Theoretical Questions Concerning Macroeconomic Balance and Macroeconomic Control

In 1985, confronted with the high-speed growth of industrial development as well as with a series of other problems of macroeconomic imbalance, the central task of macroeconomic control was to suppress general demand, and the major policy measure adopted was to tighten up credit and finance. At the end of last year, we made a comprehensive analysis of the economic situation and came to the conclusion that excessive overall retrenchment had led to an inadequate supply of currency and insufficient demand and had caused a further reduction of production. Some comrades, however, held opposite views, maintaining that the money market was not tight even after the effort to tighten it up, that the national economy remained in a state of low heat, and that the drastic drop in the industrial rate of development in the first two months of this year has been caused mainly by the "shortages of resources." This difference between the two perceptions of the situation reflects to a considerable extent the difference in the theories on which the perceptions of the situation were based. In this article we would like to sum up the analysis of the effects of the 1985 retrenchment and discuss a few theoretical questions concerning macroeconomic balance and macroeconomic control.