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24.11.2023

Consequences of inflation. Anti-inflationary policy of the state. Socio-economic consequences of inflation and anti-inflation policy Socio-economic consequences of inflation and anti-inflation policy of the state

3. Inflation: causes, measurement, socio-economic consequences. Anti-inflationary policy of the state.

Inflation(from Lat. Inflation - inflation) - a state of the economy in which money depreciates (a drop in purchasing power) due to a significant excess of its quantity in circulation over the needs of trade turnover and an increase in prices for goods and services.

Main cause of inflation- violation of the law of monetary circulation.

This violation can be formally reflected using the well-known Fisher equation Mx V = Px Q. If the mass of money in circulation (Mx V) exceeds the volume of real GNP (Px Q), then prices for goods and services rise.

Inflation factors:

external:

internationalization of economic relations– inflation in other countries affects through the prices of imported goods; the country's central bank uses its additional currency to buy foreign currency from commercial banks;

depreciation of the national currency against the currencies of other countries– there is an increase in prices for imported goods; currency exchange requires additional money emission;

world economic crises– the decline in the production of exported products is affecting, prices for fuel and energy resources are rising (the economy of the Republic of Belarus is 90% dependent on imported goods);

the state of the country's balance of payments;

currency and foreign trade policy of the country;

Internal:

government budget deficit– covering it with central bank loans sharply increases the amount of money in circulation;

military expenditures– the budget deficit increases, and this leads to inflation; the military sector does not create a consumer product, and its workers increase effective demand;

expenses for social purposes that are not adequate to the capabilities of the national economy– during a crisis, the government tries to support the population through wage indexation, various benefits, additional payments, etc., which increases the amount of money in circulation and increases inflation;

inflation expectations(the main factor of inflation, “flight from money”) increases demand and stimulates supply, rising prices, expectations of inflation are included in contract payments (concluded for 1 year or more);

credit expansion– bank lending in excess of the country’s needs, which causes the issue of non-cash money;

overinvestment– in certain sectors of the country (in agriculture);

structural disturbances in the economy– between supply and demand, accumulation and consumption, income and expenses.

Types of inflation:

demand– manifests itself in the excess of demand over supply at full capacity utilization. Reasons: an increase in government orders, rising wages and an increase in the purchasing power of the population (a lot of money appears in circulation, not backed by goods); rising prices and inflation occurs;

costs or proposals– manifests itself as a result of rising prices due to increased production costs. Reasons: increase in prices for raw materials (primarily energy resources); actions of trade unions to increase wages, monopolistic or oligopolistic pricing of resources, etc. Rising costs cause a reduction in aggregate supply and a further rise in prices.

Exists several types of inflation. First of all, those that are distinguished from the position of the rate of price growth (the first criterion), i.e. quantitatively:

1) Creeping (moderate) inflation, which is characterized by relatively low rates of price growth, up to approximately 10% or slightly more percent per year. This kind of inflation is common in most countries with developed market economies, and it does not seem unusual. Data for the 70s, 80s and early 90s. in the USA, Japan and Western European countries, they are talking about the presence of creeping inflation. The average inflation rate for the countries of the European Community was
in recent years about 3-3.5%;

2) Galloping inflation(price increases by 20-200% per year). Such
high rates in the 80s. were observed, for example, in many
countries of Latin America, some countries of South Asia.
According to the calculations of the Central Bank of Russia, the consumer price index in our country in 1992 rose to 2200%. Consumer prices outpaced the growth of household incomes.

3) Hyperinflation – prices are rising astronomically, discrepancy
prices and wages becomes catastrophic, the well-being of even the wealthiest strata of society is destroyed, the largest enterprises become unprofitable and unprofitable (the IMF now defines hyperinflation as a 50% increase in prices per month).

Types of inflation from the point of view of the correlation of price increases for various product groups, i.e., according to the degree of balance of their growth:

a) balanced inflation;

b) unbalanced inflation.

With balanced inflation, the prices of various goods remain constant relative to each other, and with unbalanced inflation, the prices of various goods constantly change in relation to each other, and in different proportions.

Balanced inflation is not scary for business. You only have to periodically increase the prices of goods: raw materials have risen in price 10 times, and you accordingly increase the price of your final products. The risk of loss of profitability is inherent only to those entrepreneurs who are the last in the chain of price increases. These are, as a rule, manufacturers of complex products based on intensive external cooperation ties. The price of their products reflects the entire amount of the increase in prices of external cooperation, and it is they who risk delaying the sale of extremely expensive products to the end consumer. It is dangerous to engage in this business; it is better not to purchase shares of the relevant companies.

We have unbalanced inflation prevailing. The rise in prices for raw materials outpaces the rise in prices for final products, the cost of a component exceeds the price of the entire complex device, etc.

Unbalanced inflation is a big problem for the economy. But it’s even worse when there is no forecast for the future, there is no confidence at least that the product groups that are leaders in price growth will remain leaders tomorrow, and in a week, and in a year. It is impossible to rationally select areas for investing capital, calculate and compare the profitability of investment options. Industry cannot develop in such conditions; industrial revival is unrealistic. Only short speculative and intermediary operations are possible, fertilized by spontaneous, unbalanced jumps in relative prices both in the sectoral and territorial aspects.

The combination of balanced and expected inflation does not cause economic harm, but unbalanced and unexpected inflation is especially dangerous and is fraught with large costs for the adaptation plan.

The imbalance and unpredictability of inflation destroys the psychological stability of people, who are less and less hopeful that price growth will slow down.

Most developed countries tend to have moderate inflation; an increase in inflation from moderate through galloping to hyperinflation is not inevitable. Persistent government policy can, if not stop price growth, then at least make it more expected or balanced. Unfortunately, little depends on individual enterprises here. Only associations of industrialists and the powerful industrial lobby in parliament can have influence on the government.

by expectation:

expected– predicted by the government and population for a certain period;

unexpected– there is a sudden jump in prices. In a situation where there were already inflationary expectations in the economy, the population, fearing the depreciation of their income, sharply increases the costs of purchasing goods and services, which distorts the real picture of demand in society and leads to disruption of the national economy. A sudden jump in prices could trigger further inflationary expectations, which would push prices higher.

According to the nature of the course:

Open – continued rise in prices;

Suppressed – with firm “frozen” retail prices and a simultaneous increase in household incomes (commodity shortages and rising prices on the “black market”).

Measuring Inflation. To do this, prices for goods and services in the “consumer basket” are summed up at the end and beginning of the period (for example, a year). Retail Price Index– determines their overall level in relation to the base period, expressed as a percentage. To determine inflation rate, it is necessary to subtract the price index of the base period from the index of this period and divide by the price index of the base (previous) period and multiply by 100.

"Rule of Magnitude 70" allows you to determine the number of years during which the average price level will double - divide the number 70 by the annual inflation rate.

Economic consequences of inflation:

1) moderate– temporary revival of the economy with a slight increase in prices and profit rates;

2) galloping And superinflation– significant damage is caused to the national economy, there is a “flight from money”, i.e. the velocity of money circulation increases. Due to the rapid rise in prices, enterprises do not have enough revenue to pay, they are expanding inflationary price spiral–wage–costs - prices";

3) all other forms– crisis of mutual non-payments; replacing trade with barter makes exchange more difficult; damage to the state budget; the functioning of the monetary system is disrupted; reduction in production volumes.

Social consequences of inflation:

Deterioration of life of the population:

Price increases significantly exceed real wages;

Incentives for work and its quality are falling;

The less protected segments of the population suffer the most;

The population's savings are depreciating;

Social tension is increasing.

Main directions of anti-inflationary policy:

Containing the growth of government spending - the budget deficit is covered not by emissions, but by internal public debt;

Permanent reduction in government funding for activities that can be transferred to the private sector;

limiting the growth of the money supply and linking it with the growth rate of real GNP;

income regulation– limiting the growth of wages and other personal incomes with simultaneous freezing of prices, the use of indexation of wages and incomes;

reducing tariffs on imports and increasing them on exports– competition is created and prices are reduced (in the field of foreign trade);

appreciation of the national currency– import prices are lower and the general price level is lower;

denationalization, development of market relations, structural restructuring, conversion.

Anti-inflationary policy.

Anti-inflationary policy is divided into active and adaptive. Active policy is aimed at eliminating the causes that caused inflation, adaptive policy is an adaptation to the conditions of inflation, mitigating its negative consequences.

The main levers for controlling inflation processes are in the hands of the state, since it is the state that is responsible for the money supply, and, consequently, for the value of the money supply.

Government conducting active policy, has at its disposal a whole set of direct monetary levers that help stop and contain inflation. Among others, these include: 1) control over the issue of money; 2) prevention of emission financing of the state budget; 3) implementation of current control of the money supply through operations on the open market; 4) suppression of the circulation of money surrogates; 5) carrying out a confiscation-type monetary reform.

The effectiveness of the first four levers can only be ensured to contain or prevent inflation. In conditions of hyperinflation, the only way out is monetary reform.

Anti-inflationary policy can be successful only if it is aimed at eliminating not only the manifestations of inflation (monetary reform), but also the causes that generate and support it.

In accordance with the inflation mechanisms discussed above, anti-inflationary measures are classified depending on the type of inflation they are aimed at combating.

Measures to combat demand inflation: reduction of government spending; tax increases; reduction of the state budget deficit; transition to tight monetary policy; stabilization of the exchange rate by fixing it. All of them ultimately come down to curbing aggregate demand.

An economy with a high level of inflation experiences these changes very painfully: a reduction in aggregate demand is accompanied by a decline in production and an increase in unemployment.

Measures against cost inflation quite diverse: restraining the growth of factor incomes and prices; the fight against monopolism in the economy and the development of market institutions; stimulating production within the framework of “supply-side economics”. A policy directed against factor incomes and at the same time rising prices - the so-called policy of containing prices and incomes - can be implemented by freezing prices and wages and indirectly limiting their growth.

Strict containment of prices and incomes produces visible results in a fairly short period of time. However, the price of such deflation is quite high, since at the same time market mechanisms for stabilizing the economy are “restrained”, imbalances and inflationary expectations are frozen.

An indirect restriction involves either the establishment of a triple agreement “state-entrepreneurs-trade unions”, or the introduction of additional taxes on rising incomes and prices.

It is worth highlighting measures aimed at stimulating production within the framework of the “supply economy”. The essence of this concept comes down to the fact that the government should carry out measures that contribute to a shift in the long-term aggregate supply curve, i.e. increasing the level of natural output. In this case, the short-run curve AS will naturally move to the right without moving upward.

The main elements of the theory of “supply-side economics” include: tax reduction; development of competition in the infrastructure sector; strengthening labor migration of the population through changes in social policy; money emission strictly within the expected increase in the natural level of output.

Adaptive policy built on the premise that all subjects of a market economy (households, firms, the state) take inflation into account in their actions, primarily by taking into account losses from a decrease in the purchasing power of money.

This policy includes the following activities: indexing; agreements with entrepreneurs and trade unions on the rate of growth of prices and wages. Indexation, i.e. changes in nominal cash payments are of great importance for mitigating the effects of inflation due to the fact that they apply to recipients of fixed incomes, i.e. on those who lose the most from inflation. In addition, if indexation is sufficiently linked to inflation rates, it can also have a downward effect on inflation expectations.

Inflation is a complex socio-economic process that causes many consequences both in the economy and in the social sphere.

1. In conditions of inflation, real incomes of the population are reduced. Here it is necessary to consider two indicators - nominal and real income. Nominal income is the income actually received, and real income is the amount of goods and services that consumers can purchase within their nominal income. This means that, with a constant nominal income, as inflation processes develop, the volume of purchases will decrease due to rising prices, that is, real income will fall. Real income can be calculated as follows:

  • 2. With inflation, real savings in the form of paper money decrease; in addition, the inflation rate is most often much higher than the interest rate in credit institutions. Thus, the personal savings of the population depreciate.
  • 3. Social stratification occurs especially quickly. The majority of the population falls into poverty, crossing the poverty line.
  • 4. Hidden confiscation by the state of funds from the population through progressive taxation. Taxation of basic household income is progressive in most countries, that is, the higher the income, the higher the income tax rate. In conditions of high inflation, the initial tax rates for the income of the rich segments of the population, which existed at the beginning of the year, are gradually beginning to extend to the incomes of the middle and even poor segments of society.
  • 5. “Flight” from money is the accelerated materialization of funds of the population and business, that is, in conditions of depreciation of money, subjects of market relations try to get rid of them as quickly as possible, converting them into goods and services.
  • 6. The lag of the interest rate paid by banks and other credit institutions from the inflation rate up to negative values ​​of the real interest rate. Here it is necessary to distinguish between the nominal and real interest rates. Nominal interest rate is the interest rate on loans that currently exists in a given country. Real interest rate = Nominal interest rate minus i, where i is the inflation rate.
  • 7. Losses are usually borne by creditors, and debtors gain if the loan agreement does not provide for a change in the interest rate in accordance with changes in the price level in the economy. It becomes unprofitable to lend money, which leads to a crisis in the credit system.
  • 8. It is practically impossible to obtain long-term loans; therefore, there are no investments in the economy.
  • 9. Instability of the economic situation and economic information. In a market economy, prices provide the main information about the market situation. It is prices that producers and consumers focus on when deciding to sell or buy a particular product. If prices are subject to constant changes, producers become disoriented. Naturally, no one is opening new production facilities.

As a result, the system of regulation of the market economy is destroyed.

The existence of negative socio-economic manifestations of inflation forces the government to take countermeasures to reduce its level and minimize negative consequences. There are usually two main directions of the state’s anti-inflationary policy: adaptive policy, involving adaptation to inflation, mitigation of its consequences, and active policy, aimed at eliminating the causes of inflation. The essence of adaptive policy comes down to the fact that the government indexes the main types of income of the population (minimum wage, pensions, scholarships, etc.) with a certain periodicity. Typically, indexation is 60-70% of the inflation rate. This is done in order, on the one hand, to maintain a minimum sufficient level of income of the population, and, on the other hand, due to the difference of 30-40%, to gradually reduce demand in the national market over one and a half to two years and thereby extinguish inflation. This method of fighting inflation has both advantages and disadvantages. Its clear advantage is social stability in society; The disadvantage is the length of time it takes to implement this approach to combating inflationary phenomena. An active anti-inflation policy is carried out on the basis of a significant reduction in the amount of money in circulation. This implies:

  • carrying out confiscation-type monetary reform;
  • control over money issue;
  • preventing emission financing of the state budget;
  • implementation of current control over the state of the money supply as part of the implementation of monetary policy.

In addition to these measures, a number of other steps are being taken to combat demand inflation and supply inflation:

  • increasing taxes and cutting government spending;
  • reduction of the state budget deficit;
  • stabilization of the exchange rate;
  • restraining the growth of factor incomes (income of owners of production factors - payment for economic resources);
  • fight against monopolism in the economy.

The implementation of an active anti-inflation policy makes it possible to reduce inflation to almost zero in a fairly short period of time. However, the implementation of the measures described above is accompanied by the massive ruin of uncompetitive and low-profit firms, leading to an increase in unemployment, giving rise to social tension in society.

In reality, the government most often pursues a policy that combines both directions of combating inflation with the predominance of one of them.

Control questions

  • 1. What is meant by the economic cycle? What are the main phases of the business cycle?
  • 2. Name and characterize the types of economic cycles.
  • 3. What are the reasons for the cyclical development of the economy?
  • 4. How do business cycles affect production and employment in different sectors of the economy? How does the acceleration principle affect cyclical development?
  • 5. Why is unemployment an economic problem? How to measure its level? Why is it important to know the duration of unemployment?
  • 6. How is the natural rate of unemployment determined? What is full employment, potential national output?
  • 7. Describe the forms of unemployment. What is the difference between frictional, structural and cyclical unemployment?
  • 8. What are the economic and social consequences of unemployment?
  • 9. What is the essence of inflation? What are the main manifestations of inflation? What is the difference between open and suppressed inflation?
  • 10. How to measure open inflation? What are the ways to assess the level of suppressed inflation?
  • 11. Compare moderate, galloping inflation and hyperinflation.

Inflation has a number of socio-economic consequences:

1. redistribution of income:

a) losses are borne by groups of the population with fixed incomes (state employees, students, pensioners);
b) those categories of citizens who produce products that are in high demand benefit;
c) people who took out a loan win;

2. depreciation of savings:

a) inflation undermines incentives to save;
b) it reduces the real value of savings;
c) inflation depreciates the depreciation fund of enterprises, since firms spend most of their profits on current consumption, which undermines production;

3. social instability:

a) rising unemployment;
b) reducing state budget expenditures aimed at implementing social programs;
c) social tension in society.

Anti-inflationary policy

The state's anti-inflationary policy can be carried out using active and adaptive policy methods. An active policy is carried out with the aim of eliminating the causes of inflation, and an adaptive policy is carried out to adapt the economy to it and mitigate its negative consequences.

An active anti-inflationary policy involves the use of a shock therapy method, in which the causes of inflation on both the demand and supply sides are destroyed in a short period of time, and which consists of the following:

1) government spending is reduced;

2) taxes are rising;

3) a deficit-free budget is formed;

4) a tight monetary policy is being pursued;

5) wage growth is restrained;

6) market infrastructure is developing;

7) a fixed exchange rate is introduced;

8) the competitive principles of the economy are strengthened through the fight against monopolies.

9) combating the budget deficit;

10) reduction in inflation expectations;

11) structural restructuring of the national economy;

12) establishment of strict standards for the annual increase in the money supply;

13) development of production and scientific and technological progress;

14) ensuring steadily decreasing inflation rates;

15) reducing the social consequences of inflation through:

a) regulation of income of the population;
b) approval of maximum price levels for certain groups of goods;
c) implementation of socially oriented programs;

16) binding excess funds in relation to the mass of goods through privatization.

The listed measures lead to a sharp decrease in both inflation itself and the population's inflation expectations, which creates conditions for sustainable economic growth. At the same time, shock therapy leads to a significant decline in production and an increase in unemployment, greatly reduces the standard of living of the population and leads to an increase in social tension in society.

Adaptive policy involves using the method of gradually reducing inflation. A gradual reduction in the excess money supply in circulation makes it possible to avoid a shock in the sphere of employment and production, as well as excessive social tension in society, but does not deceive the inflationary expectations of the population.

Inflation acts as a constant companion of a market economy. The socio-economic consequences of inflation include:

1. redistribution of income and wealth in favor of a small segment of the population ;

Redistribution of income and wealth occurs, for example, when debtors become richer at the expense of creditors. The repayment of a loan for the construction of a house under the agreement occurs at constant prices, there is no adjustment for the depreciation of money. With inflation, it is unprofitable to lend at a fixed price. Inflation redistributes income from those who give money to those who take out loans. Especially with unexpected (unpredictable) inflation.

In conditions of inflation, intermediaries engaged in the resale of securities, goods, and currency become richer. As a result of increasing their tariffs, natural monopolies “profit.” All this is happening against the backdrop of losses from rising prices for civil servants with fixed salaries, pensioners, recipients of insurance, rent and utility payments.

2. price lag of state-owned enterprises from market prices , which is facilitated by their long-term nature, fixity, and inflexibility, since the increase in prices of state-owned enterprises must be justified through higher organizations. There is a growing imbalance between the private and public sectors, with state-owned enterprises suffering losses.

3. hidden state confiscation of funds from the population through taxes, while the old tax rates make even the wealthy segments of the population poorer. Progressive taxation, as inflation rises, automatically enrolls various social groups into increasingly wealthier incomes, while income rises nominally rather than in reality. The state collects an ever-increasing amount of taxes.

4. accelerated materialization of funds into goods, flight from cheaper money ; The escape from cheaper money in the USSR was the construction of dachas, the purchase of furniture, gold, etc. In the early 90s, with the fall in monetary incomes, the demand for all goods, including food, decreased, but a certain segment of the population remained in steady demand for real estate, cars, antiques.

5. instability and lack of economic information for sellers and buyers ; Prices are the main indicator of a market economy. When they grow feverishly, consumers and producers constantly make mistakes in choosing the optimal price, confidence in future incomes decreases, the population loses economic incentives, the economic activity of entrepreneurs decreases, and the efficiency of allocation of economic resources drops sharply.

6. the lag of the real interest rate for a loan from the annual inflation rate , which forces bankers to increase interest rates, loans become more expensive; Real interest = nominal interest - inflation rate percentage.

7. inverse relationship between the inflation rate and the unemployment rate . Inflation has a certain connection with employment. An increase in inflation may be combined with high employment and high production volumes, or, conversely, a decrease in inflation may be accompanied by a decline in production and a significant increase in unemployment. When inflation decreases by 1%, unemployment increases by 2%.

The negative social and economic consequences of inflation force governments of different countries to pursue certain economic policies. The state has always paid significant attention to the regulation of the money supply. Anti-inflationary policy includes a wide range of different monetary and budget measures, tax measures, stabilization programs and actions to regulate and distribute income.

Assessing the nature of anti-inflationary policy, we can distinguish three general approaches. The first (proposed by supporters of modern Keynesianism) provides for an active fiscal policy - maneuvering government spending and taxes in order to influence effective demand: the state limits its expenses and increases taxes. As a result, demand is reduced and inflation rates are reduced. However, at the same time, a decline in investment and production may occur, which can lead to stagnation and even to phenomena opposite to the initially set goals, and unemployment to develop.

Fiscal policy is also being pursued to expand demand in times of recession. If demand is insufficient, programs of government investment and other expenditures are implemented (even in conditions of significant budget deficits), and taxes are reduced. This is believed to increase demand for consumer goods and services. However, stimulating demand with budgetary funds, as the experience of many countries in the 60-70s showed, can increase inflation. In addition, large budget deficits limit the government's ability to maneuver taxes and spending.

The second approach is recommended by authors who support monetarism in economic theory. Monetary regulation comes to the fore, indirectly and flexibly influencing the economic situation. This type of regulation is carried out by a central bank not controlled by the government, which determines the issue, changes the amount of money in circulation and interest rates. Proponents of this approach believe that the state should carry out deflationary measures to limit effective demand, since stimulating economic growth and artificially maintaining employment by reducing the natural rate of unemployment leads to a loss of control over inflation.

Trying to curb out-of-control inflation, the governments of many countries, starting from the 60s, pursued the so-called price and income policy, the main task of which essentially boils down to limiting wages - the third method. Since this policy refers to an administrative rather than a market strategy to combat inflation, it does not always achieve its stated goal.

19. Economic growth: essence, indicators, factors. Types of economic growth. Quality of economic growth.

The economic growth represents the development of the national economy in which the gross national income and real gross domestic product increase as sources of satisfying the needs of society. Economic growth is usually understood not as short-term increases in the real volume of national production, but as long-term trends in the increase and qualitative improvement of the national product and the factors of its production.

Essence and the significance of economic growth lie in the constant resolution and repetition at a new level of the main problem of any economic system - the contradiction between the limited production resources and the limitlessness of human needs. Economic growth allows you to simultaneously increase available resources, current consumption, as well as new additional investments in the further development of production.

Economic growth is measured using indicator the growth rate of total income or real GDP as a whole or per capita. The growth rate of real GDP is as follows:

X = (Y t - Y t - 1) : Y t - 1,

where X ¾ growth rate of real output;

Y t ¾ real output of the current year;

Y t - 1 ¾ real output of the previous year.

Economic growth can be measured both in physical terms (physical growth) and in monetary terms (value growth). The use of any of these methods presupposes the purification of economic growth indicators from the inflationary component. For this purpose, the measurement of physical growth is given in prices of the previous period. When calculating the value increase in total income (or GDP), its value is divided by the price growth index for the noted period.

Factors of economic growth can be divided as follows:

1) supply factors (natural resources, labor resources, capital, technology);

2) demand factors (level of economic activity, cyclical fluctuations);

3) distribution factors (work motivation, social stability).

In any case, economic growth primarily depends on production capabilities and is associated with the use of the main types of production resources - labor, capital, natural (land), available in limited quantities.

Transition to new quality of economic growth means that economic development:

· carried out mainly as a result of the use of the scientific and technological progress factor ¾ the use of computer, resource-saving technologies, etc.;

· to a greater extent than in the previous period, it is associated with an increase in the quality of manufactured goods and services, which is driven by quality competition;

· has restrictions established by the government in order to protect the ecological environment of human activity (violation of these limits of economic growth is considered socially dangerous);

· has a social orientation, namely, there is an increase in social infrastructure, an improvement in the safety of working conditions, an influx of investment in human capital, a more rational use of free time, ensuring full employment of the working population, etc.

Types of Economic Growth are characterized by the following.

Extensive type economic growth involves an increase in output using additional resources: means of production, labor, additional financial resources.

Intensive type economic growth is associated with increased production efficiency. It involves increasing production output per unit of resources used and improving the quality characteristics of production. Similar processes occur:

· in using the achievements of scientific and technical progress, updating production;

· in improving the qualifications of employees;

· in improving the quality of products and updating the assortment.

Extensive and intensive types of economic growth can be combined when an increase in the scale of production occurs on a new technological and technical basis.

With extensive growth, the economy basically maintains its economic proportions, its structural characteristics and develops in breadth. In conditions of an intensive type of development, the economy becomes dynamic, not only the growth rate increases, but also progressive structural changes occur.


Related information.


Inflation leads to serious socio-economic consequences, causing in particular:

– decrease in real incomes of the population, depreciation of savings of the population;

– worsening living conditions of social groups with fixed incomes, decreasing public confidence in government programs;

– decreased economic efficiency, difficulties with long-term planning, increased investment risk;

– “flight from money”, as a result of which money ceases to fulfill its functions;

– increased social tension in society.

The negative social and economic consequences of inflation force governments of different countries to pursue anti-inflationary economic policies.

The fight against inflation is possible only at the macroeconomic level and by the state. Anti-inflationary measures can only be applied to open inflation; suppressed inflation cannot be limited because it cannot be measured. The first step in the fight against suppressed inflation should be its translation into open inflation.

The anti-inflation program should be based on an analysis of causes and factors, a set of economic policy measures that help reduce inflation.

There are two approaches to managing the economy in conditions of inflation:

1) adaptation policy;

2) an attempt to reduce inflation through anti-inflationary measures.

Adaptation policy means that the economy must be adjusted to the conditions of inflation. Adaptive mechanisms include:

1) price and income policy, which means that the government either “freezes” prices and nominal incomes, or “links” price increases to increases in wages, and increases in incomes to increases in labor productivity;

2) increasing the discount rate (refinancing rate).

The set of government measures to combat inflation includes:

1) restriction of the money supply, which can be reduced sharply (by the shock therapy method) or gradually (by the gradation method), which can be called successful if the growth of the money supply and the price level does not exceed 20–30% per year;

2) increasing the mandatory reserve rate;

3) reduction of government spending and social programs;

4) improving the tax system and increasing tax revenues to the budget;

5) refusal to finance the state budget deficit through additional money issues;

6) preventing “import of inflation”.

25. Employment and unemployment

One of the manifestations of macroeconomic instability is unemployment.

Unemployment is a socio-economic phenomenon indicating that a certain part of the working-age population does not find use for their mental and physical abilities due to reasons beyond their control.

Statistics classify any person into one of three groups:

1) working (employed);

2) unemployed - persons who are able and willing to work, but are currently not working and are actively looking for work.

3) part of the population that, unlike the first two groups, is not included in the labor force (persons under 16 years of age, housewives, pensioners, students, etc.).

According to the definitions of international organizations such as the ILO and OECD, the unemployed are persons who do not have a job, are ready to start work and have been looking for work within four weeks. According to the legislation of the Republic of Belarus, a citizen is considered unemployed if the following set of conditions are met in relation to him: citizens are able to work; are of working age; permanently reside on the territory of the Republic of Belarus; do not have a job; are not engaged in entrepreneurial activities; do not study in educational institutions and do not serve in military service; registered with the employment service.

The main indicator of unemployment is its level, calculated as the ratio of the number of unemployed to the total labor force (the sum of the number of employed and unemployed), expressed as a percentage.

The economic reasons that give rise to unemployment include the following:

1) the development of modern technologies, the emergence of new equipment and machines lead to the release of some workers who require retraining or retraining;

2) reduction of the administrative apparatus;

3) economic recession, as a result of which the economy’s needs for resources, including labor, decrease;

4) structural changes in the economy leading to the disappearance of outdated industries and enterprises and industries and enterprises and the emergence of new ones;

5) seasonal changes in the demand for labor due to the specifics of production (for example, agriculture, construction, tourism, etc.).

At the present stage of development of economic science, the following types of unemployment are distinguished:

1) frictional unemployment is associated with the constant movement of the population from profession to profession, from region to region due to the end of maternity leave, graduation, or military service. The main feature of this type of unemployment is short duration. Typically, frictional unemployment affects 2–8% of the workforce and cannot be eliminated;

2) structural unemployment is of a long-term nature and is associated with changes in the aggregate demand for labor, since the structure of the labor force begins to not correspond to the demand for labor due to scientific, technical, technological, and organizational innovations. The presence of structural unemployment in the country is indicated by the presence of a high level of vacancies that cannot be filled without retraining workers. A type of structural unemployment is considered to be technological unemployment, which arises due to the introduction of labor-saving equipment and technologies into production, especially information technologies (mainly office, warehouse, and sales employees suffer);

3) cyclical unemployment arises due to a decline in production and a general low demand for labor in all areas, industries, and regions. During a recession, its level can reach 8–10%. One of the most striking examples of cyclical unemployment is the period of the “Great Depression” (USA, 1929–1933), when every fourth American was unemployed;

4) seasonal unemployment is formed in industries characterized by seasonal fluctuations in production volumes;

5) hidden unemployment occurs in enterprises switching to part-time work or a shortened work week.

In economic theory, to characterize the situation on the labor market, in addition to the unemployment rate, the following concepts are used:

1) full employment - the level of employment when only structural or frictional unemployment exists in the country. At full employment, 94–95% of the workforce are employed;

2) natural rate of unemployment - the unemployment rate at full employment is 5.5 - 6.5%.

Unemployment is negative and has the following consequences for the economy:

1) production and income of the population are reduced, that is, the volume of the gross national product lags. This relationship is expressed by A. Okun's law. He proved that the ratio 1: 2.5 determines the absolute loss of production at any level of unemployment. This means that if unemployment exceeds the natural level by 1%, then the lag in the gross national product will be 2.5%, if by 2%, then 5%, etc.;

2) tax revenues to budgets of all levels are decreasing;

3) the standard of living decreases not only for the unemployed person himself, but also for his family;

4) crime and the number of mental illnesses are increasing.

Although unemployment is an integral property of the market economic system, it itself is not able to cope with unemployment. State regulation of the labor market is necessary, which is carried out in two directions:

1) impact on the level and duration of unemployment using employment services, which not only help find work, but also provide retraining of workers;

2) providing guarantees of material and social support.

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