ECON 201 Lecture Notes - Lecture 19: Price Level, Aggregate Demand, Aggregate Supply
Document Summary
Econ 201 lecture 19 ad & as pt. The long run aggregate supply curve shows the relationship between the aggregate price level and the quantity of aggregate output supplied that would exist if all prices, including nominal wages, were fully flexible. It should come from a production function (see chapter 9) This is the maximum potential output our economy could achieve. Can shift rightward: economic growth will shift it to the right. The ad-as model uses the aggregate supply curve and the aggregate demand curve together to analyze economic fluctuations. Graphically, this is where sras and ad intersect. A negative demand shock shifts the ad curve to the left: leads to lower aggregate price level and lower aggregate output. A positive demand shock shifts the ad curve to the right: leads to a higher aggregate price level and a higher aggregate output.
