A Static General-Equilibrium Model

Angus Chu

Chapter 1 in Advanced Macroeconomics:An Introduction for Undergraduates, 2020, pp 1-7 from World Scientific Publishing Co. Pte. Ltd.

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.

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 (search for similar items in EconPapers)
JEL-codes: E6 E62 E66 F4 F43 O11 (search for similar items in EconPapers)
Date: 2020
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