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Aggregate Supply (In long run (LR adjustment: Recessionary gap…
Aggregate Supply
In long run
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LRAS
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Depends on supply of resources in the economy, technology and the production incentives
When the unemployment rate is low, SRAR leftward
When the unemployment rate is high, SRAS rightward
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Adverse supply stock
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Temporarily: drought, earthquake, flood,civil
Hysteresis
If the unemployment rate remain above the natural rate for long time, the natural rate will increase "Bounce back"
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