Answer to Question #217175 in Macroeconomics for Muhammad qaiser

Question

Discuss with help of graph (s) the general equilibrium of the economy and how
economy will reach to general equilibrium if goods market is in equilibrium but
money market is not.

Answer 1

In economy with numerous markets functioning similar time, general equilibrium depicts the way supply and demand interact as well as tend toward the equilibrium. Price equilibrium is reached if competing levels of demand and supply in various markets tend to be balanced.

ADVERTISEMENTS: IS-LM model tends to determine interest rate and income value, clearing the money markets and goods at similar period. Both the income level and interest rate should be in such a way both markets become balance.