ABSTRACT
The concept of Walras' law is fundamental to shon-run macroeconomic analysis. It underlies the presentation of the IS-LM model, which has four goods - commodities, money, bonds and labourbut has explicit analysis of only three of them. While Walras' law has been defined and used in various earlier chapters, its foundations are examined rigorously in this chapter. The somewhat related concept of Say's law is also defined, followed by the implications of assuming both Walras' law and Say's law as identities.
