31.The term "inflation" literally means "swelling". Indeed, the financing of public expenditure
(for example, during perio...
the country is in a state of stagnation;
ii) imported inflation - the issue of national currency in excess of requirements...
32Macroeconomics is the study of the entire economy in terms of the total amount of goods
and services produced, total inc...
State
the foreign sector .
To understand the subject of macroeconomics is necessary to distinguish the macroeconomic
analy...
33.Indicators of results of any kind of labor have a place in his characterization as the starting point for determining t...
Third, the income of the business sector must take into account depreciation, which are for the purchase of investment
goo...
34. GDP: Expenditure Approach

Gross domestic product (GDP) represents the value of all final goods produced and services
...
Purchasers’ prices
Basic prices – income in kind, retained goods or services for own consumption
Time of recording - accru...
35.One

of the main macroeconomic indicators that measure economic performance are gross
domestic product ( GDP) and gross...
land owned by another owner ) , interest on loans obtained from the bank profit - income for
the owner of the firm.
In acc...
36. Theories explaining the economic cycle mainly due to external factors , called externalities

theories , unlike intern...
cycle - from the beginning of 1844-1851 to 1890-1896 years.
cycle - from 1890 - 1896 to 1914 to 1920 .
Large economic cycl...
37.Society seeks both to economic growth and full employment to a sustainable level of prices.
Since the time of the emerg...
Cycles differ in duration and intensity, but all the cycles passes the same phases:In the cycle
structure of the isolated ...
38. Unemployment (or joblessness) occurs when people are without work and actively seeking
work. The unemployment rate is ...
Okun'soriginal statement of his law, 2% increase in output corresponds to a 1% decline
in the rate of cyclical unemploymen...
39. Okun's Law describes a clear relationship between unemployment and national output, in

which lowered unemployment res...
that their purchasing power has fallen because prices have risen more rapidly than they
expected. But, over time, as worke...
40. Unemployment types and causes
There are several types of unemployment, each one defined in terms of cause and severity...
Seasonal unemployment exists because certain industries only produce or distribute their
products at certain times of the ...
41. Wage labour (or wage labor in American English) is the socioeconomicrelationship
between a worker and an employer, whe...
worker is assigned or posted to a job by a political authority, or that an agency hires out a worker
to an enterprise toge...
42. The label 'capital market' is a blanket term for all procedures and institutions providing for
transactions of long-te...
There exist different types of bonds in the market like- the corporate bond,
municipal bond, government bond and many more...
quality in terms of maturity i.e. short term, intermediate term, or long term, or based
on some component of the indenture...
cause the aggregate supply curve to shift inwards. For example a sharp rise in global
commodity prices. If AS shifts to th...
It is easier to remember if you just think that they are really different ways of measuring
the same thing, which is the f...
affect the cost of borrowing and thus both consumption and investment expenditures. Interest
rates are a component of inve...
45. Aggregate supply - is the total amount of goods and services produced in the economy ( in
terms of value ) . This conc...
Explanation of the form of the AS curve in the classical model is associated with the analysis of
the labor market , since...
of firms have excess capacity , stocks of finished goods in warehouses , as well as the ability to
use overtime or hire ad...
The essence of money is manifested in the unity of the three properties : • universal direct
exchangeability ; • crystalli...
2 . Money plays a qualitatively new role : they become capital , or self-expanding value. Money
turns into money-capital i...
aggregates and overall monetary velocity.
If the monetary aggregates are growing too quickly, it could trigger inflationar...
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  1. 1. 31.The term "inflation" literally means "swelling". Indeed, the financing of public expenditure (for example, during periods of extreme economic development during the wars, revolutions) with the issue of paper money with the cessation of cash payments to the metal led to a "swelling" of money and depreciation of paper money. Anti-inflation policy is carried out by central banks. It uses increases in interest rates to hold down price inflation. Increased interest is employed to slow down investment and hiring and lowering wages, which are seen as the culprit in price inflation. Criticisms. Anti-inflation policy is very controversial. Supporters point out that it prevents the loss of currency value, holding prices down. Critics point out that the goal of anti-inflation policy is to increase unemployment, and that as long as wage increases meet inflation, it has a minimal impact on working people. The critics claim that since the rich have most of the money, anti-inflation policy is designed to protect the value of their investments at the expense of working people whose wages stagnate or fall during periods of higher unemployment. Impasse Anti-inflation policy is based on a recursive relationship between interest rates and growth/stagnation. During the 1970s and the late 2000s, anti-inflation policy ran into a dilemma with its "interest-rate weapon." Unemployment continues to rise, even as the general economy stagnates. The interest rates were dropped to nearly zero, with little visible effect on the stagnation. The model fails in this instance, because there is no place left to go, i.e, interest rates cannot be lowered below zero. Modern inflation has a number of distinctive features. Thus, the local nature of the former was replaced by the ubiquitous, all-encompassing, the frequency of acquired chronic form and act on it, not only monetary factors, as before, and many others. The first group of factors are those that cause the excess demand for money on commodity supply, resulting in a violation of the law of money circulation. The second group includes factors that are responsible for rising costs and prices of goods, supported by further pulling the money supply to their increased level. In fact, both groups of factors are intertwined and interact with each other. Depending on the predominance of the factors of a group of two types of inflation: inflation, demand and cost inflation. Inflation caused by demand factors, the following money: a) The militarization of the economy and the growth of military spending. Military Nye technique becomes less and less adapted for use formation in civilian areas, and the resulting cash equivalence, as opposed to her becoming a factor, excess for treatment; b) The state budget deficit and the growth of domestic long hectares. Cover the budget deficit in two ways: placement of government borrowing in the money market, or additional issue of irredeemable notes of the Central the bank. The first way is typical for most industrialized developed countries. c) bank credit expansion, which is expressed in the extended rhenium credit to the economy, while the production in
  2. 2. the country is in a state of stagnation; ii) imported inflation - the issue of national currency in excess of requirements for purchase of foreign trade currency countries with surplus. Foreign-economic component of the inflation process, or imported inflation has two main channels of penetration of the national economy. The first source of external inflationary impulses could be lowering the exchange rate of the monetary unit, which increases the market prices of imported consumer goods. With regard to imported raw materials from abroad and semi, their appreciation of the national money increases the value of goods produced with them in the country, and thus triggers the mechanism of cost-push inflation. The second type of inflationary impact from the outside - it is an excessive expansion of money supply (money supply) as a result of a major and sustainable balance of payments surplus on current account or a massive inflow of capital. This drives the demand for inflation; e) excessive investment in heavy industry. In this case the market is constantly extracted the elements of productive capital, which in return received an additional turnover of cash equivalent. Inflation is characterized by the costs of non-cash impact of these factors on the process of pricing: a) The price leadership. It has been observed in industrialized countries oped countries in the 60's and 70's. XX century. When large companies with formation and price changes were guided by prices, the mouth lished leading companies, ie the largest of ducer in the industry or within the local and territorial market. The same trend is observed in Russia; b) reduction of labor productivity growth and the fall of production. This factor was characteristic of the industrialized developed countries in the 70-80s. XX century. When a crucial role in slowing down Research productivity growth has played a deterioration in general conditions of reproduction due to the crisis. c) the acceleration of growth in costs, especially wages per unit of output. The economic strength of the working class, The need to allocate a category called generalizing the economic unity of the reproduction process. It is impossible to explain the causes of the financial crisis, high tax threshold, or the budget deficit. The financial crisis is a consequence of the level of production technology, the stability of national currency, the wage level, the level of the ultimate profits of producers, refinancing, and many other factors operating simultaneously. The category "money economy of the country" allows us to understand the dependencies of economic processes in their interaction. The whole set of relationships that makes money economy of the country, can be represented as follows Each of the separate structural units (units) of the money economy of the country has a specific role in the economy. Any link in the money economy can claim to be the economic category, which has its social purpose, which is realized through its specific functions. But each of these categories are inherent features in common with the category of "money economy of the country." These functions are the formation and use of funds
  3. 3. 32Macroeconomics is the study of the entire economy in terms of the total amount of goods and services produced, total income earned, the level of employment of productive resources, and the general behavior of prices. Macroeconomics can be used to analyze how best to influence policy goals such as economic growth, price stability, full employment and the attainment of a sustainable balance of payments. is the branch that studies large-scale economies. Macroeconomics observes and analyzes how entire countries, full of many industries and consumers, function. It is notsimply the sum of many "microeconomics"; many of the concepts are entirely different. Where micro will study a single consumer, a paper-clip manufacturing plant or the airline industry, macro studies the entire economy within which those three exist. Macroeconomics studies elements of a large economy, including inflation, government policies, output growth, and unemployment.on the other hand, takes a much broader view by analyzing the economic activity of an entire country or the international marketplace Analysis of ex post and ex ante. There are two types of macroeconomic analysis : analysis of ex post analysis and ex ante. Macroeconomic analysis ex post or national accounting , ie analysis of statistical data that allows to evaluate the economic performance , identify problems and adverse events , develop economic policies to address them and overcome , to conduct a comparative analysis of the economic potentials of different countries. Macroeconomic analysis of the ex ante, ie predictive modeling of economic processes and phenomena on the basis of certain theoretical concepts, allowing you to identify the patterns of development of economic processes and to identify causal relationships between economic phenomena and variables. This is macroeconomics as a science . Methods and principles of macroeconomic analysis In his analysis of macroeconomics uses the same methods and principles as microeconomics . Such general principles and methods of economic analysis are: abstraction, ( the use of models for the study and explanation of economic processes and phenomena ) , a combination of methods of deduction and induction , a combination of normative and positive analysis , the use of the principle of " ceteris paribus " assumption of rational behavior economic agents , etc. Feature of macroeconomic analysis is that it serves an important principle of aggregation . The study of economic relationships and patterns on the economy as a whole is only possible if we consider the aggregate or aggregates . Macroeconomic analysis requires aggregation. Aggregation is the bringing together of separate elements into one, in aggregate, in the aggregate . Aggregation is always based on an abstraction ,ie abstraction from unimportant moments and capture the most important , significant , typical features , patterns of economic processes and phenomena. Aggregation allows you to select : macroeconomic agents macroeconomic markets , macroeconomic linkages , macroeconomic indicators . Aggregation based on the identification of the most typical features of the behavior of economic agents , provides an opportunity to highlight the four macroeconomic agent : households firms
  4. 4. State the foreign sector . To understand the subject of macroeconomics is necessary to distinguish the macroeconomic analysis ex post, or national accounting and analysis of ex ante - the macroeconomy in the proper sense of the word. National accounting (ex post) determines the macroeconomic situation of the economy in the past period . This information is needed to determine the extent to which the objectives set out above , economic policy-making , a comparative analysis of the economic potentials of the various countries. On the basis of ex post adjustment of existing implemented macroeconomic and development of new concepts . Analysis (ex ante) - is predictive modeling of economic phenomena and processes on the basis of certain theoretical concepts. The purpose of this analysis - to determine the regularities of macroeconomic parameters. Macroeconomics gives some recommendations for the development of economic policy on the basis of the analysis of real economic variables . Methods of Macroeconomic Analysis For macroeconomic research , like other sciences, is characterized by the use of complex techniques. Method - a set of techniques , methods , principles, by which identifies ways to achieve the research objectives . They can be divided into general scientific and specific research methods. Scientific methods of investigation include the method of abstraction , analysis , synthesis , induction , deduction , the unity of the historical and logical , systemic-functional analysis, etc. The main specific methods of research in macroeconomics are aggregation and modeling. Aggregation - consolidation of economic indicators by combining them into a single overall (creation units, total units ) . Aggregate values characterize the economy as a whole : Gross domestic product (rather than issue a separate company ) , the general price level (rather than prices for specific products ) , the market interest rate ( rather than individual species percent) , inflation , employment , unemployment etc. Macroeconomic aggregation applies primarily to economic entities , which are grouped into four sectors: the household sector ; the business sector ; the public sector ; sector " rest of the world ."
  5. 5. 33.Indicators of results of any kind of labor have a place in his characterization as the starting point for determining the degree of the achievement . Activities are evaluated at any level of production, whether it be an individual , company, organization or the national economy as a whole. The results of the operation at the national level is called macroeconomic . They are usually formed as a cumulative result of microeconomic indicators. The fact that each of the main macroeconomic indicators, generally corresponds to the analogue , which is calculated at the level of the primary economic unit. Moreover , a significant part of macroeconomic indicators can only be obtained as the sum of the microlevel indicators . Thus, we can talk about the kind of system, that is such a set of indicators , which are interrelated , complementary and performance-oriented economic performance . SNA is the main indicator of GDP. It expresses the result of the economy over a certain period of development, characterizes the finished products and services produced . Unlike previously used in our statistics, the total social product ( SOP) , GDP does not include the cost of the means Discontinued and thus eliminates the double counting . On the other hand, unlike GDP SOP addition results material production includes the cost of services. GDP and GNP , the composition and methods of calculation. The main macroeconomic indicator ranked countries as well as international organizations such as the UN, IMF , World Bank , is the GDP. GDP is the gross value of all goods and services produced within the State within a certain period minus intermediate consumption. That is, GDP is the sum of value added of all units of the national economy . GDP measures the performance of the entities in the economic territory of the State , but it is not designed to assess the production outside the country. Thus, GDP characterizes the value created by both residents and non-residents of this State , but does not consider the cost produced by residents outside the country. The national statistics of some of the main macroeconomic indicator can be considered as GNP (used in the U.S. and Japanese systems). In the quantitative ratio of a difference between GDP and GNP low and is usually not more than 2%. Unlike GDP , GNP characterizes the value of the final product created by residents within the State and beyond , but does not include the activities of non-residents in the economic territory of the country. Methods of calculating GDP. GDP can be calculated in three ways : from the production , distribution and end use. In the volume of gross output also included some categories produced but unsold goods. These include: products produced by enterprises for vnutriproiz - duction consumption products used for construction of buildings and the production of other fixed assets products and services exchanged by barter products and services used to pay in kind agricultural and food products produced by households for their own consumption other products produced by households imputed income from living in their own home imputed payment of financial intermediation services As for the land rent , then it is treated as income from the property and is not included in the gross output . GDP , calculated production method , in addition to the amount of value added includes net indirect taxes. The system of national accounts is - taxes on production and imports . This implies that GDP is the total volume of gross output of products and services in the domestic economy , minus intermediate consumption, plus value-added tax and net taxes on imports (excluding VAT) . GDP = gross output - intermediate consumption + VAT + CHNI In accordance with the method of distribution of GDP has gross revenues of all business units and people from all kinds of economic activities , as well as depreciation. More precisely, the GDP as an income stream represented by : First, income owners of factors of production (ie the sum of wages, interest , rent payments and other property income property before taxes) secondly, the income of the state in the form of various indirect taxes
  6. 6. Third, the income of the business sector must take into account depreciation, which are for the purchase of investment goods In applying the method of final uses of GDP appear as final consumption of goods and services , capital investment , increase in inventories and the balance of foreign trade operations. Thus, GDP will include four streams of costs: First, consumer spending. This household spending on durable consumer goods , as well as the costs of services . To denote the aggregate of these costs apply the letter C Second, gross private domestic investment (I). They represent the cost of the private business sector of the State to increase investment in a given year ( net investment ) , as well as investment goods for compensation consumed machinery , equipment, fixtures , etc. , ie depreciation Third, the state represented by their government is a consumer , making purchases of goods and services, such as military equipment. Government spending on consumption designated - G. It should be noted that public procurement exclude all government transfer payments , as this category of expenditure does not reflect the increase in current production and is just a transfer of part of government revenue to certain categories of persons Fourth, some of the goods and services produced in the state is exported beyond it ( export) and consumed in other countries , so they should be added . On the other hand , imported goods and services worth subtracted because they are produced in other systems and do not reflect the national production . Thus, the fourth component is net exports ,ie difference between exports and imports ( Xn ) . Based on the above , the GDP by the end use of the method is : GDP = C + I + G+ Xn. GDP calculations based on various components inevitably leads to a mismatch of its quantitative evaluations. Most often there is a discrepancy due to the fact that the collected statistical data do not provide absolutely reliable reflection of the quantitative content of economic operations. In countries with developed statistical service , such deviations are negligible and at the level of GDP, as a rule, do not exceed 1-2 %. In statistical references mismatch between calculus GDP values in different ways , as well as some other macroeconomic indicators are reflected in the special column " statistical discrepancy ."Nominal and real GDP. GDP estimate for a certain period of time gives you the opportunity to judge the dynamics of the economy. If, for example , the value of GDP increased by 2% , which means that the increased weight of the goods and services. However, GDP growth is not always indicative of the progress in development. The fact that GDP it cost index and thus , it depends on the level of prices in the economy . Therefore, in economic theory and practice distinguish nominal and real GDP. Nominal GDP - a measure of current prices , that is established at the time of calculation. Real GDP - is GDP at constant prices, ie inflation-adjusted . Adjustment is performed by the formula: real GDP = nominal GDP / price index . Other parameters of the SNA are the following . Net national product - is the gross national product minus the part produced product that is required to replace the means of production, worn in the output ( depreciation). Gross national income - the sum of primary incomes received by residents of the State in connection with their direct or indirect participation in the GDP of the country 's GDP and other countries. Net national income - is the difference between GNI and consumption of fixed capital, ie depreciation. National disposable income - net national income plus current transfers from abroad. Thus, LPR measures the amount of income that residents can use either for consumption or for savings . Gross national disposable income ( GNDI ) equals GDP at market prices plus (minus ) the net balance between the domestic economy and other countries on taxes on production and imports , subsidies , wages, income from property and entrepreneurial income , insurance operations and other transfers. Net national disposable income equals GNDI minus consumption of fixed capital .Gross national savings - GNDI part that does not go to final consumption . It is equal to the sum of gross savings of all sectors. Net national savings - equal to the difference between the VNS and consumption of fixed capital .
  7. 7. 34. GDP: Expenditure Approach Gross domestic product (GDP) represents the value of all final goods produced and services delivered within the geographical boundaries of a region (city, state, country) in a period (most commonly a year). There are two commonly used approaches to calculate GDP: the expenditures approach and the income approach. The production approach is also another possible alternative. Adventures of expenditure method: Shows demand for goods and services Stimulus to the economy Use of supply of goods and services Link to welfare and production capacity Link with the rest of the world Estimates based on the supply and use of goods and services Estimates are at purchasers prices Estimate is equal to GDP by economic activity at market or purchasers price Types of expenditures: Final consumption expenditure Households General government Non profit institutions serving households Gross domestic capital formation Gross Fixed Capital Formation Inventory Valuables Net export Exports of goods and services Less Imports of goods and services Time of recording and valuation of final consumption expenditure Follows the main principles in the system Valuation
  8. 8. Purchasers’ prices Basic prices – income in kind, retained goods or services for own consumption Time of recording - accrual principle Expenditure on a good is to be recorded at the time its ownership changes Expenditure on a service is recorded when the delivery of the service is completed The GDP under the expenditures approach is calculated by adding up all the expenditures made on final goods and services produced within the geographical boundaries of a region. These include consumption expenditure (by households), investment expenditures (by businesses), government expenditures (on purchase of goods and services) and net expenditures by foreigners (i.e. net exports which in turn equals total exports minus total imports). The GDP under the expenditures approach is calculated using the following formula: GDP = C + I + G + (X − M) C stands for personal consumption expenditures and it represents the spending by individuals on goods and services for personal use. Examples of expenditures that fall under this heading includes: spending on purchase of durable goods (such as cars, computers, etc.), non-durable goods (such as bread, milk, etc.) and on purchase of services (such health, entertainment, haircuts, etc.)I stands for gross private investment and it represents the spending by entrepreneurs to sustain and grow their business. Examples of expenditures falling under gross private investment includes: fixed investment (purchase of final plant and machinery, business tools, etc.), construction for assets (residential and others) and changes in inventory levels, etc. However, it excludes a mere transfer of existing assets from one party to another (such as purchase of securities on the stock exchange, purchase of a resold asset, etc.) G stands for government expenditures and gross investment and it represents the spending by government on consumption and on investment in new infrastructure, etc. Examples of expenditures falling under this heading include: salaries of government officers, expenditure on stationery and equipment used by government, expenditure on training of government officials, expenditure on construction of new high ways, parks, etc. (X − M) equals net exports. X stands for exports and represents the purchase of goods produced in a region that are consumed by foreigners. M stands for imports and represents the purchase of foreign goods and services. Since GDP sums up all production within geographical boundaries of a region, it must include the output that is purchased by foreigners and exclude the portion of C, I and G that is expended on foreign goods and services. Classification of Individual Consumption by Purpose (COICOP) HealthTransportCommunication Recreation and cultureEducationRestaurant and hotelsMiscellaneous goods and services
  9. 9. 35.One of the main macroeconomic indicators that measure economic performance are gross domestic product ( GDP) and gross national product (GNP). GDP - is the market value of all final goods and services produced in a country during the year , regardless of the factors of production are owned by residents of a country or foreign-owned ( non-residents ) . GDP - the market value of all final goods and services produced in a country during the year. GDP measures the value of output created factors of production owned by the citizens of this country ( resident ) , including in other countries - this is called net income factors. GNP = GDP + net factor income . Net factor income from abroad is equal to the difference between the income derived nationals abroad and foreign income received in that country . Dividing GDP by the number of its citizens , providing an estimate , which is called " GDP per capita " . The higher the GDP per capita , the higher the standard of living in the country. Final goods and services are those that are acquired during the year for final consumption and is not used for intermediate consumption (ie, the production of other goods and services). In the GDP does not include the cost of purchasing goods produced in previous years (for example , buying a home , built five years ago) , as well as costs for the purchase of intermediate products ( raw materials, fuel, energy , etc. used to produce final products) . For example, food cooked at home and in a restaurant can be exactly the same , but only the last price recorded in GDP. Servant and a housewife can do the same job , but only wage workers will enter the GDP. Not counted in GDP output in the shadow economy . The company sells tire manufacturing company that produces cars, 4 tires cost 4000 rubles . Another company sells automotive company player for 3000 rubles . When all this is a new car , car company sells it to customers for 200,000 rubles. What amount will be included in the calculation of the GDP ?" The composition of GDP will cost of the final product - the finished car , 200,000 rubles. The cost of the tires and the player enters into the intermediate. If the player was bought in a store for their own use . Its cost would be included in GDP this year. 2 . When calculating GDP should be based on the following conditions. All that will be produced in the country, will be sold .Therefore , you can simply calculate how much consumers are spending - end users of output - to buy it . Thus , one can imagine the GDP as the sum of all costs required to redeem the entire market output. You can look at the same problem from the other side. That took consumers to purchase goods . Income received in the form of those involved in their production. Revenue from the sale of goods used for the payment of wages , rents the land owner (if the plant is located on
  10. 10. land owned by another owner ) , interest on loans obtained from the bank profit - income for the owner of the firm. In accordance with this approach, identify two ways of counting GDP : a) expenditure ; b) income . When calculating GDP by expenditure summed costs of all economic agents : households, firms , government and foreigners (the cost of our exports ) . Total expenses consist of : personal consumption expenditures , including household spending on durable goods and the current consumption of services , but does not include the costs of buying a home ; gross investment , including business investment , or investment in fixed assets , investment in housing , investment in inventories . Gross investment can be represented as the sum of net investment and depreciation. Net investment increases the stock of capital in the economy ; government purchases of goods and services , such as the construction and maintenance of schools , roads, maintenance of the army and the state apparatus. This does not include transfer payments ( benefits, pensions , social security payments ); net exports of goods and services abroad , which is calculated as the difference between exports and imports. GDP by expenditure = P + I + G + ( Exp. - Imp . ) ( Gross investment - depreciation = net investment ) . When calculating GDP income summarizes all income received by residents of the country of production (wages , rents , interest, profits ) as well as two components that are not income : depreciation and indirect business taxes . GDP by income = c / mp + Release + dividends + interest + depreciation + indirect taxes Profit for calculating GDP includes : income tax and retained earnings and dividends. Personal income = c / mp + rent + interest + dividends Personal disposable income = personal income - individual taxes + transfers Net National Product = GNP - Depreciation National income = net national product - indirect taxes
  11. 11. 36. Theories explaining the economic cycle mainly due to external factors , called externalities theories , unlike internal'nym theories , considering the economic cycle as a product of internal , inherent in the economic system itself , factors. These factors may cause both rise and decline in economic activity at regular intervals . If one or more branches of a boom , which caused a sharp increase in demand for machinery and equipment , it is natural to assume that the phenomenon is repeated after 10-15 years, during which the machinery and equipment will be completely worn out. Supporters externalities theory is in the external environment phenomena are repeated every two to three and a half years and is, in their opinion, the objective reasons related economic cycles. Short cycles are called cycles Kitchin , who dedicated his work to this problem in 1923 . Joseph Kitchin cycle tied , he took equal to three years and four months , with a range of world gold reserves. Currently, however, such an explanation of the reasons for the short-term cycle can satisfy very few . Most modern economists who support the idea of the existence of short-term economic cycles , tends to regard them only as an integral part of the overall ring system , which is based on medium-term economic cycles , called cycles Zhuglyara , after the French economist who studied the economic fluctuations in the second half of the XIX century . Clement Zhuglyar considered the economic cycle as a natural phenomenon whose causes lie in the monetary, more precisely, of the loan. Crisis - the main phase of the cycle - Zhuglyar assessed as sanatory factor leading to an overall decrease in prices and liquidation of enterprises , designed to meet the demand artificially overgrown .Zhuglyar believed that repetition of all economic processes caused by banking, occurs every ten years. By the middle cycles also include the so-called construction cycles or cycles Kuznets ( American economist ) . C. Smith believed that oscillatory processes (cycle 15-20 years ) are associated with periodic updates of certain types of dwellings and industrial buildings . Tendency to blur the phases of the industrial cycle , the participation of their mismatch in different countries and regions together with the trend growth of a market economy difficulties caused by structural crises , forced scientists to look for new reasons for such a complex economic phenomena. Renewed interest in the half-forgotten studies in 20 - 30s years. XX century. Among them is the concept of large economic cycles (the theory of "long waves " ) . The essence of great economic cycles was determined ND Kondratyev follows. Along with short-term and medium-term economic cycles , there are economic cycles lasting about 48-55 years. Since the end of the XVIII century. , As shown by ND Kondratiev cycles are the following : cycle - from the beginning of the 90s . XVIII century. until 1844 - 1851gg .
  12. 12. cycle - from the beginning of 1844-1851 to 1890-1896 years. cycle - from 1890 - 1896 to 1914 to 1920 . Large economic cycles can not be explained by accidental causes . ND Kondratiev explained the existence of large economic cycles so that the duration of the operation from the different economic benefits varies. Likewise for their creation requires a different time and different means . As a rule, the longest period of operation are bridges, roads, buildings and other infrastructure . It also requires the longest time and the accumulated capital to create them. Hence it is necessary to introduce the concept of different types of equilibrium for different time periods. Large cycles in this context can be regarded as a breach and restore economic balance long period. Their main reason lies in the mechanism of accumulation, accumulation and dispersion of capital sufficient to create new elements of market infrastructure. Cybernetics , genetic engineering, new chemistry , synthetic fuels , the revolution in aircraft innovation in agriculture - that's the starting positions for the fifth great cycle . JM Clark, who has studied the problem of active economic cycles believed that the increase in demand for commodities creates a chain reaction leading to a manifold increase in the demand for machinery and equipment . This pattern , is, according to Clark , the key moments of the process of cyclical development was defined by him as the acceleration principle ( the accelerator effect ) . Thus, the accelerator can be represented as the ratio between investment and growth in consumer demand ( finished products ) or national income. where v - accelerator I - investment, Y - income ( or consumer demand ) t - the year when the investments were made . In general, the effect of the accelerator is considered as an essential element of economic fluctuations generated by the instability of the economy and generating this instability
  13. 13. 37.Society seeks both to economic growth and full employment to a sustainable level of prices. Since the time of the emergence of capitalism the national economy is growing in all countries not only increases production volume for a certain period of time , but also increases the national wealth and productive potential of nations. However, this growth is neither constant nor smooth. Economy is subject to fluctuations that are often referred to as business cycles or cycles of economic conditions . Business cycles have long attracted the attention of economists who seek to not only identify patterns of cyclical development , but also to predict future economic development . Economic cycle is called the interval between two identical states of the economic situation . Economic ( business ) cycle - the ups and downs of economic levels ( business ) activity for several years . This is the time between two equal states economic conditions. Cyclical fluctuations may experience various macroeconomic indicators , but the most common is the analysis of business cycle fluctuations on the example of the GDP (or GNP). Fig .4.1 shows a diagram of the economic cycle. Trend line (or average value of GDP for several years ) shows the overall direction of the economy over time , the line of GDP - real fluctuations in the indicator . Economic cycles are characterized by the following important factors : oscillation amplitude - the maximum difference between the highest and lowest value of the index during the cycle (distance CD); cycle time - the time period during which performed one complete oscillation of business activity (distance AB). For the duration of the cycles are divided into: short cycles related to the restoration of economic equilibrium in the consumer market , with fluctuating wholesale prices and changes in stocks of firms . Their duration is 2-4 years ; average cycles associated with changes in investment demand companies with long-term accumulation of factors of production and the improvement of technologies . Their duration is 10-15 years ;long cycles (waves ) associated with discoveries and important technological innovations and their dissemination. Their duration is 40-60 years.
  14. 14. Cycles differ in duration and intensity, but all the cycles passes the same phases:In the cycle structure of the isolated 4 stages ( or phases ) Rise . In the recovery phase the national income is growing from year to year , unemployment is reduced to the natural rate , and the size of investment in real capital grow , but growth is slowing . Also due to increased consumer and investment demand increases prices and interest rate. Boom. Phase lifting boom ends , at which time there and ultra-high overload capacity , the price level , wage rate and the interest rate is very high . Investments in production almost not, due to the high cost of raising resources. Downturn. Production and employment are declining. Due to lower demand falling prices for goods and services . Investments become negative , because at this stage of the cycle of the company not only carry out new investments , but an increase in idle capacity . Many firms suffer losses or go bankrupt . The bottom of the recession. The rate of decline slowed down and stabilized at this stage . Decline in production and rising unemployment reach their maximum values . Prices are minimal. Survived only the strongest firms . Accumulated potential for future growth - at low interest rates investment increases. The transition to the stage of recovery occurs after a period of time when the investments are paying off . There are situations when the background of the decline in production and rising unemployment also observed a rise in prices . This situation is called stagflation and most often occurs with sudden changes in the economic situation. Stagflation was observed in the 70 -ies. in developed countries during the energy crisis caused by rising oil prices. Another example Russia in the 90s .after the start of economic reforms. Crisis as an essential element of the cycle Phase of recession is also called phase of the crisis and depression. This step is especially important for the economy, because after the crisis occurs renewal of businesses survive the strongest and most efficient firms , new inventions and open new economic opportunities. However, the crisis is also a great social upheaval - people lose their jobs , their incomes are reduced , reduced standard of living. Therefore, to prevent or mitigate crises - one of the most important tasks of the state . Cyclical development of the economy clearly began to manifest itself , since the XIX century. First cyclical crisis of overproduction occurred in England in 1825 in the XIX century. cyclical crises occurred in some countries , they do not coincide in time and were due to internal causes of development of countries or international non-economic events (eg wars ) . The first crisis , called the world , which began in the United States and spread to other capitalist countries in 1929 - 1933 gg. , Was called the Great Depression. He covered allindustries (especially the steel industry , mechanical engineering , mining, marine transport , etc.) and agriculture.
  15. 15. 38. Unemployment (or joblessness) occurs when people are without work and actively seeking work. The unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labor force. During periods of recession, an economy usually experiences a relatively high unemployment rate. According toInternationalLabour Organization report, more than 197 million people globally are out of work or 6% of the world's workforce were without a job in 2012 To a certain extent, these were covered in the topic called 'Macroeconomic objectives'. They are reproduced here in a little more detail. Economic cost to the economy as a whole. There is the cost to the whole economy in terms of wasted, unused resources. The existence of any idle resources means that the economy will be at a point within its production possibility frontier (PPF). frictional unemployment is voluntary unemployment for workers who are looking for a better job. This all sounds very trivial, but the numbers involved are quite significant. When you hear the monthly unemployment figures announced on the news (a fall by 20,000; a rise by 10,000; etc.) what you may not realise is that the monthly change is dwarfed by the actual inflows of workers into jobs and outflows of workers into unemployment. Some months these figures can be as high as 300,000! Thereplacement ratio would be too high (the size of the unemployment benefit as a percentage of in work disposable income). But if benefits are too low, newly unemployed workers might take the first job that comes along, which might not be the best use of his skills. The economy's resources would not be allocated efficiently. Structural unemployment . The huge shift away from manufacturing to the service sector over the last twenty to thirty years (often referred to as deindustrialisation) has caused structural unemployment to be the largest component of the total unemployment figures. Technical unemployment One can probably think of examples where 'technology' has put people out of work. A good recent example is the banking sector, where the introduction of phone and Internet banking has caused the big banks to close many of their traditional high street branches. Of course, it is not quite as simple as that. In economics, Okun's law (Arthur Melvin Okun 1962) is an empiricallyobserved relationship relating unemployment to losses in a country's production. The "gap version" states that for every 1% increase in the unemployment rate, a country's GDP will be roughly an additional 2% lower than its potential GDP. The "difference version" describes the relationship between quarterly changes in unemployment and quarterly changes inreal GDP. The stability and usefulness of the law has been disputed. Imperfect relationship Okun's law is more accurately called "Okun's rule of thumb" because it is primarily an empirical observation rather than a result derived from theory. Okun's law is approximate because factors other than employment (such as productivity) affect output. In
  16. 16. Okun'soriginal statement of his law, 2% increase in output corresponds to a 1% decline in the rate of cyclical unemployment; a .5% increase in labor force participation; a .5% increase in hours worked per employee; and a 1% increase in output per hours worked (labor productivity).[4] Okun's law states that a one point increase in the cyclical unemployment rate is associated with two percent age points of negative growth in real GDP. The relationship varies depending on the country and time period under consideration. The relationship has been tested by regressing GDP or GNP growth on change in the unemployment rate. Martin Prachowny estimated about a 3% decrease in output for every 1% increase in the unemployment rate. However, he argued that the majority of this change in output is actually due to changes in factors other than unemployment, such as capacity utilization and hours worked. Holding these other factors constant reduces the association between unemployment and GDP to around 0.7% for every 1% change in the unemployment rate (Prachowny 1993). The magnitude of the decrease seems to be declining over time in the United States. According to Andrew Abel and Ben Bernanke, estimates based on data from more recent years give about a 2% decrease in output for every 1% increase in unemployment (Abel and Bernanke, 2005). There are several reasons why GDP may increase or decrease more rapidly than unemployment decreases or increases: As unemployment increases, a reduction in the multiplier effect created by the circulation of money from employees unemployed persons may drop out of the labor force (stop seeking work), after which they are no longer counted in unemployment statistics employed workers may work shorter hours labor productivity may decrease, perhaps because employers retain more workers than they need One implication of Okun's law is that an increase in labor productivity or an increase in the size of the labor force can mean that real net output grows without net unemployment rates falling (the phenomenon of "jobless growth") Mathematical statements The gap version of Okun's law may be written (Abel & Bernanke 2005) as: , where is potential GDP is actual output is the natural rate of unemployment is actual unemployment rate is the factor relating changes in unemployment to changes in output
  17. 17. 39. Okun's Law describes a clear relationship between unemployment and national output, in which lowered unemployment results in higher national output. Such a relationship makes intuitive sense: as more people in a nation work it seems only right that the output of the nation should increase. Building on Okun's law, another economist, A. W. Phillips, discovered a relationship between unemployment and inflation. The chain of basic ideas behind this belief follows: as more people work the national output increases, causing wages to increase, causing consumers to have more money and to spend more, resulting in consumers demanding more goods and services, finally causing the prices of goods and services to increase. In other words, Phillips showed that unemployment and inflation shared an inverse relationship: inflation rose as unemployment fell, and inflation fell as unemployment rose. Since two major goals for economic policy makers are to keep both inflation and unemployment low, Phillip's discovery was an important conceptual breakthrough, but also posed a troublesome challenge: how to keep both unemployment and inflation low, when lowering one results in raising the other? The Phillips curve represents the relationship between the rate of inflation and the unemployment rate. Although he had precursors, A. W. H. Phillips’s study of wage inflation and unemployment in the United Kingdom from 1861 to 1957 is a milestone in the development of macroeconomics. Phillips found a consistent inverse relationship: when unemployment was high, wages increased slowly; when unemployment was low, wages rose rapidly. Phillips conjectured that the lower the unemployment rate, the tighter the labor market and, therefore, the faster firms must raise wages to attract scarce labor. At higher rates of unemployment, the pressure abated. Phillips’s “curve” represented the average relationship between unemployment and wage behavior over the business cycle. It showed the rate of wage inflation that would result if a particular level of unemployment persisted for some time. Economists soon estimated Phillips curves for most developed economies. Most related general price inflation, rather than wage inflation, to unemployment. Of course, the prices a company charges are closely connected to the wages it pays. . If government uses expansionarymonetary or fiscal policy in an attempt to lower unemployment below its natural rate, The resulting increase in demand encourages firms to raise their prices faster than workers had anticipated. With higher revenues, firms are willing to employ more workers at the old wage rates and even to raise those rates somewhat. For a short time, workers suffer from what economists call money illusion: they see that their money wages have risen and willingly supply more labor. Thus, the unemployment rate falls. They do not realize right away
  18. 18. that their purchasing power has fallen because prices have risen more rapidly than they expected. But, over time, as workers come to anticipate higher rates of price inflation, they supply less labor and insist on increases in wages that keep up with inflation. The real wage is restored to its old level, and the unemployment rate returns to the natural rate. But the price inflation and wage inflation brought on by expansionary policies continue at the new, higher rates. The expectations-augmented Phillips curve is a fundamental element of almost every macroeconomic forecasting model now used by government and business. It is accepted by most otherwise diverse schools of macroeconomic thought. Early new classical theories assumed that prices adjusted freely and that expectations were formed rationally—that is, without systematic error. These assumptions imply that the Phillips curve in Figure 2 should be very steep and that deviations from NAIRU should be short-lived (see new classical macroeconomics and rational expectations). While sticking to the rationalexpectations hypothesis, even new classical economists now concede that wages and prices are somewhat sticky. Wage and price inertia, resulting in real wages and other relative prices away from their market-clearing levels, explain the large fluctuations in unemployment around NAIRU and slow speed of convergence back to NAIRU. Modern macroeconomic models often employ another version of the Phillips curve in which the output gap replaces the unemployment rate as the measure of aggregate demand relative to aggregate supply. The output gap is the difference between the actual level of GDP and the potential (or sustainable) level of aggregate output expressed as a percentage of potential. This formulation explains why, at the end of the 1990s boom when unemployment rates were well below estimates of NAIRU, prices did not accelerate. The reasoning is as follows. Potential output depends not only on labor inputs, but also on plant and equipment and other capital inputs. At the end of the boom, after nearly a decade of rapid investment, firms found themselves with too much capital. The excess capacity raised potential output, widening the output gap and reducing the pressure on prices.One can believe in the Phillips curve and still understand that increased growth, all other things equal, will reduce inflation. The misplaced criticism of the Phillips curve is ironic since Milton Friedman, one of the coinventors of its expectations-augmented version, is also the foremost defender of the view that “inflation is always, and everywhere, a monetary phenomenon.” The Phillips curve was hailed in the 1960s as providing an account of the inflation process hitherto missing from the conventional macroeconomic model. After four decades, the Phillips curve, as transformed by the natural-rate hypothesis into its expectations-augmented version, remains the key to relating unemployment (of capital as well as labor) to inflation in mainstream macroeconomic analysis.
  19. 19. 40. Unemployment types and causes There are several types of unemployment, each one defined in terms of cause and severity. Cyclical Cyclical unemployment exists when individuals lose their jobs as a result of a downturn in aggregate demand (AD).If the decline in aggregate demand is persistent, and the unemployment long-term, it is called either demand deficient, general, or Keynesian unemployment. For example, unemployment levels of 3 million were reached in the UK in the last two recessions, between 1980 and 1982, and between 1990 and 1992. In the most recent recession of 20082010, unemployment levels rose to 2.4m in the last quarter of 2009, and are likely to peak at over 2.5m during 2010. (Source: ONS). Demand deficienct unemployment This is caused by a lack of aggregate demand, with insufficient demand to generate full employment. Structural Structural unemployment occurs when certain industries decline because of long term changes in market conditions. For example, over the last 20 years UK motor vehicle production has declined while car production in the Far East has increased, creating structurally unemployed car workers. Globalisation is an increasingly significant cause of structural unemployment in many countries. Regional When structural unemployment affects local areas of an economy, it is called ‘regional’ unemployment. For example, unemployed coal miners in South Wales and ship workers in the North East add to regional unemployment in these areas. Classical Classical unemployment is caused when wages are ‘too’ high. This explanation of unemployment dominated economic theory before the 1930s, when workers themselves were blamed for not accepting lower wages, or for asking for too high wages. Classical unemployment is also called real wage unemployment. Seasonal
  20. 20. Seasonal unemployment exists because certain industries only produce or distribute their products at certain times of the year. Industries where seasonal unemployment is common include farming, tourism, and construction. Frictional Frictional unemployment, also called search unemployment, occurs when workers lose their current job and are in the process of finding another one. There may be little that can be done to reduce this type of unemployment, other than provide better information to reduce the search time. This suggests that full employment is impossible at any one time because some workers will always be in the process of changing jobs. Voluntary Voluntary unemployment is defined as a situation when workers choose not to work at the current equilibrium wage rate. For one reason or another, workers may elect not to participate in the labour market. There are several reasons for the existence of voluntary unemployment including excessively generous welfare benefits and high rates of income tax. Voluntary unemployment is likely to occur when the equilibrium wage rate is below the wage necessary to encourage individuals to supply their labour. The natural rate of unemployment This is a term associated with new Classical and monetarist economists. It is defined as the rate of unemployment that still exists when the labour market it in equilibrium, and includes seasonal, frictional and voluntary unemployment. The US economist Milton Friedman first used the concept to help explain the connection between unemployment and inflation. Friedman argued that if unemployment fell below the natural rate there would be an increase in the rate of inflation. The different types of unemployment can be illustrated through the AJ-LF model. See also: the Phillips Curve. Over the last 30 years, employment in the service sector has increased to over 70% of total employment, while employment in manufacturing has decreased to under 20%. Since the 1940s employment in the primary sector, including agriculture, has been less that 3% of the workforce. Recent changes have created two speed economy, with a relatively bouyant service sector and a declining manufacturing one. The main reasons are: Globalisation and the rise of new ‘low cost’ overseas competitor countries. Increased competition within the domestic product market. The increasing comparative advantage of the UK as an international supplier of financial services.
  21. 21. 41. Wage labour (or wage labor in American English) is the socioeconomicrelationship between a worker and an employer, where the worker sells their labourunder a formal or informal employment contract.[1] These transactions usually occur in a labour market where wages are market determined.[2] In exchange for the wages paid, the work product generally becomes the undifferentiated property of the employer, except for special cases such as the vesting of intellectual propertypatents in the United States where patent rights are usually vested in the original personal inventor. A wage labourer is a person whose primary means of income is from the selling of his or her labour in this way. In modern mixed economies such as those of the OECD countries, it is currently the dominant form of work arrangement. Although most work occurs following this structure, the wage work arrangements of CEOs, professional employees, and professional contract workers are sometimes conflated with class assignments, so that "wage labour" is considered to apply only to unskilled, semi-skilled or manual labour. The most common form of wage labour currently is ordinary direct, or "full-time", employment in which a free worker sells his or her labour for an indeterminate time (from a few years to the entire career of the worker), in return for a money-wage or salary and a continuing relationship with the employer which it does not in general offer contractors or other irregular staff. However, wage labour takes many other forms, and explicit as opposed to implicit (i.e. conditioned by local labour and tax law) contracts are not uncommon. Economic history shows a great variety of ways in which labouris traded and exchanged. The differences show up in the form of: employment status: a worker could be employed full-time, part-time, or on a casual basis. He or she could be employed for example temporarily for a specific project only, or on a permanent basis. Part-time wage labour could combine with part-time self-employment. The worker could be employed also as an apprentice. civil (legal) status: the worker could for example be a free citizen, an indentured labourer, the subject of forced labour(including some prison or army labour); a worker could be assigned by the political authorities to a task, they could be asemi-slave or a serf bound to the land who is hired out part of the time. So the labour might be performed on a more or less voluntary basis, or on a more or less involuntary basis, in which there are many gradations. method of payment (remuneration or compensation). The work done could be paid "in cash" (a money-wage) or "in kind" (through receiving goods and/or services), or in the form of "piece rates" where the wage is directly dependent on how much the worker produces. In some cases, the worker might be paid in the form of credit used to buy goods and services, or in the form of stock options or shares in an enterprise. method of hiring: the worker might engage in a labour-contract on his or her own initiative, or he or she might hire out their labour as part of a group. But he or she may also hire out their labour via an intermediary (such as an employment agency) to a third party. In this case, he or she is paid by the intermediary, but works for a third party which pays the intermediary. In some cases, labouris subcontracted several times, with several intermediaries. Another possibility is that the
  22. 22. worker is assigned or posted to a job by a political authority, or that an agency hires out a worker to an enterprise together with means of production. Criticisms[ Socialists see wage labour as a major, if not defining, aspect of hierarchical industrial systems. Most opponents of the institution support worker self-management and economic democracy as alternatives to both wage-labour and to capitalism. While most opponents of wage labour blame the capitalist owners of the means of production for its existence, mostanarchists and other libertarian socialists also hold the state as equally responsible as it exists as a tool utilised by capitalists to subsidise themselves and protect the institution of private ownership of the means of production—which guarantees the concentration of capital among a wealthy elite leaving the majority of the population without access. As some opponents of wage labour take influence from Marxist propositions, many are opposed to private property, but maintain respect for personal property. A point of criticism is that after people have been compelled by economic necessity to no feasible alternative than that of wage labour, exploitation occurs; thus the claim that wage labour is "voluntary" on the part of the labourer is considered ared herring as the relationship is only entered into due to systemic coercion brought about by the inequality of bargaining power between labour and capital as classes. Wage slavery[edit] Wage labourhas long been compared by socialists to slavery, and has thus acquired the epithet wage slavery.[3] Similarly, advocates of slavery looked upon the "comparative evils of Slave Society and of Free Society, of slavery to human Masters and slavery to Capital,"[4] and proceeded to argue persuasively that wage slavery was actually worse than chattel slavery.[5]Slavery apologists like George Fitzhugh contended that workers only accepted wage labour with the passage of time, as they became "familiarized and inattentive to the infected social atmosphere they continually inhale[d]."[6] The slave, together with his labour-power, was sold to his owner once for all. . . . The [wage] labourer, on the other hand, sells his very self, and that by fractions. . . . He [belongs] to the capitalist class; and it is for him . . . to find a buyer in this capitalist class.[7] —Karl Marx For Marxists, labour-as-commodity, which is how they regard wage labour,[8] provides an absolutely fundamental point of attack against capitalism.[9] "It can be persuasively argued," noted one concerned philosopher, "that the conception of the worker's labour as a commodity confirms Marx's stigmatization of the wage system of private capitalism as 'wage-slavery;' that is, as an instrument of the capitalist's for reducing the worker's condition to that of a slave, if not below it."[10] That this objection is fundamental follows immediately from Marx's conclusion that wage labour is the very foundation of capitalism: "Without a class dependent on wages, the moment individuals confront each other as free persons, there can be no production of surplus value; without the production of surplus-value there can be no capitalist production, and hence no capital and no capitalist!
  23. 23. 42. The label 'capital market' is a blanket term for all procedures and institutions providing for transactions of long-term financial products. These products include loans, lease equity, and bonds. Two basic types of capital markets are over-the-counter markets and organized security exchanges. Other types of capital markets, such as primary, secondary, public, and private markets, function within these two basic categories. Organized security exchanges are tangible markets that occupy a physical space, such as an office or a building, and equity and debt are traded on the premises. All other types of capital markets are over-the-counter. The United States has seven major organized security exchanges, including the New York Stock Exchange and the American Stock exchange, which are the two national markets. The other five markets, such as the Boston or Philadelphia stock exchanges, are regional. Companies that want to sell securities, but don’t meet the organized exchanges’ listing requirements, often use over-the-counter markets. Business may also uses these types of capital market to avoid fees. A network of stockbrokers, dealers, and brokerage firms completes most over-the-counter transactions. When a corporation decides to sell equity in the form stocks in a capital market, the financial managers have a choice to sell privately or publicly. In a public stock market offering, both individuals and investing conglomerates can purchase the company’s securities. Stock sold in public markets is referred to as common stock. Private stock is sold to a limited number of investors in a private placement market. Private placement capital markets come in two forms, private debt markets and equity markets that sell stocks and other forms of equities. Often, investment firms transfer venture capital to new projects using private equity markets. Stock offered privately is often more expensive than common stock and it pays in higher dividends. Other types of capital markets include primary and secondary markets. A primary market is created when a company offers its securities for the first time. If the stock is common and the company has never offered stock before, it is called the company’s initial public offering, or IPO. After a company’s IPO, it may continue to offer issue new stock in the primary market. Secondary markets are those in which previously offered securities are sold and traded. The first buyer of a stock buys in the primary market, but if she decides to sell or trade that stock, she does so in the secondary market. Only initial purchases in primary markets have a direct effect on the stock-issuing company. The two main types of capital market securities are stocks and bonds. Traded in separate markets, companies, corporations and governments use them to raise funds for various purposes. These funds are raised for long terms and are the regulatory to supervise the capital market securities and their respective market in every country. Bonds Bond is the medium for handling the debt securities. As the bond market is a part of the capital market, it provides the opportunity to deal in the debt securities. Bond enjoys a vast international market estimated to be around $45 trillion. A huge slice of this bond market transaction generally takes place in the over-the-counter market, where as the corporate bonds are listed on the exchanges.
  24. 24. There exist different types of bonds in the market like- the corporate bond, municipal bond, government bond and many more. The government bond is the most secured one amongst all these, besides being the biggest and most liquid. Another type of capital market security is known as stocks. These are favored by the investors as they can get huge returns from this capital market instrument. The estimated size of the global stock market is evaluated to be around $45 trillion. Used for trading of company stocks, companies and governments use it to raise funds for different purposes. There exists every kind of investor in the capital market, both the individual investors and the institutional investors. Today, the market trend has completely changed and is mainly dominated by the institutions, which are increasing the volume of the market. Hence it’s very important for the investor to take proper care while selecting capital market securities, as the risk factor related to these securities are different.A proper research should be done before any investment. Capital market instruments are fixed-income obligations that trade in the secondary market, which means anyone can buy and sell them to other individuals or institutions. Marketable securities are exchanged through the organized markets for example, stock exchanges and its Representative dealers and brokers who sell and buy marketable securities on behalf of their customer in exchange of commission. Capital market instruments fall into four categories: (1) Treasury securities, (2) government agency securities, (3) municipal bonds, and (4) corporate bonds. Treasury Securities: All government securities issued by the Treasury department of Govt. are fixed income instruments. They may be bills, notes, or bonds depending on their times to maturity. Specifically, bills mature in one year or less, notes in over one to 10 years, and bonds in more than 10 years from time of issue government obligations are essentially free of credit risk because there is little chance of default and they are liquid. Government Agency Securities Agency securities are sold by various agencies of the government to support specific programs, but they are not direct obligations of the treasury department. Mortgage bonds that sell bonds and uses the proceeds to purchase mortgages from insurance companies or savings and loans; and the home loan which sells bonds and loans the money to its banks, which in turn provide credit to savings and loans and other mortgage-granting institutions. Otheragenciesarethegovernmentbanksforcooperatives. Municipal Bonds Municipal bonds are issued by local government entities as either general obligation or revenue bonds. General obligation bonds are backed by the full taxing power of the municipality, whereas revenue bonds pay the interest from revenue generated by specific projects. Municipal bondsdiffer from other fixed-income securities because they are tax-exempt. The interest earned from them is exempt from taxation by the government and by the state that issued the bond, provided the investor is a resident of that state. For this reason, municipal bonds are popular with investors in high tax brackets. Corporate Bonds Corporate bonds are fixed-income securities issued by industrial corporations, public utility corporations, or railroads to raise funds to invest in plant, equipment, or working capital. They can be broken down by issuer, in terms of credit
  25. 25. quality in terms of maturity i.e. short term, intermediate term, or long term, or based on some component of the indenture. 43. Macroeconomic equilibrium for an economy in the short run is established when aggregate demandintersects with short-run aggregate supply. This is shown in the diagram below At the price level Pe, the aggregate demand for goods and services is equal to the aggregate supply of output. The output and the general price level in the economy will tend to adjust towards this equilibrium position. If the price level is too high, there will be an excess supply of output. If the price level is below equilibrium, there will be excess demand in the short run. In both situations there should be a process taking the economy towards the equilibrium level of output. Consider for example a situation where aggregate supply is greater than current demand. This will lead to a build up in stocks (inventories) and this sends a signal to producers either to cut prices (to stimulate an increase in demand) or to reduce output so as to reduce the build up of excess stocks. Either way - there is a tendency for output to move closer to the current level of demand. There may be occasions when in the short run, the economy cannot meet an increase in demand. This is more likely to occur when an economy reaches full-employment of factor resources. In this situation, the aggregate supply curve in the short run becomes increasingly inelastic. The diagram below tracks the effect of this. We see aggregate demand rising but the economy finds it difficult to raise (expand) production. There is a small increase in real national output, but the main effect is to put upward pressure on the general price level. Shortages of resources will lead to a general rise in costs and prices Impact of a change in aggregate supply Suppose that increased efficiency and productivity together with lower input costs (e.g. of essential raw materials) causes the short run aggregate supply curve to shift outwards. (I.e. an increase in supply - assume no shift in aggregate demand). The diagram below shows what is likely to happen. AS shifts outwards and a new macroeconomic equilibrium will be established. The price level has fallen and real national output (in equilibrium) has increased to Y2. Aggregate supply would shift inwards if there is a rise in the unit costs of production in the economy. For example there might be a rise in unit wage costs perhaps caused by higher wages not compensated for by higher labour productivity. External economic shocks might also
  26. 26. cause the aggregate supply curve to shift inwards. For example a sharp rise in global commodity prices. If AS shifts to the left, assuming no change in the aggregate demand curve, we expect to see a higher price level (this is known as cost-push inflation) and a lower level of real national output. National Income Equilibrium when Aggregate Supply is Perfectly Elastic When short run aggregate supply is perfectly elastic, any change in aggregate demand will feed straight through to a change in the equilibrium level of real national output. For example, when AD shifts out from AD1 to AD2 (shown in the diagram below) the economy is able to meet this increased demand by expanding output. The new equilibrium level of national income is Y2. Conversely when there is a fall in total demand for goods and services (AD1 shifts inwards to AD3) we see a fall in real output. Long Run Economic GrowthWe have considered short-term changes in both aggregate demand and aggregate supply. For an economy to experience sustained economic growth over the longer run it must shift out the long run aggregate supply curve by either increasing the supply of factors of production available (e.g. an increase in the labour supply, more land and more capital inputs); increasing the productivity of those factors or the economy might increase LRAS by achieving an improvement in the state of technology. An outward shift in the LRAS is similar to an outward shift in the production possibility frontier.The effects are shown in the diagram below. If LRAS shifts out the economy can operate at a higher level of aggregate demand and can achieve an increase in real national output without running into problems with inflation. One of the main long-term economic objectives of the current Labour government is to raise the economy's productive potential and therefore provide a platform for faster economic growth in future years. For this to happen the economy needs to achieve a higher level of investment in new capital and new technology. And the quantity and productivity of the labourforce also needs to increase over time. Equilibrium is the situation where there is no tendency for change. The economy can be in equilibrium at any level of economic activity that is a high level (boom) or a low level (recession). Due to the size of many modern economies, equilibrium is a very temporary state, as changing variables shift affect the economy.Macroeconomic Equilibrium can be shown through the C.F.M. using: S+T+M=I+G+X Savings + taxation + imports = investment + government spending + exports This can be understood as savings approximately equal to investment, government spending to taxation, and similarly imports to exports, at least over the long run. It means that, at equilibrium, injections into the income stream equal the leakages from the income stream.∑E = ∑O = ∑Y Total expenditure = total output = total income
  27. 27. It is easier to remember if you just think that they are really different ways of measuring the same thing, which is the flow of factors through the economy, which can be demonstrated with the CFM. 44. Aggregate demand In macroeconomics, aggregate demand (AD) is the total demand for final goods and services in the economy at a given time and price level.[1] It specifies the amounts of goods and services that will be purchased at all possible price levels.[2]This is the demand for the gross domestic product of a country. It is often called effective demand, though at other times this term is distinguished. It is often cited that the aggregate demand curve is downward sloping because at lower price levels a greater quantity is demanded. While this is correct at the microeconomic, single good level, at the aggregate level this is incorrect. The aggregate demand curve is in fact downward sloping as a result of three distinct effects: Pigou's wealth effect, the Keynes' interest rate effect and the Mundell-Fleming exchange-rate effect. Additionally, the higher the price level is to be, the less demanded and thus it is downward sloping.[3] The aggregate demand curve illustrates the relationship between two factors - the quantity of output that is demanded and the aggregated price level. The value of the money supply is fixed. There are many factors that can shift the AD curve. If the Bank were to reduce the amount of money in circulation (reducing money supply), the AD curve shifts. Nominal output is lower than before and decreases by the same amount as the decrease in the money supply. The price level decreases and thus the AD curve shifts rightward. Since the price level decreased, the real balances level (M/P) will decrease - demand decreases. If the money supply was increased and thus aggregate demand increased, there would be a movement up along the Long run aggregate supply curve. The cost of this is a permanently higher level of prices. As a result of increase in aggregate demand, the economy will gravitate toward the natural level more quickly AGGREGATE DEMAND DETERMINANTS: An assortment of ceteris paribus factors other than the price level that affect aggregate demand, but which are assumed constant when the aggregate demand curve is constructed. Changes in any of the aggregate demand determinants cause the aggregate demand curve to shift. The specific ceteris paribus factors are commonly grouped by the four, broad expenditure categories-consumption expenditures, investment expenditures, government purchases, and net exports.Aggregate demand determinants are held constant when the aggregate demand curve is constructed. A change in any of these determinants causes a shift of the aggregate demand curve. The determinants work through the four aggregate expenditure categories--consumption expenditures, investment expenditures,government purchases, and net exports. Should any specific aggregate demand determinant change, it must affect the aggregate demand curve through one of the four aggregate expenditures. A few of the more notable determinants that tend to stand out in the study of macroeconomics and the analysis of the aggregate market are:Interest Rates: Interest rates
  28. 28. affect the cost of borrowing and thus both consumption and investment expenditures. Interest rates are a component of investment-driven business cycles and play a key role in monetary policy. Federal Deficit: The federal deficit is comprised of government purchases, which is one of the four basic expenditures, and taxes, which affects the amount of disposable income available for consumption. Changes in the federal deficit commonly result from the use of fiscal policy. Expectations: Household and business expectations of future business-cycle conditions, especially inflation and unemployment, affect consumption and investment expenditures. Money Supply: The quantity of money circulating in the economy directly affects the buying capabilities of all four sectors and thus affects all four expenditure categories--consumption, investment, government purchases, and net exports. Control of the money supply is the key to monetary policy. Consumer Confidence: The degree of household sector optimism or pessimism affects current consumption expenditures. A host of other specific aggregate demand determinants also surface from time to time, including exchange rates between domestic currency and foreign currency, the accumulation of physical wealth especially business capital and household durable goods, and the accumulation of financial wealth especially changes in the value of the stock market. ShiftingtheAggregateDemandCurve The exhibit to the right presents a standard aggregate ShiftingtheCurve demand curve. It is negatively-sloped, capturing the specific one-to-one relationship between the price level and aggregate expenditures. The ceteris paribus factors, that is, the aggregate demand determinants, are assumed to remain constant with the construction of the curve. Analogous to other determinants, aggregate demand determinants shift the aggregate demand curve. A change in any of the determinants can either increase or decrease the aggregate demand curve. An increase in aggregate demand is illustrated by a rightward shift in the aggregate demand curve. A decrease in aggregate demand is illustrated by a leftward shift. Click the [Increase in AD] and [Decrease in AD] Начало формы buttons for a demonstration. What does it mean to have an increase in demand? It means that for every price level, the four sectors have an increase in aggregate expenditures on real production. A decrease in demand is the exact opposite. For every price level, the four sectors have a decrease in aggregate expenditures on real production.
  29. 29. 45. Aggregate supply - is the total amount of goods and services produced in the economy ( in terms of value ) . This concept is often used as a synonym for gross domestic product. Aggregate supply curve AS ( from the English aggregate supply) shows how much of aggregate output can be offered to the market by manufacturers for different values of the general price level in the economy. Non-price factors, the aggregate supply are changes in technology , prices of resources , taxation , etc. Companies that graphically reflected a shift of the curve AS. For example , a sharp rise in prices for oil and oil products leads to higher costs and lower volume of supply at any given price level in the economy, which is interpreted graphically shift the AS curve to the left. High yield , caused by unexpectedly favorable weather conditions will increase aggregate supply and affect the schedule shift the AS curve to the right. Form AS curve is interpreted differently in classical and Keynesian schools. Change of the aggregate supply under the influence of the same factor , say, aggregate demand may be different . It depends on whether we take into account the changes in supply have occurred in a short period of time or we are interested in long-term effects of fluctuations in aggregate demand. The difference between short-term (usually 2-3 years) and long-term periods in macroeconomics associated mainly with the behavior of real and nominal variables. In the short term nominal values (prices, nominal s / n , the nominal interest rate ) under the impact of market fluctuations change slowly , usually talk about their relative "rigidity" . Actual quantities (volume of output, employment, real interest rate ) - more mobile , "flexible" . In the long term , on the contrary , the nominal values as a result of change is strong enough - they are considered "flexible" , but real change very slowly , so that for the convenience of analysis, they are considered as constants. Classical model describes the behavior of the economy in the long run . Analysis of aggregate supply in the classical theory is built on the basis of the following conditions : Markets are competitive; Issue volume depends only on the number of factors of production ( labor and capital) and technology and does not depend on the price level; Changes in factors of production and technology is slow ; Economy is operating at full employment of factors of production , therefore, is a potential production volume ; Prices and nominal wages - flexible, they support the balance changes in the markets. AS curve is vertical in these circumstances at issue at full employment factors.
  30. 30. Explanation of the form of the AS curve in the classical model is associated with the analysis of the labor market , since labor is the main factor that changes which may affect the level of output in the short run . Growth of the general price level reduces real wages, hence the demand for labor exceeds the supply of labor ( workers and employers react to changes in the real and not the nominal s / n ) . This will cause an increase in nominal wages. As a result, the real increase to the original level that will restore equilibrium in the labor market , the previous level of employment and, consequently , the volume of virtually unchanged (subject to only minor short-term fluctuations ) . Adjusting nominal wages are fast , so any change in the price level aggregate supply ( production volume ) remains unchanged at the level of potential (Y *). AS shifts are possible only to the extent that the factors of production or technology. If there are no such changes , the curve in the long run AS (LRAS - a portmanteau . Long run aggregate supply curve) is fixed at the level of potential output , and any fluctuations in aggregate demand is recorded only at the level of prices (Figure number 3). Keynesian model considers economic performance over relatively short periods of time . Analysis of aggregate supply is based on the following assumptions : Economy operates in a part-time factors of production ; Prices , nominal wages and other nominal values - relatively rigid , slow to respond to market fluctuations ; Actual quantities (volume of output, employment, real wages , etc.) are more flexible , more responsive to market fluctuations . AS curve in the Keynesian model is horizontal ( in extreme cases - under severe price and the nominal s / n ) or has a positive slope (with rigid nominal s / n and relatively mobile prices) . The reasons for the relative stiffness values in the short term are : duration of employment contracts , government regulation of nominal s / n , stepwise changes in prices and wages ( when firms change their prices and s / n, gradually , "chunks ", with an eye on the competition ) , the validity of contracts for the supply of raw materials and finished products, trade union activities , the effect of the "menu" , etc. For example, if the cost of reprinting catalogs with prices for manufactured products are large enough and the process takes time to reissue (the " menu "), then an increase in the firm's demand for some time will seek to hire additional workers, increase production and meet the demand of buyers in the same price level. In this extreme case, the price is hard vacation AS curve is horizontal .If nominal wages are rigid enough and the prices are relatively flexible , their growth due to increased aggregate demand will lead to a drop in real wages , labor becomes cheaper, which will boost the demand for labor by firms . Using a larger amount of labor will increase release. Thus at a time when nominal wages does not change , there is a positive correlation between the level of prices and production volume . AS curve under these conditions has a positive slope (Figure number 4). Reasonable assumptions about the relative rigidity for short time intervals confirmed typical behavior business. Under normal conditions, the majority
  31. 31. of firms have excess capacity , stocks of finished goods in warehouses , as well as the ability to use overtime or hire additional workers (especially in under-employed ) . Therefore, in the short term, increased demand can always be met by an increase in sales volume without any significant price changes. 46. The essence of money , their function and role. The essence of money is that it is a specific product with a natural form which merges the social function of a universal equivalent . Value - is the social labor expended on the production of goods. Different products have different prices , that is, each of them had invested various labor. Different prices of commodities creates a need for it somehow measure, to evaluate .And here comes the concept of exchange value. Exchange value - the ability of some of the goods exchanged for others in certain proportions . On the other hand , stands the concept of use-value of the goods, ie the ability to meet people's needs . In an exchange of goods should have an exchange value for the seller and use value for the buyer. Barter has evolved over time , and with it, and changed the form of value . The first form of value - simple. Randomly appeared on the market looking for their products antipodes for exchange. For example, if the blacksmith made it wanted to change the ax on a bag of grain, it was necessary to look farmer who wants to change their grain to the ax . Already there has been some the comparison values (1 ax = 1 bag of grain ), but it is intermittent . The second form of value - detailed . With the development of commodities on the market there are other products that meet each other and relate to specific proportions (1 ax = 1 bag of grain = 3 = 1 clay pot pig , etc.) . The third form - general . Sale of goods becomes the target of the manufacturer, but for the product of his labor , it requires some universal equivalent value. Initially, this was the equivalent of such commodities as cattle , furs, honey , and other slaves . Equivalents changed rapidly , as they simply do not meet the equivalent properties - they do not always and not everywhere can be easily exchanged for other goods. Finally , there is a fourth form of value money . In the development of commodity humanity has to ensure that the most convenient equivalent value of the goods is a metal . To become a commodity money is necessary to satisfy a number of conditions . First, this product should be recognized and the buyer and seller. Secondly, this product should be compact , and its physical properties should allow him to communicate repeatedly without loss of value . Third, this product should fulfill the role for a long time equivalents . In this respect, metals , namely gold and silver were the best money - equivalents . Money still retain the properties of the goods they may have a use value (eg , in the form of gold jewelry satisfies aesthetic needs ) and exchange value ( for the manufacture of goods , money expended labor) . But this is a special commodity , as it increases the use value (money can satisfy any need .) On the other hand , the money becomes the spokesman of use values of other goods through its cost . Thus, the money - it spontaneously arose goods acting as universal equivalent and resolve contradictions between use value and exchange value .
  32. 32. The essence of money is manifested in the unity of the three properties : • universal direct exchangeability ; • crystallization of exchange value ; • materialization of universal labor-time . Therefore, the money arising from the resolution of contradictions Item ( use value and value ) are not technical means of circulation and reflect deep social relations . In its evolution, money appears in the form of metal ( copper , silver and gold ) , paper , a new kind of credit and credit money - electronic money. Money performs five functions: a measure of value , medium of exchange , a means of hoarding , savings and savings , payment , world money. ^ Function of money as a measure of value. Money as a universal equivalent measured value of all goods . But do not make money comparable products and the amount spent on their production of socially necessary labor . With metal handle this function was performed by real money ( gold and silver) , which themselves have value , and the value of goods was expressed perfectly , ie as represented mentally money. ^ Function of money as a medium of exchange. Commodity circulation includes two metamorphosis ,ie two changes to the forms of value : the sale of one product and buy another . Singularity of the function of money as a medium of exchange is that this function is performed , first, real, or cash , money , and secondly, the cost of the signs - paper and credit money . ^ Function of money as means of payment. This feature is the result of the development of credit relations in the capitalist economy . In this case, the money is used when : • the sale of goods on credit, the necessity of which is associated with different conditions of production and sale of goods, different duration of their production and circulation , the seasonal nature of production ; • payment of wages to workers and employees . ^ Function of money as a means of hoarding , savings and savings. Accumulation function previously performed full of treasures and real money - gold and silver. Since money is the universal embodiment of wealth , there is a tendency to their accumulation . While money falls out of circulation and turn into a "golden doll ", ie in treasure. Pursuit of maximum profit prompts businesses not to store money as a dead treasure , and keep them out of circulation. Today, gold along with the credit money is used to create a centralized state reserves of the country , concentrated in the central banks. ^ Function of world money . This f. manifested in the relationship m / s from countries or m / y jur. andnat - E persons in different countries in the form of foreign trade relations , international loans , services external partner . Money functions as: 1) the universal means of purchase , and 2) the universal means of payment , and 3) general materialization of social wealth. 1. The social role of money , their function in the economic system is that they act as a link between producers .Money is like a general condition of social production, "tool" in the commodity economy .
  33. 33. 2 . Money plays a qualitatively new role : they become capital , or self-expanding value. Money turns into money-capital in the reproduction of individual capital because their function is included in the circuit of industrial capital and they are the starting point and the result of the last circuit . 47.In economics, the money supply or money stock, is the total amount of monetary assets available in an economy at a specific time.[1] There are several ways to define "money," but standard measures usually include currency in circulation and demand deposits (depositors' easily accessed assets on the books of financial institutions).[2][3] Money supply data are recorded and published, usually by the government or thecentral bank of the country. Public and private sector analysts have long monitored changes in money supply because of its effects on the price level, inflation, theexchange rate and the business cycle.[4] That relation between money and prices is historically associated with the quantity theory of money. There is strong empirical evidence of a direct relation between money-supply growth and long-term price inflation, at least for rapid increases in the amount of money in the economy. That is, a country such as Zimbabwe which saw rapid increases in its money supply also saw rapid increases in prices (hyperinflation). This is one reason for the reliance on monetary policy as a means of controlling inflation.[5][6] The nature of this causal chain is the subject of contention. Some heterodox economists argue that the money supply is endogenous (determined by the workings of the economy, not by the central bank) and that the sources of inflation must be found in the distributional structure of the economy.[7] In addition, those economists seeing the central bank's control over the money supply as feeble say that there are two weak links between the growth of the money supply and the inflation rate. First, in the aftermath of a recession, when many resources are underutilized, an increase in the money supply can cause a sustained increase in real production instead of inflation. Second, if the velocity of money, i.e., the ratio between nominal GDP and money supply, changes, an increase in the money supply could have either no effect, an exaggerated effect, or an unpredictable effect on the growth of nominal GDP. Definition of 'Monetary Aggregates' Broad categories measuring the total value of the money supply within an economy. In the United States, the standardized monetary aggregates and their measured contents are known as: M0 – Physical cash and coin M1 – All of M0 plus demand deposits, traveler's checks M2 – All of M1 plus savings deposits, money market shares There is also an M3 aggregate that includes larger (greater than $100,000) time deposits and institutional funds. The M3 measure is no longer tracked by the Federal Reserve as of 2006, although analysts still calculate the figure broadly. The Federal Reserve uses monetary aggregates to measure the effects of open-market operations, like changing the discount rate or trading in Treasury securities. Monetary aggregates are watched closely by economists and investors, as they give a clear picture of the true size of the "working" money supply. Frequent reporting of the M1 and M2 measures (data is published weekly) allows investors to measure the rate of change in the monetary
  34. 34. aggregates and overall monetary velocity. If the monetary aggregates are growing too quickly, it could trigger inflationary fears (more money chasing after the same amount of goods and services leads to rising prices) and cause central-banking groups to raise interest rates or otherwise halt money-supply growth. While the monetary aggregates were once key in determining overall central-banking policy, the past few decades have shown a lower correlation between changes in the money supply and key metrics like inflation, GDP and unemployment. Narrow money (M1) includes currency, i.e. banknotes and coins, as well as balances which can immediately be converted into currency or used for cashless payments, i.e. overnight deposits. "Intermediate" money (M2) comprises narrow money (M1) and, in addition, deposits with a maturity of up to two years and deposits redeemable at a period of notice of up to three months. Depending on their degree of moneyness, such deposits can be converted into components of narrow money, but in some cases there may be restrictions involved, such as the need for advance notification, delays, penalties or fees. The definition of M2 reflects the particular interest in analysing and monitoring a monetary aggregate that, in addition to currency, consists of deposits which are liquid. Broad money (M3) comprises M2 and marketable instruments issued by the MFI sector. Certain money market instruments, in particular money market fund (MMF) shares/units and repurchase agreements are included in this aggregate. A high degree of liquidity and price certainty make these instruments close substitutes for deposits. As a result of their inclusion, M3 is less affected by substitution between various liquid asset categories than narrower definitions of money, and is therefore more stable. Pool of money available to the population , economic entities , states , local governments are financial resources. Revolving funds are a combination of cash invested in working capital funds and treatment. Some of their functions in the sphere of production , the other - in the sphere of circulation. Current assets - is to advance the construction organization in the current funds and treatment ( less depreciation ) pool of money , which mediates their movement in the process of circulation and ensures the continuity of production and circulation of construction products (Fig. 12.1) , as a source of funding for current and (partial) capital costs of a construction company , and consists of circulating material and financial assets. Capital expenditures - a collection of materials, labor and cash macro - and micro allocated for simple and expanded reproduction of capital is the cost , which is compensated by increases and fixed assets. Financial capital , money - a set of funds intended for the purchase of elements of fixed capital and working capital , as well as the monetary expression of the value of securities . Governing income - is the totality of funds transferred from higher to lower-level budgets to control ( balance ) their costs and revenues. Governing income territorial budgets - a set of funds transferred from higher to lower-level budgets to control their income and expenses.

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