Macro Equilibrium

• Macroeconomic equilibrium occurs where aggregate demand equals aggregate supply.
• There are many different ways of showing aggregate supply, leading to numerous ways of showing macro equilibrium.
• Classical economies believe in two types of equilibrium: short run macro equilibrium and long run macro equilibrium.
• Short run equilibrium occurs where aggregate demand equals short-term aggregate supply, but does not equal long-term aggregate supply.
• The classical model shows that a deviation from yfe in the long run is a short run equilibrium.
• Long run equilibrium is when aggregate demand equals short-term aggregate supply and long-term aggregate supply.
• The Keynesian way of showing macroeconomic equilibrium is much easier, represented by the Keynesian LRAS curve.
• According to Keynesian economists, a deviation from yfe could be a long run equilibrium.