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General equilibrium theory is a branch of theoretical microeconomics. It seeks to explain the behavior of supply, demand and prices in a whole economy with several or many markets. It is often assumed that agents are price takers and in that setting two common notions of equilibrium exist Walrasian (or competitive) equilibrium and its generalization, a price equilibrium with transfers. Broadly speaking, general equilibrium tries to give an understanding of the whole economy using a "bottom-up" approach, starting with individual markets and agents. Macroeconomics, as developed by the Keynesian economists, uses a "top-down" approach, where the analysis starts with larger aggregates, the "big picture". The distinction is not as clear as once thought, however. This distinction has gradually become even less sharp, since much of modern macroeconomics has emphasized microeconomic foundations. However, many macroeconomic models simply have a "goods market" and study its interaction with, for instance, the financial market. General equilibrium models typically involve a multitude of different goods markets. Modern general equilibrium models are usually complex and require computers to help with numerical solutions. In a market system, the prices and production of all goods, including the price of money and interest, are interrelated. A change in the price of one good -- say, bread -- may affect another price, such as bakers' wages. If bakers differ in tastes from others, the demand for bread might be affected by a change in bakers' wages, with a consequent effect on the price of bread. Calculating the equilibrium price of just one good, in theory, requires an analysis that accounts for all of the millions of different goods that are available.
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