ECO 1102 Lecture Notes - Lecture 17: Potential Output, Aggregate Supply, Longrun

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ECO 1102 Full Course Notes
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ECO 1102 Full Course Notes
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Why the long-run aggregate-supply curve might shift natural rate of output: the production of goods and services that an economy achieves in the long run when unemployment is at its normal rate. Potential output full-employment output changes in labor changes in capital changes in natural resources changes in technological knowledge. Using aggregate demand and aggregate supply to depict long-run growth and inflation with the introduction of the aggregate-demand curve and the long-run aggregate-supply curve we are now in a positio(cid:374) to des(cid:272)ri(cid:271)e the e(cid:272)o(cid:374)o(cid:373)y"s lo(cid:374)g-run trends. Why the aggregate-supply curve slopes upward in the short run in the short run, the price level does affe(cid:272)t the e(cid:272)o(cid:374)o(cid:373)y"s output. An increase in the overall level of prices tends to raise the quantity of goods and services supplied and vice versa. Macroeconomists have proposed three theories for the upward slope of the short-run aggregate supply curve. The sticky wage theory the sticky price theory the misperceptions theory.

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