16. What is the subject of economy?

An economy is a set of human and social activities and institutions related to the production, distribution, exchange and consumption of goods and services. It is also an organized way a society provides for the wants and needs of its people.

The main people and organizations involved in economic activities are: firms, workers, investors, consumers, States...

Word History: Managing an economy has at least an etymological justification. The word economy can be traced back to the Greek word oikonomos, "one who manages a household," derived from oikos, "house," and nemein, "to manage." From oikonomos was derived oikonomiā, which had not only the sense "management of a household or family" but also senses such as "thrift," "direction," "administration," "arrangement," and "public revenue of a state." The first recorded sense of our word economy, found in a work possibly composed in 1440, is "the management of economic affairs," in this case, of a monastery. Economy is later recorded in other senses shared by oikonomiā in Greek, including "thrift" and "administration." What is probably our most frequently used current sense, "the economic system of a country or an area," seems not to have developed until the 19th or 20th century.

The economy and the factors affecting the economy have spawned (порождать, вызывать) one of the largest fields of study in human history - economics. One of the uses of economics is to understand how economies work and what the relations are between the main economic players and institutions.

An economy is usually analyzed in either of two ways.

17. What is the difference of microeconomics and macroeconomics?

Microeconomics examines the economic behavior of individual units (including businesses and households) and their interactions through individual markets, given scarcity and government regulation. Within microeconomics, general equilibrium theory aggregates across all markets, including their movements and interactions toward equilibrium. Microeconomics is a branch of economics that studies how individuals, households, and firms make decisions to allocate limited resources, typically in markets where goods or services are being bought and sold.

Microeconomics examines how these decisions and behaviors affect the supply and demand for goods and services, which determines prices, and how prices, in turn, determine the supply and demand of goods and services.

One of the goals of microeconomics is to analyze market mechanisms that establish relative prices amongst goods and services and allocation of limited resources amongst many alternative uses. Microeconomics analyzes market failure, where markets fail to produce efficient results, as well as describing the theoretical conditions needed for perfect competition. Significant fields of study in microeconomics include markets under asymmetric information, choice under uncertainty and economic applications of game theory. Also considered is the elasticity of products within the market system.

Macroeconomics - the field of economics that studies the behavior of the aggregate economy. Macroeconomics examines economy-wide phenomena such as changes in unemployment, national income, rate of growth, gross domestic product, inflation and price levels.

Macroeconomics is focused on the movement and trends in the economy as a whole, while in microeconomics the focus is placed on factors that affect the decisions made by firms and individuals. The factors that are studied by macro and micro will often influence each other, such as the current level of unemployment in the economy as a whole will affect the supply of workers which an oil company can hire from, for example.

Macroeconomics since at least the 1960s has been characterized by further micro-based modelling as to rationality of players and efficient use of market information. Today a consensus view is that good macroeconomics has solid microeconomic motivation as to theory and evidence.

Needless to say, the macroeconomy is very complicated and there are many factors that influence it. These factors are analyzed with various economic indicators that tell us about the overall health of the economy. Macroeconomists try to forecast economic conditions to help consumers, firms and governments make better decisions.

• Consumers want to know how easy it will be to find work, how much it will cost to buy goods and services in the market, or how much it may cost to borrow money.

• Businesses use macroeconomic analysis to determine if expanding production will be welcomed by the market: will consumers have enough money to buy the products, or will the products sit on shelves and collect dust?

• Governments turn to the macroeconomy when budgeting spending, creating taxes, deciding on interest rates and making policy decisions.

Macroeconomic analysis broadly focuses on three things: national output (measured by the GD), unemployment and inflation.

18. What is the present state of Russian economy? Russia's economy Feb 7th 2007 From Economist.com America and the European Union designated (характеризовать, называть) Russia a market economy in 2002, but dirigisme (дирижизм - теория и практика государственно-монополистического регулирования во Франции) continues to play a big role. Although high oil prices helped Russia recover from the economy's systemic collapse in 1998, a glut of oil revenues has allowed Vladimir Putin, Russia's president, to forgo(отказываться, воздерживаться от чего-л.) necessary reforms. Infrastructure needs investment, the financial system needs reform and foreign companies face cumbersome (громоздкий, обременительный) ground rules. The government's dismemberment (разделение на части) of Yukos, a Russian oil company, has chilled the business climate. And a handful of oligarchs account for some 60% of the Russian stockmarket. Yet the economy has grown strongly for eight years, and increased by just under 7% in 2006. Nevertheless, the glacial pace of reform has left the country's economic outlook increasingly glum.

From Wikipedia, the free encyclopedia

Although half the size of the former Soviet economy, which was second in the world, the economy of Russia includes formidable assets, and Russia is increasingly becoming again an economic superpower. Russia possesses ample supplies of many of the world's most valued natural resources, especially those required to support a modern industrialized economy. It also has a well-educated labor force with substantial technical expertise. At the same time, Soviet-era management practices, a decaying infrastructure, and inefficient supply systems hinder efficient utilization of those resources. For nearly sixty years, the Russian economy and that of the rest of the Soviet Union operated on the basis of a centrally planned economy, viz. state control over virtually all means of production and over investment, production, and consumption decisions throughout the economy. Economic policy was made according to directives from the Communist Party, which controlled all aspects of economic activity. The central planning system left a number of legacies with which the Russian economy must deal in its transition to a market economy.

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19. Can Russian market be described by classical economic models?

Сlassical economics – a system or school of economic thought developed by Adam Smith, Jeremy Bentham, Thomas Malthus, and David Ricardo, advocating minimum governmental intervention, free enterprise, and free trade, considering labor the source of wealth and dealing with problems concerning overpopulation.

Classical economics The dominant theory of economics from the 18th century to the 20th century, when it evolved into NEO-CLASSICAL ECONOMICS. Classical economists, who included Adam SMITH, David RICARDO and John Stuart Mill, believed that the pursuit of individual self-interest produced the greatest possible economic benefits for society as a whole through the power of the INVISIBLE HAND. They also believed that an economy is always in EQUILIBRIUM or moving towards it.

Equilibrium was ensured in the LABOUR market by movements in WAGES and in the CAPITAL market by changes in the rate of INTEREST. The INTEREST RATE ensured that total SAVINGS in an economy were equal to total INVESTMENT. In DISEQUILIBRIUM, higher interest rates encouraged more saving and less investment, and lower rates meant less saving and more investment. When the DEMAND for labour rose or fell, wages would also rise or fall to keep the workforce at FULL EMPLOYMENT.

In the 1920s and 1930s, John Maynard KEYNES attacked some of the main beliefs of classical and neo-classical economics, which became unfashionable. In particular, he argued that the rate of interest was determined or influenced by the speculative actions of investors in BONDS and that wages were inflexible downwards, so that if demand for labour fell, the result would be higher UNEMPLOYMENT rather than cheaper workers.

P.S. Equilibrium. When SUPPLY and DEMAND are in balance. At the equilibrium PRICE, the quantity that buyers are willing to buy exactly matches the quantity that sellers are willing to sell. So everybody is satisfied, unlike when there is DISEQUILIBRIUM. In CLASSICAL ECONOMICS, it is assumed that markets always tend towards equilibrium and return to it in the event that something causes a temporary disequilibrium. GENERAL EQUILIBRIUM is when supply and demand are balanced simultaneously in all the markets in an economy. KEYNES questioned whether the economy always moved to equilibrium, for instance, to ensure FULL EMPLOYMENT.

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20. What laws are needed to improve the state of Russian economy?

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21. What are the main reasons of unemployment in Russia? Unemployment - the state of being unemployed or not having a job.

Unemployment is measured annually as the percent of the labor force that cannot find a job. The labor force comprises adults who want to work. Uncounted are those who do not seek employment, or who have become discouraged enough to stop looking.

February 18, 2003 PRAVDA.Ru Russia on the Edge of Unemployment Disaster The government presents joyful reports, although the situation gets critical

The Russian Federation State Statistics Committee informs about the reduction of the unemployment level in Russia. As it turns out, the unemployment situation in the country improves. Official documents say so, at least. Nevertheless, the major social department of the government – the Ministry for Labor – projects a considerable growth of unemployment in the nearest future. Power industry reforms, public utilities reforms, railway and metallurgy reforms will deprive hundreds of thousands (if not millions) of Russian people of their jobs. The state has nothing to offer to all those people, who suffer from the stabilization and from the moderate economic growth. There are a lot of doubts about the fact, if there is someone, who is interested in the fates of those people at all. Yet, the State Statistics Committee of Russia keeps providing its joyful calculations.

According to the report from the State Statistics Committee, only 21.6% of Russian people had their income lower than the official living wage during the last quarter of the last year. The official living wage is 1.893 rubles a month, which is a bit more than $50. There were 31.5% of such people in the beginning of 2002. That is why, the Ministry for Labor can report that the number of poor people in Russia reduced by 14.2 million people. The ministry hopes that this index will be an advantage of its work.

By the way, according to the official statistics, the level of hidden unemployment dropped almost 2.7 times over the recent two years. The officials of the Ministry for Labor believe that 92.6-92.8% of the economically active population of the country will have jobs by the year 2005. Although, this assertion contradicts to the forecasts of the same ministry. Various departments of the ministry have probably failed to coordinate their data.

Alexander Pochinok, the incumbent Minister for Labor, promised two years ago that the official number of the poor would be reduced to the level of 17-18 million people by the middle of 2003. However, as the dynamics of the statistic information shows, Pochinok’s words remained only words. The minister failed to work a miracle. The number of the Russian people, whose level of income is lower than the living wage, does not have a tendency for reduction: 31 million people in the first quarter of 2001 and 30.9 million in the beginning of the year 2003. Their number is supposed to grow in the percentage ratio: the State Statistics Committee registered that the Russian population considerably reduced in its number over the last two years.

Ministerial departments often forget to coordinate their data. Last year the State Statistics Committee informed that up to 40 million Russian people suffer from undernourishment on a regular basis. It is obvious at present that the number of hungry people is going to increase in the nearest future.

The Ministry for Labor forecasts nowadays that the registered unemployment level in Russia is likely to grow to 1.5 million people in the coming three years. Metallurgy, railway transport and power industries will provide the basic growth of the unemployment. Ministerial officials forget to mention the coal industry for some reason: oligarchs are about to complete its unification. Officials do not take account of the coming reform in the field of public utilities either.

In connection with the reform of the metallurgical industry, about 150 thousand people will become unemployed, as the specialists of the Ministry for Labor think. Two hundred and thirty-eight thousand people are expected to be fired as a result of the railway transport reform. The power industry reform is to result in the unemployment of 61 thousand people at least. Furthermore, the ministry acknowledges that the number of illegal labor migrators (about three million people) doubles the official number of the unemployed people in the country.

It goes without saying that no population employment departments (not to mention small business or shadow economy) will be able to cope with such a huge mass of people. All those things will eventually result in the fact that the human labor price will drop considerably in Russia as a whole. The employment demand will exceed the unbalanced supply several times. Hundreds of thousands of people will remain unemployed, homeless and hungry.

Does anyone in the Russian government calculated such a development of the social situation? Does anyone at the presidential administration think about who those people are going to vote for at the election? Do Kremlin politicians hope that the worst is going to happen after the parliamentary and the presidential elections? It is hard to answer these questions. The government does not say anything on the subject, while oligarchs keep brushing such questions aside.

On the other hand, Russian large companies come to the realization of the fact that the bitter situation needs to be improved at least a little bit. The Siberian Coal Energetic Company, which got hold of Siberian coal fields, gets rid of the excessive personnel at the moment. This is a logical way for market relations development in Russia: no charity at all. A company will keep only those people, whose labor brings the maximum profit to the company (at the minimum spending, of course). So, the company decided to set up the special stabilization foundation. As the official press release of the company mentioned, the funds of the foundation would help the dismissed people to survive the hard consequences of their dismissal. So-called excessive people will be able to obtain new professions at regional schools. In addition to that, the company launches a program to assist the economic employment of the Krasnoyarsk region. The company is going to offer certain loans to those people, who will wish to start their own businesses after they are fired. Most likely, those loans will go not to the fired people, but to the children and relatives of the company’s managers. On the other hand, an oligarchic company is doing something for its workers, trying to observe some decencies, at least verbally. Dmitry Slobodanuk Translated by Dmitry Sudakov

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