Unit 2 Microeconomics and Macroeconomics

Macroeconomic Models

A macroeconomic model is an analytical tool designed to describe the operation of the economy of a country or a region. These models are usually designed to examine the dynamics of aggregate quantities such as the total amount of goods and services produced, the total income earned, the level of employment of productive resources, and the level of prices.

The goal of a macroeconomic model is to replicate the main mechanisms of an entire economic system, which may consist of a region (such as the Italian Mezzogiorno), a nation state (such as Poland), or a collection of nation states (such as the 27 members of the EU). The only requirement is that the entity being modeled is large enough to display the distinctive properties that are the subject area of macroeconomics. Of course, it is also possible to construct economic models of other entities, such as a town, a transport system, a cluster of firms, the operation of a particular policy program, etc. However, such models fall outside the category of macroeconomic models.

Macroeconomic models may be logical, mathematical, and/or computational; the different types of macroeconomic models serve different purposes and have different advantages and disadvantages.

Macroeconomic models may be used to clarify and illustrate basic theoretical principles; they may be used to test, compare, and quantify different macroeconomic theories; they may be used to produce "what if" scenarios (usually to predict the effects of changes in monetary, fiscal, or other macroeconomic policies); and they may be used to generate economic forecasts. Thus, macroeconomic models are widely used in academia, teaching and research, and are also widely used by international organizations, national governments and larger corporations, as well as by economics consultants and think tanks.

Notes:

tool – инструмент

to replicate – воссоздавать

distinctive properties – отличительные черты, свойства

forecast – прогноз

think tank – экспертно-аналитический центр

Unit 3 Types of Economic Systems

A Consumer Economy

A consumer economy refers to an economic system that primarily runs on consumers' spending. In the USA, it is often said and also often disputed that consumers are responsible for 70% of all spending and, therefore, this class of spenders must be constantly stimulated to make money for businesses. There are other classes of spenders that represent a lower amount of spending and are usually ignored by attempts to revitalize the economy. In this economy, some financial experts say consumption is required, while others say production is required to keep the consumer economy satisfied.

A consumer economy simply means that there is an economy where consumers dominate the spending sphere. Instead of businesses, government, pharmaceutical or other spenders, consumers dominate the spending world. For this type of economy to work, consumers must be stimulated to buy products, and products must be produced. To stimulate purchases, the government will usually offer larger tax returns so consumers have more money to spend, which will give businesses more capital so they can create more jobs.

The main principle of a consumer economy is that the consumer must consume. Products must be purchased and used for the economy to function. This economy is so heavily dependent on the cycle of consumption that it can easily break if the consumer refuses to spend money and chooses instead to invest it. To this end, consumers are often given extra money to spend on products to drive the economy. Most other spenders, such as businesses and manufacturers that purchase supplies, often go ignored by these stimulus attempts because they represent a lower percentage of overall spenders.

Others believe a consumer economy is not about consumption but production. If the right product is made, the consumer will purchase it and a variety of different products must be made to satisfy consumer demands. If production stops, there will be nothing to consume, which is what leads many financial experts to state that production is the driving force of a consumer economy.

Notes:

spender – лицо, осуществляющее расходы

to revitalize – восстановить активность