16466 Chapter Notes - Chapter 23: Output Gap, Aggregate Supply, Potential Output
Document Summary
Long-run aggregate supply: land, labour and capital are the inputs the economy uses to produce output (gdp). Inflation is the increase in prices over a year measured by a price index, typically the consumer price index (cpi) made up of a basket of goods and services purchased by households. This is the price level across the economy, not a specific price for an item. Deflation is a decrease in prices over a year: full employment is where everyone in the workforce who wants a job can find one. Excludes retirees and others not looking for work. Includes people looking for work but unemployed, so an unemployment rate of. Long-run equilibrium: the economy where wages and prices have adjusted to equilibrium levels, long-run equilibrium occurs at the intersection of the ad and lras curves, qn is natural real gdp or the potential output of the economy.
