Economics 1022A/B Study Guide - Aggregate Demand

• School: Western University
• Department: Economics
• Course: Economics 1022A/B
• Professor: Lanfeng Yu

Document Summary

Chapter 26 aggregate supply and aggregate demand. Aggregate supply: the relationship between the quantity of real gdp supplied and the price level. This relationship is different in the long run than in the short run. 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 achieve full employment. Quantity of real gdp supplied at full employment = potential gdp: this quantity is the same regardless of the price level. Along the long run aggregate supply curve, as the price level changes, the money wage rate also changes so the real wage rate is constant and real gdp remains at potential gdp. Vertical line - potential gdp is independent of the price level: price level and money wage rate change by the same percentage the real wage rate remains constant.