Page 184 - DECO402_Macro Economics

Unit-19: Equilibrium in Product and Money Market

Self Assessment Notes

State whether the following statements are True or False:
7. If LM curve is given, then high equilibrium comes from the coincidence of actual GDP and
interest rate because of right shift of IS curve.
8. Because of right shift of LM curve on given IS curve, the actual GDP rise.
9. An economy can come in equilibrium from disequilibrium by Automatic Adjustment
Process.
10. Adjustment process can bring the change in actual GDP or interest rate or in both.

19.3 Summary

y The change in equilibrium of real and monetary fields will then happen when there will be
a shift in IS curve or LM curve or both. As we have shown previously that the IS curve shifts
towards right because of rise in autonomous components of total expenditure. The IS curve
shifts towards left because of fall in autonomous components of total expenditure.

19.4 Keywords

y Excess Supply – More Supply.
y Excess Demand – Excess of Demand.

19.5 Review Questions

1. Please interpret the Simultaneous Equilibrium in Product and Money Market.
2. Write a comment on ‘How would equilibrium be achieved?’

Answers: Self Assessment

1. change 2. fall 3. (a) 4. (b)
5. (a) 6. (a) 7. True 8. True
9. True 10. True.

19.6 Further Readings

Books 1. Macroeconomics— S.K. Chakravarti, Himalaya Publishing House, 2010
2. Macroeconomics: Economic Growth, Fluctuations and Policy— Robert
E. Hall and David H. paipal, Vaina Books 2010.
3. Macroeconomics: Theory and Policy— H. L. Ahuja, S. Chand Publisher,
2010.
4. Necessity of Economics— H. S. Nath, Cyber Tech Publications, 2012.

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