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Aggregate Equilibrium

Macroeconomic equilibrium is the price level and amount of real output where the plans of firms to produce and the plans of all elements of aggregate demand coincide. It is the total planned output of an economy, identified by the intersect of AS and AD.

Note that Keynes pointed out that equilibrium isn’t always full employment equilibrium and so may not be beneficial to be at.

Page last updated on 20/10/13