Macroeconomic Equilibrium:
In general, Macroeconomic equilibrium occurs when AD equals AS (SRAS
and LRAS)
Short Run Equillbiurum: (DOEST LAST IN LR)
When AD = SRAS (doesn’t = LRAS)
Determines General PL and real GDP.
Diagram 1: AD = SRAS, LRAS is to Right of Equilibrium
- -ve Output gap as Y1<yfe
- Likely in Rescession
Diagram 2: AD = SRAS, LRAS is to Left of Equilibrium
, - Diagram shows a +ve output gap
- In Boom phase
- Due to producing resources unsustainably.
Long Run Equilibrium:
a) CLASSICAL: AD = SRAS = LRAS
In general, Macroeconomic equilibrium occurs when AD equals AS (SRAS
and LRAS)
Short Run Equillbiurum: (DOEST LAST IN LR)
When AD = SRAS (doesn’t = LRAS)
Determines General PL and real GDP.
Diagram 1: AD = SRAS, LRAS is to Right of Equilibrium
- -ve Output gap as Y1<yfe
- Likely in Rescession
Diagram 2: AD = SRAS, LRAS is to Left of Equilibrium
, - Diagram shows a +ve output gap
- In Boom phase
- Due to producing resources unsustainably.
Long Run Equilibrium:
a) CLASSICAL: AD = SRAS = LRAS
