Multiple Equilibria

Multiple equilibria occur when a system or situation can settle into more than one stable state, each equally valid given the circumstances. This means that depending on initial conditions or slight changes, the outcome can vary, with the system settling into different "balances." For example, an economy might be stable at high growth or low growth, with no clear reason to prefer one over the other. Recognizing multiple equilibria helps in understanding why systems sometimes shift unexpectedly and highlights the importance of initial conditions and policies in determining outcomes.