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Chapter 4: Q. 17 (page 104)

How do economists define equilibrium in financial markets?

Short Answer

Expert verified

Equilibrium is the state in which market supply and demand are balanced, resulting in steady prices.

Step by step solution

01

Definition

Market equilibrium:

When the supply and demand curves are combined, there is a point where they intersect, which is known as market equilibrium. There is no shortage or excess at the equilibrium price because the quantity of the good that buyers are willing to buy equals the quantity that sellers are willing to sell.

02

Explanation

The state of equilibrium is when market supply and demand are matched, resulting in stable prices. In general, when there is an overabundance of goods or services, prices fall, resulting in higher demand, and when there is a shortage or undersupply, prices rise, resulting in reduced demand.

03

Conclusion

Therefore, the quantity of loanable money required equals the quantity supplied in equilibrium.

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Most popular questions from this chapter

Name some factors that can cause a shift in the supply curve in labor markets.

What is the 鈥減rice鈥� commonly called in the labor market?

Name some factors that can cause a shift in the demand curve in labor markets.

Are households demanders or suppliers in the goods market? Are firms demanders or suppliers in the goods market? What about the labor market and the financial market?

Identify each of the following as involving either demand or supply. Draw a circular flow diagram and label the flows A through F. (Some choices can be on both sides of the goods market.)

a. Households in the labor market

b. Firms in the goods market

c. Firms in the financial market

d. Households in the goods market

e. Firms in the labor market

f. Households in the financial market
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