Stable Economic Equilibrium Assignment

Added on - 31 Oct 2019

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Running head: STABLE ECONOMIC EQUILIBRIUMSTABLE ECONOMIC EQUILIBRIUMName of the StudentName of the UniversityAuthors Note
1STABLE ECONOMIC EQUILIBRIUMTable of ContentsIntroduction......................................................................................................................................2Concept of Sable equilibrium..........................................................................................................2Stable equilibrium of the Australian economy................................................................................4GDP of Australia.............................................................................................................................5Australia’s inflation rate..................................................................................................................5Stabilization instrument...................................................................................................................6Conclusion.......................................................................................................................................7References........................................................................................................................................8
2STABLE ECONOMIC EQUILIBRIUMIntroductionThe paper focuses on the stable economic equilibrium concept and highlights on whether theeconomy of Australia have stable equilibrium in the present period. Stable equilibrium subsist ifthe movement in the economy returns back to the equilibrium position after it faces shocks.Stable equilibrium can also be defined in terms of market equilibrium (Sutherland and Hoeller,2012). Therefore, balance in the economy restores automatically through workings in the market.Stable equilibrium is analyzed with the help of demand and supply of product. Australia being acapitalist country, its economic stability mainly depends on the market economy. Themacroeconomic indicators such as GDP and inflation help the economist in assessing whetherthe economy is in stable equilibrium.Concept of Sable equilibriumImbalance in the market creates change in product price and this causes variation in quantitydemanded as well as quantity supplied. This change in quantity removes either shortage as wellas surplus in the market and reinstates equilibrium in the market (Pearson et al., 2014). Thefigure below illustrates this state. In this diagram, E represents equilibrium point where demandcurve meets the supply curve. Corresponding to this equilibrium point the equilibrium price andquantity is attained , which is shown by Peand Qerespectively. Now, as the price rises from Peto P1, then the demand for the product declines in the market as the consumers restricts theirpurchase. However, as supply becomes greater than demand, excess supply occurs in theexisting market (Garda and Ziemann, 2014). Now, the sellers plans to decrease the price forselling these excess commodities and hence price restores back to equilibrium price Pe..Likewise,if the price of the product decreases from Pe to P2 , then its quantity demanded increases. Hence,
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