value of which can be obtained today) and future (the effect of the value of these goods can be obtained in the future). In macroeconomics, as in microeconomics, present goods are worth (valued) more than future ones, because it is assumed that they make an economic circuit, bringing various types of income to their owners.  

Models of this kind also include another group of them, which concerns ways of realizing the goals of participants in the macroeconomic circulation of resources and benefits. In modern macroeconomic theory, it is believed that participants in the circulation implement strategies of rational economic behavior, determined by the specifics of the stage of economic development of the country. This approach is called civilizational. The civilizational approach to modeling macroeconomics is based on the type of historical classification of economic systems of the past  

Entrepreneurial function. In Chapter 1, Schumpeter describes a hypothetical stationary state of the circuit, which is characterized by an unchanged set, quantity, and methods of consumption of all produced goods. Under these conditions of complete information about the present and future, the product is distributed without remainder to the owners of productive goods, so that not only residual income, but also interest does not arise (here Schumpeter differs from B. Bawerk - see, chapter 11). The main ideas of Schumpeter’s theory of economic development are presented in Chapter 2. In order for the economy to move away from its usual trajectory and dramatically change its own indicators, the so-called new methods of production and commercial use of the benefits of existing 3) development of new markets of monetary circulation must be implemented

The functioning of any economic system is associated with the movement of economic goods. Economic circulation in a market economy is a circular movement of real economic goods, accompanied by a counter flow of cash income and expenses. Economic goods do not move on their own, but act as a means of communication between economic agents.

Economic agents are subjects of economic relations involved in the production, distribution, exchange and consumption of economic goods. The main economic agents in a market economy are households (consumers) and firms (producers). Since we are considering a market mechanism, we do not include in the analysis the activities of such an economic agent as the state.

The model consists of the following elements:

• 1. Households - directly or indirectly own all economic resources, but need consumer goods (consumers, not producers.)
• 2. Firms - produce consumer goods, but for this they need economic resources.
• 3. Resource market - this is where households offer their resources to firms that demand these resources. As a result of the interaction of supply and demand in the market, resource prices are formed, resources move from households to firms (counterclockwise lines at the top of the figure show this movement). In turn, a cash flow moves from firms to households - firms pay resource prices in the form of expenses for production costs, which households receive as factor income (clockwise lines)
• 4. Product market - this is where firms offer manufactured products (consumer goods) to households that have a demand for them. As a result of the interaction of supply and demand in the market, prices of products are formed that move from firms to households (counterclockwise lines at the bottom of the figure). Households pay the prices of products in the form of consumer spending, which firms receive in the form of income from the sale of their products (clockwise lines).

The model, firstly, represents the economic cycle, since there is a circular movement of real economic goods - resources and products (counterclockwise lines), accompanied by a counter-movement of cash flows - expenses and income of firms and households (clockwise lines). Secondly, the model shows that it is the functioning of markets that gives impetus to this movement, since it is there that the price of products and resources is formed, which therefore become goods.

Economic circuit (circular flow)- circular movement of real economic goods, accompanied by a counter flow of cash income and expenses.

The main subjects of a market economy are households and firms. Households present demand for consumer goods and services, while simultaneously being suppliers of economic resources. Firms demand resources and, in turn, offer consumer goods and services. The behavior of the main economic agents can be expressed by the cycle of supply and demand.

Circulation of supply and demand

Despite all the conventionality of the circuit diagram, it reflects the main thing - in a developed market economy there is a constant interaction between supply and demand: demand creates supply, and supply develops demand.

The circulation of supply and demand can be specified taking into account the movement of resources, consumer goods and income. Household demand is expressed in expenditures made in markets for consumer goods and services. The sale of these goods and services constitutes the firms' revenue. Purchasing the resources needed to do this incurs costs for the firm. Households, by supplying the necessary resources (labor, land, capital, entrepreneurial abilities), receive cash income (wages, rent, interest, profit). Thus, the real flow of economic benefits is complemented by a counter cash flow of income and expenses.

Simple Circulation Model

This model can be refined by including turnover within sectors. Emphasizing the main point, the simple circulation model somewhat idealizes reality.

Firstly, it does not take into account the accumulation of both economic goods and monetary resources, as well as the fact that some resources may fall out of the turnover process. For example, if consumers begin to save part of their income, the impact of aggregate demand decreases. Such circumstances can subsequently significantly modify the elementary circuit model. The most important of their consequences is the development of the credit system.

Secondly, the scheme abstracts from the role of the state. The role of the state in the modern world is very diverse, since it influences both the agents of the market economy and the markets for products, factors of production, and credit. If we abstract from the role of credit, then the functions of the state in the circuit can be represented as follows.

The role of the state in the circulation

Households and firms pay taxes to the government, receiving in turn transfer payments and subsidies. In addition, the government carries out large purchases of both consumer and industrial nature in all markets.

Third, The circular model can be refined by including international trade.

The economic circulation model is important not only for understanding the mechanism of functioning of a market economy, but also for studying the specifics of the functioning of various economic systems. To approach their analysis, let us briefly dwell on the main economic goals that individuals, firms and society as a whole strive for.

Economic agents are subjects of economic relations involved in the production, distribution, exchange and consumption of economic goods. The main economic agents are individuals, households (families), firms (enterprises), the state and its divisions. In turn, firms can act as sole proprietorships, partnerships, and corporations.

Modern economic theory assumes that each economic agent is guided in its activities by rational behavior, which means the desire to achieve maximum results with minimal expenditure of limited resources.

Economic agents communicate with each other through the movement of economic goods along the chain: production, distribution, exchange, consumption, which represents a kind of circulation.

Economic circuit – This is the movement of economic goods, accompanied by a counter flow of monetary income and expenses of agents.

Let us imagine abstractly that the main subjects of the economy are households, firms and the state. Households place demand for consumer goods and services and at the same time act as suppliers of economic resources such as labor, land and capital. And firms demand (demand) for all resources and at the same time offer goods and services to households.

In the circuit shown in Fig. 2.7., supply and demand flows are specified, replaced by their resources, income, expenses, goods and services.

In any economic system, a household acts as the main supplier of resources, a consumer of goods and services, and a link in the formation of human capital.

The budget of the household (family) plays a major role in the movement of the circulation of goods (Table 2.9.)

Table 2.9.

Formation of a household (family) budget

Human capital - it is capital embodied in people in the form of ability to work, qualifications, knowledge and experience. By its nature, it is comparable to physical capital, since its formation requires the expenditure of funds and money to the detriment of current consumption, and also serves as a source of increasing labor productivity and earnings in the future. Requires “depreciation expenses” in the form of rest, recovery and updating of qualifications. However, human capital, unlike physical capital, is more risky and the investment period is much longer. If the investment period of physical capital reaches up to 5 years, then this form of investment in a person, like education, can last more than 20 years.

Household demand is expressed in spending, which is paid in cash in markets for goods and services. Household expenditures constitute the revenues of firms for the sale of these goods and services. The purchase of resources needed by firms constitutes costs in monetary form - the costs of firms. In turn, households, supplying firms with the necessary resources (capital, labor, land), in return receive income in cash (salaries, rent, interest).

Thus, the real flow of demand in kind is absorbed by the counter flow of supply in monetary form (Fig. 2.7.).

Households and firms pay taxes to the state, in turn, from the state they receive transfer payments and subsidies, respectively. In addition, the state is a major customer of raw materials, goods and services for the maintenance of the army, healthcare, education and social protection of the population.

Reproduction is a process of constant repetition and resumption of production. In any society, reproduction includes the following main points:

1. Reproduction of material goods. The means of labor wear out in the production process, objects of labor and consumer goods are consumed.

2. Reproduction of labor force. Reproduction of the labor force in a broad sense means training a new generation of workers who have professional qualities.

3. Reproduction of natural resources and human habitat.

4. Reproduction of relationships between people arising in production, distribution, exchange and consumption.

Reproduction has four phases: production, distribution, exchange and consumption.

Production - This the starting point where the product is created, or rather , material goods and services. Therefore, it plays a decisive role in the life of society.

Distribution - the reproductive phase where it occurs distribution, firstly, of the results of social production, and secondly, of resources or factors of production.

Exchange means exchange of activities between people and exchange of products of labor.

Consumption - use of the product in the process of satisfying needs, the final phase of reproduction. Distinguish

· personal consumption - products are consumed.

· industrial consumption - means of production and labor are consumed, resulting in the creation of labor products.

All phases of reproduction are interconnected, interact, and are in unity. The decisive role in this unity belongs to production . Without production, the remaining phases are unthinkable. At the same time, distribution, exchange and consumption have the opposite effect on production.

Reproduction is divided into:

1. simple reproduction - dimensions of the produced product, as well as his quality stay every year unchanged. All surplus product goes for personal consumption. The factors of production also remain unchanged.

2. expanded reproduction -the size of the produced product and its quality increase. Factors of production also change.

The source of expanded reproduction is the surplus product. Expanded reproduction has two types:

1) extensive type – involvement of additional labor, natural, fixed and working capital without changing their technical basis.

2) intense - based on improving the means of production and increasing labor productivity.

The law of functioning of expanded production- this is the law of accelerated production of means of production compared to the production of consumer goods.

Sometimes in society there is diminishing reproduction when observed reduction in production volumes due to natural disasters, wars, destruction, environmental crises.

Economic science considers the theoretical basis of reproduction circulation of economic goods. Circulation is understood as the process of movement of economic goods and funds between economic entities, ensuring the maintenance of the existence of each of them and the entire system as a whole.

At the same time, to clearly illustrate the movement of flows of benefits and income in the economic system, simple graphical models are used (Fig. 2.2).

Rice. 2.2. The simplest model of the circulation of economic goods and resources

IN This model uses four types of production factors, with the help of which economic theory classifies the entire set of resources used in the economy: land, labor, capital and entrepreneurial abilities. The prices paid for these factors are set in the resource market represented at the top of the diagram. Here, firms act as demand agents, and households act as supply agents. Prices for finished products and services are determined in the product market shown at the bottom of the diagram. Here households act as demand agents, and enterprises act as supply agents.

Closer to reality is another version of the circulation model, which takes into account the role of the state (government) in the movement of goods and resources, which plays a regulatory role in the economy.

The main subjects of a market economy are firms, households, and the state. There is a constant exchange of economic goods and money between them.

Households- these are relatively separate economic units that own economic resources, including labor, that supply the economy with production factors and receive income in return.

Firms act as relatively separate economic units in which factors of production are combined and finished products or services (benefits) are produced in order to make a profit.

State participates in the circulation both as one of the market subjects (entrepreneurial activity) and through the redistribution of income, forming the revenue and expenditure side of the budget. In the latter case, it receives goods and services, consumption

which are related to the functioning of the state, as well as support for disabled members of society.

Let us pay special attention to the following Yu the main important aspects of this process.

/. Flows of money and economic goods in their value terms during the circulation are always equal in value (balanced) and opposite in direction. The reason for this is obvious: each economic entity pays for an economic good an amount exactly equal to its market price.

2. Since the expense of one subject is the income of another, and vice versa, then all budgets are interconnected. This is the reason for the closed reproduction process.

Axiom of circulation, thing is The magnitude of the flows of economic goods circulating in the national economy is constant at all stages of its movement. That is, according to this axiom of circulation, the flows of economic benefits in each of the phases of reproduction will be quantitatively equal.

Strictly speaking, equality is observed in three areas (production, distribution, consumption), and not in four. After all, the exchange does not cover all the goods produced; some of them are used by the producer himself and are not put on the market. However, the axiom is not violated in relation to the sphere of exchange: the sum of goods received and not received in the sphere of exchange still corresponds to the total volume of production. When the manufacturer himself consumed his product, we can conditionally assume that he sold it to himself. Only those economic benefits that were previously produced can be distributed (and subsequently redistributed). And each economic subject consumes goods only to the extent that they were received by him during distribution (redistribution).