AS/AD Flashcards
Aggregate Supply
Total output that producers in an economy are willing and able to supply at a given price level in a given time
Short Run Aggregate Supply
Total output of an economy that will be supplied when there has not been enough time for the prices of factors of production to change
Long Run Aggregate Supply
Total output of a country supplied in the period when prices of factors of production have fully adjusted
Shape Short Run Aggregate Supply Curve and causes
direct relationship : profit effect, cost effect, misinterpretation effect
Shifts in the SRAS curve
Change in : factors of production, taxes, factor productivity/quality, quantity of resources
KEYNESIAN Shape of the LRAS curve
real GDP-changes in Price Level, LR means there has been time to adjust to AD
perf. elastic - upward sloping - perf inelastic
New classical school LRAS Shape
Vertical Line
Keynesians
government intervention is needed to achieve full employment
New classical economists
move towards full employment without gov. intervention
Shift in LRAS
Caused by changes in quantity or quality of resources (factor productivity), increase productive potential
Causes of increases in quantity of resources in the LR are
Net immigration, increase in work force, net investment, discovery of resources, land reclamation
Improvements in quality of resources
improved education and training, advances in technology
macroeconomic eqilibrium
where AD and AS meet
Macroeconomic eqilibrium determines
Price Level and Real GDP
Macroeconomic eqilibrium determines
Price Level and Real GDP
