Comparative Analysis (Comparative Macro Statics)


Comparative Analysis (Comparative Macro Statics) is concerned with a comparative study of different equilibrium positions attained by the economy as a result of a change in macroeconomic variables. It compares the new and old equilibrium attained by the economy. But it does not deal with the transitional period and process involved in the moment from one equilibrium point to another.

The concept of comparative analysis has been illustrated in the diagram below:

In the above figure, E is the original equilibrium point where an aggregate demand curve (C+I) and aggregate supply curve (45° line) are intersected. OY is the equilibrium level of national income. When there is an increase in investment, the aggregate demand curve shifts to C+I+ΔI. Consequently, the new equilibrium point E1 and new equilibrium national income is OY1. The comparative study of two equilibrium points E and E1 is called comparative analysis (comparative macro statics). But it does not explain the process through which a new equilibrium is attained.

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Static Analysis (Macro Statics)
Dynamic Analysis (Macro Dynamics)


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