dynamic analysis

Fig. 50 Dynamic analysis. An increase in export demand raises AGGREGATE DEMAND from AD₁ to AD₂ and results in an increase in the equilibrium level of national income from Y₁ to Y₂. In moving from Y₁ to Y₂, a number of steps are involved. The initial increase in exports raises aggregate demand from A to B and produces an increase in real output from B to C. This extra output creates, via the MULTIPLIER EFFECT, additional income and expands aggregate demand further from C to D. The extra spending in turn produces an increase in real output from D to E. These movements continue until a new equilibrium position is reached at point H.

dynamic analysis

a method of economic analysis that traces out the path of adjustment from one state of EQUILIBRIUM to another. Consider, for example, the effects of a change of the export demand on the EQUILIBRIUM LEVEL OF NATIONAL INCOME. See COMPARATIVE STATIC EQUILIBRIUM ANALYSIS, DISEQUILIBRIUM.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005