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A Static General-Equilibrium Model

In: ADVANCED MACROECONOMICS An Introduction for Undergraduates

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  • Angus C. Chu

Abstract

Dynamic general equilibrium is the foundation of modern macroeconomic models. In this chapter, we first explore the concept of general equilibrium using a simple static model. Our simple economy involves two groups of economic agents: consumers and firms. We consider a representative household, which determines the behaviour of consumers. We also consider a representative firm, which determines the behaviour of firms. The representative household supplies labour and capital to the representative firm, which then uses these factor inputs to produce output and sells the output back to the household. We use this model to explore how changes in the level of technology affect the labour market and the capital market and how the two markets interact with each other.

Suggested Citation

  • Angus C. Chu, 2020. "A Static General-Equilibrium Model," World Scientific Book Chapters, in: ADVANCED MACROECONOMICS An Introduction for Undergraduates, chapter 1, pages 1-7, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9781786349132_0001
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    Keywords

    Macroeconomics; Dynamic General Equilibrium; Economic Growth; Endogenous Technological Change; Monetary Policy; Fiscal Policy; Business Cycles; Unemployment; Market Failure; The Neoclassical Growth Model; The Romer Model; The Schumpeterian Growth Model; The Solow Growth Model; The Ramsey Model; The New Keynesian Model;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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