expenditure and also there is no change in income. (Equation4) 1. Yi = Ci + S = Ye= Ce+ I. 2. Yi = C↓+S↑ 3. Ye = Ce↓+I↑ 4. If S = I then Yi = Ye. Thus, we can see that monetary-equilibrium shares a lot with the classical model. Problems with monetary-disequilibrium theory According to Yeager, monetary-disequilibrium is a part of the monetarist tradition which states that "money matters the most" which cannot be true as in terms of economic analysis actors matter most. The static definition of equilibrium at the heart of monetary-disequilibrium theory is flawed as he uses a very neoclassical definition on the macro-economic level i.e. he talks about constant price level. Yeager does not take into consideration that business cycles start not just with monetary-disequilibrium but happen when that disequilibrium enters the market for loanable funds and produces disequilibrium there, such that the supply of lonable funds exceeds real savings. As the name suggests the monetary-disequilibrium theory is a strictly monetary explanation of a set of economic phenomenon. It does not take into account the real economic factors like real savings or market processes that influence business cycles. Footnotes Further reading Description and preview. Description and Preview. Description. Herschel I. Grossman, 1987.“monetary disequilibrium and market clearing” in The New Palgrave: A Dictionary of Economics, v. 3, pp. 504–06. The New Palgrave Dictionary of Economics, 2008, 2nd Edition. Abstracts: "monetary overhang" by Holger C. Wolf. "non-clearing markets in general equilibrium" by Jean-Pascal Bénassy. "fixprice models" by Joaquim Silvestre. "inflation dynamics" by Timothy Cogley. "temporary equilibrium" by J.-M. Grandmont. As 2007 working paper. Clark Warburton, 1966. Depression, Inflation, and Monetary Policy; Selected Papers, 1945-1953 Johns Hopkins Press. Evaluation in Anna J. Schwartz, Money in Historical Perspective, 1987. Knut Wicksell, 1898. Interest and Prices, tr. R.F. Kahn. Macmillan, 1936 . Chapter links, pp. v-vi. Leland B. Yeager, 1997. The Fluttering Veil: Essays on Monetary Disequilibrium. Description, table of contents (scroll down), and review in Cato Journal, 1998, (scroll down to) pp. 156-61. Business cycle theories Monetary economics