ECON 1010 Lecture Notes - Aggregate Demand, Aggregate Supply, Potential Output
13 Jun 2013
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Document Summary
Quantity of real gdp supplied is the total quantity of goods and services, valued in constant base year. 2002 dollars, that firms plan to produce during a given period. Real gdp is potential gdp at full employment. Aggregate supply is the relationship between the quantity of real gdp supplied and the price level. Long-run aggregate supply is the relationship between the quantity of real gdp supplied and the price level, when the money wage rate changes in step with the price level to maintain full employment. Short-run aggregate supply is the relationship between the quantity of real gdp supplied and the price level, when the money wage rate, the prices of other resources, and potential gdp remain constant. Potential gdp can increase: increase in full employment quantity of labour, increase in quantity of capital, advance in technology. Real gdp demanded y=c + i + g + (x-m)
