Question

The figure depicts a(n)

a)foreign exchange market equilibrium.

b)factor market equilibrium.

c)microeconomic equilibrium.

d)macroeconomic equilibrium.

Answer 1

Sol:

a) Foreign exchange market equilibrium

• Foreign exchange market is also known as currency market. Foreign exchange market determines foreign exchange rate for every currency.  It consist of all aspect of buying, selling and exchanging currencies at current price. Foreign exchange market is a global online network where traders and investors buy and sell currency.

• Foreign exchange market will be in equilibrium when quantity supply of a currencies is equal to quantity demand of currency. If the market has shortage, the exchange rate will adjust till the equilibrium is achieved.

Example diagram for Foreign exchange market equilibrium

b) Factor market equilibrium

• Factor market is a market in which companies buy the factors of resources they want to produce their goods and service.
• e.g. labor, raw materials, capital, and land.
• Factor market means services needed to complete the production process of company.

Equilibrium in the factor market is for a perfect competitive market is achieve the factor price and factor quantity is give by the intersection of the factor demand curve and the factor supply curve.

Example diagram for Factore market equilibrium

c) Micro economic equilibrium

• Microeconomics is a study of particular market and segment of the economy.
• Micro economics involves

1. Consumer behaviour
2. Individual labour markets
3. The theory of firms
4. supply and demand in individual market

In microeconomics the  economic equilibrium is also be defined as price at which supply equals demand for a product it is hypothetical supply and demand curves intersecting.

Example diagram for micro economic equilibrium

d) Macroeconomic equilibrium

• Macro economics is about whole economy such as aggregate demand, national output and inflation.
• Macro economic involves

1. Monetary / fiscal policy
2. Inflation
3. Unemployment
4. Growth of economy and economic growth between countries
5. International trade

Example diagram for macro economic equilibrium