High-level equilibrium trap

Okay kiddo, let's talk about something called a high-level equilibrium trap. This may sound like a big and complicated phrase, but it's actually quite simple.

Imagine you have a game where you and your friend are playing catch with a ball. The game is going smoothly and you're both having fun. But suddenly, your friend throws the ball really high and it gets stuck in a tree. You both try to jump and reach for the ball, but it's just too high to grab.

This is kind of like the high-level equilibrium trap in economics. It happens when an economy is doing well and everyone is making money and buying things. But because everyone is making money and buying things, the prices of goods and services start to increase.

This is called inflation. Inflation means that the same amount of money can buy fewer things than before. So, people start to demand more money to keep up with the rising prices. This causes higher wages and salaries.

However, when everyone starts earning more money, businesses start raising their prices even more to keep up with the higher salaries they have to pay. This creates a cycle of higher prices and higher wages, which causes even more inflation.

This cycle can continue until it becomes almost impossible to control. It's like the ball being stuck in the tree - it's hard to bring it back down without causing damage. This is the high-level equilibrium trap.

So, to sum it up, the high-level equilibrium trap is a situation where an economy becomes stuck in a cycle of rising prices and wages. This can make it difficult for the economy to return to a stable state and can cause long-lasting damage.