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AGGREGATE SUPPLY, (•Labor, •Capital, •Natural Resources, •Technological…
AGGREGATE SUPPLY
Definition of Aggregate Supply:
In economics, aggregate supply or domestic final supply is the total supply of goods and services that firms in a national economy plan on selling during a specific time period. It is the total amount of goods and services that firms are willing and able to sell at a given price level in an economy.
Examples: If the aggregate supply increase includes an increase in population, increased physical capital stock, and technological progress and then the aggregate supply determines the extent to which the aggregate demand increases the output and prices of a good or service.
Including this:
Aggregate supply, also known as total output, is the total supply of goods and services produced within an economy at a given overall price in a given period.
How does Aggregate Supply affect the growth economy?-The aggregate supply curve depicts the quantity of real GDP that is supplied by the economy at different price levels.
- Increases in the price level will increase the price that producers can get for their products and thus induce more output.
To address this issue, it has become customary to distinguish between two types of aggregate supply curves, the short‐run aggregate supply curve, and the long‐run aggregate supply curve.
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Inflationary pressure in Aggregate supply
- The greatest spikes in inflation in the US economy over the 20th century. For example, coincided with the wartime booms. Inflation rates, on the other hand, tend to fall during recessions.
- Two ways, according to the AS framework.
When the economy is already at or near potential GDP and full employment, one possible cause is if aggregate demand begins to move the right, moving the macroeconomic equilibrium into the steep portion of the aggregate supply curve
- Inflationary pressures manifest themselves in variety of ways, such as
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- The long-run aggregate supply curve is shifted by any transition in the economy that changes the normal rate of production
- The shifts can be classified according to the different factors that influence output in the classical model.
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