STABILIZATION POLICY: MACROECONOMIC DIMENSIONS
DOI:
https://doi.org/10.17721/apmv.2016.128.0.105-114Abstract
The article studies models and conceptions of stabilization policy that aims to reduce the severity of economic fluctuations in the short term. According to the economic science, production and employment fluctuate around their natural levels in the long run. The paper reveals, that stabilization policies are designed to defuse the business cycle phases, bringing production and employment to its natural level. It uncovers, that the main function of stabilization policy is to limit short-term deviations in the system of long-term market equilibrium.
This is done in the form of aggregate supply – aggregate demand by establishing relationships between potential output and prices of production, on the one hand, and the relationship between aggregate demand and industrial production prices – on the other. The government’s instruments are fiscal and monetary policy, which maintains high and stable levels of economic activity.
The article outlines, that the best option for stabilization policy is to stimulate aggregate supply and use only certain aspects of aggregate demand in the absence of real prerequisites for its improvement under current economic conditions. Therefore, neoclassical paradigm and monetary concept should be taken for the basis of stabilization.References
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