Static Analysis (Macro Statics)


Static analysis (macro statics) explains the final position of equilibrium of the whole economy at a particular point of time. It shows a still picture of the economy as a whole. It also investigates the relation between macro variables in the final position of equilibrium. But it does not tell the process of adjustment to the final equilibrium.

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

In the above figure, aggregate demand curve (C+I) and aggregate supply curve (45° line) are intersected at point E. Point E is the equilibrium point where the equilibrium level of national income is OY. As aggregate demand and aggregate supply refer to the same point of time, it is static analysis.


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