Macroeconomics 1.3 Aggregate Supply and the interaction of AD and AS Flashcards
Short run aggregate supply curve
a curve showing how much output all firms would be prepared to supply in the short run at any given overall price level.
Neoclassical economists
economists who argue that markets would allow the economy to adjust to equilibrium
Monetarist school
Group of economists who argued the economy would always converge on an equilibrium level of output
Natural rate of output
the long-run equilibrium level of output that corresponds to full employment
Laissez faire approach
Hands free approach to economic policy- the economy will correct itself
Keynesian school
a group of economists who believed that the macroeconomy could settle at an equilibrium that was below full employment
LRAS
Long run aggregate supply
SRAS
Short run aggregate supply
Which economists would argue the LRAS is vertical?
Neoclassists
Which economists would argue the LRAS is upwards sloping?
Keynesian economists
What does the position of the LRAS depend upon?
The quantity of factor inputs available and the effectiveness with which factor inputs are used.
YFE
Full employment level of national income- maximum level of output
Expectations
Views economic agents have about what will happen to the economy in the future
Why are expectations important?
Expectations can cause changes in consumption and investment by consumers and firms respectively
Aggregate supply
Total supply of all goods and services produced within an economy at a given overall price level and at a given time.
