Macro-static

 

Generally every economic activity is affected by size of population, the supply of capital, methods of production, forms of business organization, desire of people etc. Macro-static explains the aggregate relation in a stationary state. It shows the equilibrium of an economy at particular point of time. The macrostatics analysis explains the relation among these different variables at such equilibrium level. It does not discuss how equilibrium is obtained. It shows a stationary condition, where different variables play in such a way that the equilibrium condition does not deviate from the equilibrium point. It investigates the relation between macro variables in the final position of equilibrium. Thus static economy is a timeless economy where no changes occur and gets the equilibrium. According to Prof. Kurihara,”If the object to show, ‘still picture’ of the economy as a whole, the macrostatic method is the appropriate technique. For this technique is one of investigating the relation between macro variables in the final position of equilibrium without reference to the process of adjustment implicit in that final position. ”

Final position of equilibrium can be illustrated with the help of macroeconomic model of Keynesian economy. In this model, Keynes has used the macro variables like aggregate income ‘Y’ consumption ‘C’ and aggregate investment ‘I’. Keynes explains his model as in diagram below with the help of equality of aggregate demand and aggregate supply.

4 thoughts on “Macro-static”

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