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temporary equilibrium


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In a model of a dynamic economy consisting of a sequence of short single periods, such as the overlapping generations model, a static equilibrium in a given single period, with agents having expectations about the values of economic variables in the future periods. These expectations may be correct (perfect foresight) if there is no uncertainty about the future. If there is uncertainty, the expectations will typically be modelled as forward-looking rational expectations.

Subjects: Economics.


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