macroeconomic Macroeconomics is a branch of economics that deals with the performance, structure, behavior, and decision-making of an economy as a whole. This includes regional, national, and global economies. Macroeconomists study topics such as output/ GDP ...

theory, general disequilibrium is a situation in which some or all of the aggregated markets, such as the

money market The money market is a component of the economy that provides short-term funds. The money market deals in short-term loans, generally for a period of a year or less. As short-term securities became a commodity, the money market became a compo ...

, the goods market, and the

labor market Labour economics seeks to understand the functioning and dynamics of the Market (economics), markets for wage labour. Labour (human activity), Labour is a commodity that is supplied by labourers, usually in exchange for a wage paid by demanding ...

, fail to clear because of price rigidities.Mankiw (1990), 1655. In the 1960s and 1970s, economists such as Edmond Malinvaud,

Robert Barro Robert Joseph Barro (born September 28, 1944) is an American macroeconomist and the Paul M. Warburg Professor of Economics at Harvard University. Barro is considered one of the founders of new classical macroeconomics, along with Robert Lucas ...

and Herschel Grossman,

Axel Leijonhufvud Axel Leijonhufvud (6 September 1933 – 2 May 2022)
of the original. was a Swedi ...

, Robert Clower, and Jean-Pascal Benassy investigated how economic policy would impact an economy where prices did not adjust quickly to changes in supply and demand. The most notable case occurs when some external factor causes high levels of unemployment in an economy, leading to households consuming less and firms providing less employment, leading to a rationing of both goods and work hours. Studies of general disequilibrium have been considered the "height of the

neoclassical synthesis The neoclassical synthesis (NCS), or neoclassical–Keynesian synthesis Mankiw, N. Gregory. "The Macroeconomist as Scientist and Engineer". '' The Journal of Economic Perspectives''. Vol. 20, No. 4 (Fall, 2006), p. 35. is an academic movement a ...

"Romer, 5. and an immediate precursor to the

new Keynesian economics New Keynesian economics is a school of macroeconomics that strives to provide microfoundations, microeconomic foundations for Keynesian economics. It developed partly as a response to criticisms of Keynesian macroeconomics by adherents of new ...

that followed the decline of the synthesis. Studies of general disequilibrium showed that the economy behaved differently depending on which markets (for example, the labor or the goods markets) were out of equilibrium. When both the goods and the labor market suffered from

excess supply In economics, an excess supply, economic surplus market surplus or briefly supply is a situation in which the quantity of a good or service supplied is more than the quantity demanded, and the price is above the equilibrium level determined by sup ...

, the economy behaved according to

Keynesian Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output an ...

theory.

References

* Mankiw, N. Gregory, "A Quick Refresher Course in Macroeconomics." ''Journal of Economic Literature'', Vol. 28, No. 4 (Dec., 1990), pp. 1645–1660. * Mankiw, N. Gregory (2006) “The Macroeconomist as Scientist and Engineer,” ''Journal of Economic Perspectives'' 20(4): 29–46. * Romer, David. "The New Keynesian Synthesis." ''The Journal of Economic Perspectives'', Vol. 7, No. 1 (Winter, 1993), pp. 5–22. {{DEFAULTSORT:General Disequilibrium Keynesian economics General equilibrium theory

See also

References