Macroeconomic Equilibrium

Is it possible for all the products and services an economy produces to be in demandWhat if the aggregate supply is higher than the aggregate demandHow do we find out if the aggregate demand is met by an equal aggregate supplyThis is where macroeconomic equilibrium comes into the picture. 

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Macroeconomic Equilibrium Macroeconomic Equilibrium

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Table of contents
    Frequently Asked Questions about Macroeconomic Equilibrium

    What will increase macroeconomic equilibrium prices?

    A negative supply shock when the aggregate supply reduces over the short run and the SRAS curve shifts to the left leading to the increase in price level and decrease in the supply in the economy. 

    What is macroeconomic equilibrium?

    Macroeconomic equilibrium occurs at the point where the aggregate demand meets the aggregate supply.

    How do you calculate macroeconomic equilibrium?

    Macroeconomic equilibrium equations can be explained as AD = AS. 

    However, if we have to understand equations in algebraic format, we need to understand the factors that help to form an equilibrium.

    Y = Aggregate income = Macroeconomic equilibrium

    C = consumption

    I = investment

    G = government expenditure


    Therefore, the equation will be 

    Y = C + I + G

    What is a macroeconomic equilibrium example? 

    The whole concept of macroeconomic equilibrium can be understood with the example of iPhones. 

    Initially, when Apple launches a new series, say iPhone X, the demand is huge and supply is not equal to demand.

    This creates a positive demand shock for the iPhone X, so the supply needs to increase to meet the demand to create a short-run macroeconomic equilibrium.

    However, as time passes, Apple is able to meet the demand for the iPhone X series over the long-run, which eventually creates the long-run macroeconomic equilibrium. 

    Name three types of macroeconomics equilibrium.

    • Full employment equilibrium.
    • Recessionary gap.
    • Inflationary gap.

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