General disequilibrium occurs in macroeconomic theory when prices are fixed in a general equilibrium

General equilibrium

General equilibrium theory is a branch of theoretical economics. It seeks to explain the behavior of supply, demand and prices in a whole economy with several or many interacting markets, by seeking to prove that a set of prices exists that will result in an overall equilibrium, hence general...

 framework so that they fail to adjust to market clearing

Market clearing

In economics, market clearing refers to either# a simplifying assumption made by the new classical school that markets always go to where the quantity supplied equals the quantity demanded; or# the process of getting there via price adjustment....

 levels. Economists in the 1970s investigated how economic policy would impact an economy where prices did not adjust quickly to changes in supply and demand. Studies of general disequilibrium have been considered the "height of the neoclassical synthesis

Neoclassical synthesis

Neoclassical synthesis is a postwar academic movement in economics that attempts to absorb the macroeconomic thought of John Maynard Keynes into the thought of neoclassical economics...

" and an immediate precursor to the new Keynesian economics

New Keynesian economics

New Keynesian economics is a school of contemporary macroeconomics that strives to provide microeconomic foundations for Keynesian economics. It developed partly as a response to criticisms of Keynesian macroeconomics by adherents of New Classical macroeconomics.Two main assumptions define the New...

 that followed the decline of the synthesis.

Studies of general disequilibrium showed that the economy behaved differently depending on which markets (for example, the labor or the goods markets) was out of balance. When both the goods and the labor market suffered from insufficient demand to clear, the economy behaved according to Keynesian theory.

Works cited

• Mankiw, N. Gregory, "A Quick Referesher Course in Macroeconomics." Journal of Economic Literature, Vol. 28, No. 4 (Dec., 1990), pp. 1645–1660.
• Mankiw, N. Gregory (2006) “The Macroeconomist as Scientist and Engineer,” Journal of Economic Perspectives 20(4): 29–46.
• Romer, David. "The New Keynesian Synthesis." The Journal of Economic Perspectives, Vol. 7, No. 1 (Winter, 1993), pp. 5–22.