Question

You have been given the task as a macroeconomist, to reflect the collective interconnections and relationships of the market as a whole (both the market supply and demand). To best capture this you choose the ________ model?

A )general equilibrium

B) cyclical unemployment

C) AD-AS model

Answer 1

Option A is correct - General equilibrium

General equilirium model of macroeconomics take into consideration many markets in an economy and determine the equilibrium prices by interacting demand and supply of an economy. This model helps to define the functioning of a macroeconomy as a whole by involving interrelaitons and interdependencies of different markets in an economy. Thus it is a multi market approach that defiens the functioning of an economy as a whole.