Sunday, February 17, 2013

What is a Stationary Economy?

This whole first part of our exposition is concerned with the working of a stationary economy. It may be useful to say a few words here on the meaning of this term, in order that the reader may follow the subsequent discussions.
When we speak of a stationary economy, we do not mean an economy in which production and consumption come to a stop. In a stationary economy production and consumption always repeat themselves in the same manner because there are no forces at work which could change them. It is an economy whose course is always exactly repeated. Such an economy does not exist in reality. But it is important to examine how such a fictitious economy would work, so as to be better able to analyze the effects of changes in important data.
The stationary economy is also often referred to as an economy in equilibrium, meaning an economy which has adjusted itself to all past and is not exposed to any further changes.

Common Sense Economics

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