Different Forms of Macroeconomic Equilibrium
The objective of economic models is to explain the series of interactions among the following major sectors of the macroeconomy: the product market, the labour market, the monetary sector and the expenditure sector. Out of such sectoral interactions is established finally a potential level of output for the economy as a whole. This potential level of output is also the level of GNP toward which the economy will move by being fully bought back with factor incomes; by quickly allowing saving to be directed into investment, and thereafter into increased consumer expenditure. The state of the economy where the product market, the labour market, the monetary sector and the expenditure sector jointly establish the potential level of GNP, is referred to as an economic equilibrium in the full-employment sense.
KeywordsEquilibrium Level Supply Curve Consumption Function Economic Equilibrium Investment Expenditure
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