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Concept of Stable Economic Equilibrium

   

Added on  2020-05-16

10 Pages1423 Words344 Views
Running head: CONCEPT OF STABLE ECONOMIC EQUILIBRIUM 1Concept of Stable Economic EquilibriumNameInstitution
Concept of Stable Economic Equilibrium_1
CONCEPT OF STABLE ECONOMIC EQUILIBRIUM 2CONCEPT OF STABLE ECONOMIC EQUILIBRIUMIntroductionThis report deal with the study of Economic Equilibrium and it discuss in detail what astable Economic Equilibrium entails. Economic equilibrium is a situation where by economicforces remained in a balance state. The paper also provides the assessment of Australianeconomy, US economy and the Chinese economy. The last part is the general conclusion.The concept of a stable economic equilibriumStable economic equilibrium is a situation where there is an imbalance in the marketwhich is cause by the following factors: change in price, changes in quantity supplied andchanges in quantity demanded. The actual changes in quantity remove the surplus or shortage inorder to put equilibrium balance a constant state in the market (Adachi, 2017). A real example ofstable economy is market equilibrium.Nature of aggregate demandThis model describes the nature surrounding aggregate demand curve. The curve explainsequilibrium that exists in the market for commodities in form of Y and r. The curve is slopingdownward because as investment increases, the interest rate falls, hence increasing output.Aggregate demand identifies the quantity of commodities that will be bought at a given pricelevel..
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CONCEPT OF STABLE ECONOMIC EQUILIBRIUM 3DD shows negatively tilted demand curve and SS represent positively tilted supplycurve. Intersection point where demand and supply meet is the equilibrium (E). This is the pointwhere demand and supply are in balance. (OQ) represent the equilibrium quantity and (OQ) isthe equilibrium supply (Ikeda, Murota, & Takayama, 2017). This provides a good example ofstable equilibrium in regard to economics. Long run and short run aggregate.Long run is the actual stage in which fixed factors of production are unavailable; hencethere exist no constraints that prevents change in the output level. It is the time period whencontractual wages rates, price level and expectation modify fully to that of the economy, while inshort run these variables sometimes did not adjust fully.Short run aggregate This is where all production takes place; profit-maximizing firms perform the following:
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