For a long time, economics has been split into two partial and conflicting represantations of market economies. The first, examplified by general equilibrium models, is essentially concerned with the allocation of factors and the determination of relative prices. The second, materialized by macroeconomic models in the Keynesian tradition, deals chiefly with the level of utilization of factors at an aggregated level and with the determination of price level. But, these two groups of models have some deficiencies. On account of the deficiencies of the mentioned theories, economists, instead of trying to determine which theory is the correct one; have constructed a model (fix-price general equilibrium model) that shows in which circumstances each of the above-and possibly some other cases and their associated policy recomandations are relavent.
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