Regulation of balance of national expenditures and national income

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Regulation of balance of national expenditures and national income

Journal Title: Регіональна Економіка - Year 2017, Vol 83, Issue 1

Abstract

The problems of balance of national expenditures and national income are considered. It is emphasized that the gross domestic product (GDP) is the best indicator for modeling of the balance condition of the economy in general. Emphasis is made that GDP is both the volume of production expenditures and the volume of revenue from production in the economy. It is noted that the volume of national expenditures is formed by the population costs on consumer goods and services and companies’ costs on material resources for producing of goods and services. GDP in the real (physical) and nominal (monetary) forms as a key parameter for model of income and expenditure balance is grounded. It is indicated that the two forms of GDP are functioning simultaneously, and the government of Ukraine is the regulator of physical volume, and National Bank of Ukraine is the regulator of the amount of money. The article proves that when the balance of national expenditure and national income rates is achieved, the prices, fares and money turnover are the same. The prevalence of physical GDP above nominal GDP indicates the imbalances and price increase, and the predominance of physical GDP above nominal GDP shows the imbalances and decrease of prices. The estimation of the volume and dynamics of the both forms of GDP in Ukraine is made and their imbalance in time is found: nominal GDP dominates over real GDP. The dynamics in the form of indices of physical and monetary GDP imbalance model in Ukraine is presented: Iq: Ip ? Iv: Im, where Iq is the index of physical GDP, Ip is the index of unit price of physical GDP, Iv is the index of turnover of money GDP, Im is the index of monetary GDP. The left side of the model expresses the dynamic of potential costs formed by asynchronous movement of goods and services volume and the unit price of goods and services, and the right part expresses the dynamics of the actual national income and demand for money. The calculated ratios of indices show inertia, which expresses high rates of annual growth in national spending and demand for money, and therefore the budgets of most of individual households, businesses and government will become insolvent. General conclusions on regulator of monetary and physical products are made. National Bank of Ukraine should reduce the volume of money in circulation and Ukrainian government should reduce employment in the public sector, especially in the governance, and increase investment volume in order to maintain the production growth of GDP physical volume.

Authors and Affiliations

Maryan B. Zablotskyy

Keywords

EP ID EP436026
DOI -
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