Macroeconomic agent: concept, goals and behavior

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:53

The study of economic patterns and dependencies at the level of the economy in the general sense of the word is possible only when their aggregates or aggregates are considered. Macroeconomic analysis in any case requires aggregation. The latter is the union of individual components into a single whole, a set, an aggregate. It is through aggregation that the main macroeconomic agents, markets, indicators and relationships are distinguished.

Main Agents

Aggregation, which is based on identifying the most typical characteristics present in the behavior of economic agents, makes it possible to identify 4 macroeconomic agents. These are households, the state, firms and the foreign sector. It is advisable to consider each of the presented categories separately.

Households

So, households are macroeconomic agents that act rationally and are absolutely independent. Themthe key goal of economic activity is nothing more than the maximization of utility directly for the owner of economic resources. Among the latter, it is advisable to single out labor, capital, land, as well as entrepreneurial abilities.

In the process of realizing economic resources, these independent, rationally operating macroeconomic agents receive income. They spend most of it on consumption (this is called consumer spending), and save the rest of the money. That is why households are the main buyers of marketable products and services, as well as the main creditors or savers. In other words, they fully ensure the supply of credit plan funds in the economy.

State

The state also belongs to the main macroeconomic agents. It is a set of state organizations and institutions that have the legal and political right to influence the processes taking place in the economy, as well as the right to regulate the economy. The state is nothing more than a rationally functioning, completely independent macroeconomic agent, whose main task is to eliminate market failures. It is for this reason that the state acts as a buyer of marketable products and services for the full-fledged work of the public sector, a producer of public goods, a redistributor of national income (through transfers and taxation).system), as well as a borrower or lender in the financial market (depending on the state of the budget at the state level).

Functions of the State

It is worth knowing what exactly the state organizes and subsequently regulates the activities of a market economy. In other words, this macroeconomic agent forms and provides the institutional basis for the functioning of the economy (security system, legal framework, tax system, insurance system, and so on). That is, the state is the developer of the "rules of the game." It ensures and fully controls the supply of money in the country, as it has the monopoly right to issue money. The state pursues a stabilization (macroeconomic) policy, the key varieties of which are the following:

• Fiscal (in other words, fiscal). This is nothing more than the government's policy in the field of taxation, the state budget, as well as state spending, aimed at balancing the balance of payments, employment and growth of anti-inflationary GDP (GNP).
• Monetary (monetary). This is the macroeconomic policy of the authorities in monetary terms. In other words, a set of measures that are aimed at controlling aggregate demand through money market factors (nominal exchange rates or the level of liquidity of banking institutions in the current period, as well as the interest rate in the short term) in order to achieve a certain combination of final goals. howTypically, this group of goals includes price stability, maintaining a stable exchange rate, financial stability, and promoting balanced growth in the economy.
• Foreign trade policy is a component of economic policy implemented by the state, which involves influencing foreign trade through economic and administrative levers. Here it is advisable to single out such instruments as subsidies, tax payments, direct restrictions on exports and imports, loans, and so on.

Thus, the state regulates the economy to ensure stable economic growth, the level of full resource employment, as well as a stable price level.

Firms as macroeconomic agents

Firms are a rationally operating and completely independent agent of macroeconomics, the purpose of whose economic work is considered to be profit maximization. They are the main producers of commercial products and services in the economy, as well as buyers of economic resources.

Besides, in order to expand production, as well as fully ensure the growth of cash reserves and compensate for the depreciation of capital, companies need investment goods (it is advisable to include here, first of all, equipment). That is why they are investors, that is, buyers of investment products and services. And since firms tend to use borrowed money to finance their own investment expenditures, they are considered the main borrower in the economy, in other words, companies demandcredit funds.

Combinations of categories

It is worth noting that together firms and households form the private economic sector. In turn, the public and private sectors together constitute a closed economy.

Next, it is advisable to consider the foreign sector and the behavior of this macroeconomic agent.

Foreign sector

The foreign sector is considered an independent and rationally functioning macroeconomic agent that interacts with a particular country through international trade (import and export of commercial products and services) and the movement of capital, in other words, financial assets (import and export of capital). The foreign sector unites all other countries of the world. It should be added that the inclusion of macroeconomic agents of the foreign sector in the general analysis implies an open economy.

Conclusion

So, we have considered macroeconomic agents and their behavior, goals, and methods of functioning. If foreign agents of the economy are allowed to enter the domestic market, and national agents enter the external market, the economy becomes open to the flow of resources, goods, and financial capital. In conclusion, it is worth noting that the possibility of free import-export of goods, as a rule, entails increased competition within the country.(primarily at the expense of foreign substitutes for domestic marketable products). It promotes price equalization. The policy of introducing import quotas, import duties, which causes a rise in the price of a foreign commodity product in the domestic market and limits its import, is called protectionism.