Monetary Equilibrium

Gunnar Myrdal, a Swedish economist and sociologist, explored monetary equilibrium in his 1939 work, Monetary Equilibrium. This concept, stemming from the Stockholm school of economics, distinguishes between planned (ex ante) and realized (ex post) savings and investment.1

A related perspective in monetary policy focuses on the supply and demand for money itself, rather than just output. This "money model" suggests that the level of economic activity is primarily influenced by the money supply. In this framework, equilibrium occurs when the demand for money equals the supply. If the demand for money exceeds the supply, income tends to fall, and conversely, an excess supply of money is associated with rising income.2