Aggregate Supply
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The total supply of goods and services produced within an economy at a given overall price level in a given time period.
It is the total amount of goods and services that firms are willing to sell at a given price level in an economy.
- Short run AS
- Long run AS
Aggregate Supply Curve
Shows relationship between nation՚s overall price level and the quantity of goods and services produce by that nation՚s suppliers
There is a positive relationship between aggregate supply and the price level. Rising prices are usually signals for businesses to expand production to meet a higher level of aggregate demand.
The curve is upward sloping in the short run and vertical, or close to vertical, in the long run.
Short-Run and Long-Run Macroeconomics Equilibrium
The equilibrium in the short-run is depicted by the intersection of the Aggregate Demand (AD) curve and the Short-Run Aggregate Supply (SAS) curve. When either AD or SAS shifts, the equilibrium point is changed.
Graph 1: Shift to the right of the AD curve will cause the equilibrium output as well as the price level to increase.
Graph 1
Graph 2: If the AD curve were to shift to the left, opposite would be true: output and price level will decrease.
Graph 2
Graph 3: A shift to the left in SAS, will cause the price level to rise while equilibrium output will decrease.
Graph 3
Graph 4: Shift to the right of SAS curve, will decrease price level and increase output.
Graph 4
Output level is higher than what is consistent with full employment
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