Question

The macroeconomy contains four main markets governed by the laws of supply and demand. In the...

The macroeconomy contains four main markets governed by the laws of supply and demand. In the table below, state the name of each market and describe the types of prices and quantities determined by the equilibrium of supply and demand in each market. Be specific! HINT: Think of the y-axis (vertical) and x-axis (horizontal) of the graphs of supply and demand curves.

   
Output

   
Labor

   
Money

   
Financial

A.  
y-axis: interest rate.

x-axis: quantity of money.

B.  
y-axis: wage.

x-axis: employment.

C.  
y-axis: return.

x-axis: quantity of assets.

D.  
y-axis: price of output.

x-axis: quantity of output.

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Answer #1

A) The interaction between interest rate and quantity of money determines MONEY MARKET.

In money market, interest rate is determined as price of money.

Y axis: interest rate

X axis: quantity of money

B) The interaction between wage and employment constitutes LABOR MARKET.

Y axis: wage

X axis: employment

In labor market, equilibrium between wage and employment determines at certain wage rate what level of employment will take place.

C) The interaction between return and quantity of assets constitutes FINANCIAL MARKET

Equilibrium in financial market shows what quantity of assets we will get certain return.

Y axis: return

X axis: quantity of asset

D) The interaction between price of output and quantity of output constitutes OUTPUT MARKET.

Equilibrium in this market shows what will be the price of output

Y axis: price of output

X axis: quantity of output

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