ECON 2 Lecture Notes - Lecture 11: Economic Equilibrium, Autarky, Aggregate Demand
Document Summary
Equilibrium occurs when there is no tendency for change. In the macroeconomic goods market, equilibrium occurs when planned aggregate expenditure is equal to aggregate output. Planned aggregate expenditure (ae) = c + i. Thus at equilibrium; ae = y = c + i. If this condition does not hold then there will be dis-equilibrium. If y > ae, output is greater than planned aggregate expenditure and there will be unplanned increase in inventories. If y < ae, output is less than planned aggregate expenditure and there will be unplanned decrease in inventories. Therefore equilibrium occurs only when planned aggregate expenditure equals output. The s = i equilibrium condition of the goods market. Assuming an economy that does not involve in foreign trade, using the income approach national. Income (y) is expressed as y = c + s + t. Using the expenditure approach, it expressed as y = c + g + i = ad.