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Economists implicitly assumed that both markets had been in equilibrium—such that prices would modify to equalize provide and demand—or that in the occasion of a transient shock, such as a financial disaster or a famine, markets would rapidly return to equilibrium. In different phrases, economists believed that the research of particular person markets would adequately clarify the habits of what we now name aggregate variables, reminiscent of unemployment and output. The extreme and prolonged global collapse in economic exercise that occurred during the great Depression changed that. It was not that economists had been unaware that aggregate variables may very well be unstable. They studied business cycles—as economies recurrently changed from a situation of rising output and employment to lowered or falling progress and rising unemployment, regularly punctuated by extreme modifications or financial crises.

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