Lesson 5 - Aggregate Supply Flashcards
1
Q
Define aggregate supply
A
The total output an economy is willing and able to supply at a given time and price level
2
Q
What is short run aggregate supply?
A
- capital is fixed
- using up spare capacity
- AD
3
Q
What is long run aggregate supply?
A
- supply side
- supply when the economy is producing at its productive potential
4
Q
What is the Keynesian view on LRAS?
A
- below Yfe without government intervention
- LRAS is elastic at low levels of output
- becomes more inelastic as resources are being used up and firms begin to suffer supply constraints
5
Q
What is the new classical view on LRAS?
A
- markets should be left alone
- we are always at Yfe in the long run
6
Q
What is Yfe also known as?
A
The natural rate of unemployment (NRU)
7
Q
What is a depression?
A
When the economy shrinks by 10% or more
