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Lecture 6

Lecture 6: Aggregate Supply and Aggregate Demand

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Department
Economics
Course
ECON 1010
Professor
Xueda Song
Semester
Winter

Description
Lecture Six Aggregate Supply and Aggregate DemandFebruary 28 2012Aggregate SupplyQuantity Supplied and SupplyThe quantity of real GDP supplied is the total quantity that firms plan to produce during a given periodAggregate supply is the relationship between the quantity of real GDP supplied and the price levelWe can distinguish two time frames associated with different states of the labor marketLong run aggregate supplyShort run aggregate supplyLongRun Aggregate SupplyLongrun aggregate supply is the relationship between the quantity of real GDP supplied and the price level when real GDP equals potential GDPPotential GDP is independent of the price levelSo the long run aggregate supply curve LAS is vertical at potential GDPIn the longrun the quantity of real GDP supplied is potential GDPAs the price level rises and the money wage rate change by the same percentage the quantity of real GDP supplied remains at potential GDPShortRun Aggregate SupplyShortrun 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 the same
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