ECO 1102 Lecture Notes - Lecture 20: Nominal Rigidity, Aggregate Supply, Aggregate Demand

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ECO 1102 Full Course Notes
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ECO 1102 Full Course Notes
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Chapter 14: part 2 aggregate demand and aggregate supply. )n the long run, an economy"s production of g&s (cid:523)its real gdp(cid:524) depends on its supplies of. The aggregate-supply curve: tells us the total quantity of g&s that firms produce and sell at any given price level labour, capital, and natural resources and on the available technology used to turn these factors of production into g&s. Because the price level does not affect the long-run determinants of real gdp, the long-run aggregate-supply curve is vertical. Natural rate of output: the production of g&s that an economy achieves in the long run when unemployment is at its normal rate (potential output, full-employment output) The long-run aggregate-supply curve might shift due to: changes in labour, changes in capital, changes in natural resources, change in technological knowledge. When immigration increases or the government abolishes the minimum wage.

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