What Is the Role of Equilibrium in Macroeconomics?
Macroeconomic equilibrium is a specialized term for macroeconomic conditions in macroeconomics. In the macroeconomics category, it refers to the name or status of the balance of the overall economic indicators.
Macroeconomic equilibrium
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- Macroeconomic equilibrium is a specialized term for macroeconomic conditions in macroeconomics. In the macroeconomics category, it refers to the name or status of the balance of the overall economic indicators.
- Macroeconomic equilibrium refers to a state in which all actors in the economy have maximized their benefits through the market. No one can get more benefits from the change in this state. At this time, all subjects have not changed. Motives of behavior, the economy reaches a stable and balanced state
- Macroeconomic equilibrium is
- There may be three states of short-term macroeconomic equilibrium:
- 1. Full employment equilibrium. When the output of the aggregate demand curve intersects the short-term aggregate supply curve exactly on the long-term aggregate supply curve, we call the macroeconomic equilibrium at this time the full employment equilibrium. At this time, resources are fully utilized, and the unemployment rate is at the level of the natural unemployment rate, which is the ideal state of the macro economy.
- 2. Below the equilibrium of full employment (unemployment equilibrium), this is the actual GDP determined at the time of macroeconomic equilibrium is less than the GDP at full employment, so that the enterprise starts insufficiently and the unemployment rate is higher than the natural unemployment rate.
- 3. Inflation equilibrium. This is the actual GDP determined at the time of macroeconomic equilibrium is greater than the actual GDP at the time of full employment. The actual output exceeds the level of potential GDP, which drives up the price.
- The above analysis shows that it is difficult to achieve full employment equilibrium in the macroeconomic equilibrium. Due to the spontaneous adjustment of the market mechanism, short-term economic fluctuations and business cycles have occurred.
- (2) Long-term macro equilibrium.
- Long-term macroeconomic equilibrium occurs where real GDP equals potential GDP. In long-term equilibrium, the aggregate demand curve and the long-term aggregate supply curve intersect.