Chapter 15 - Aggregate Supply

What is AS

the total of all supply/output at every given price level

What are the long run and short run

Short run: time period when at least one FoP IS fixed

Long run: all FoP are variable

what does the Keynesian SRAS look like

did you get it?

what does the new classical SRAS look like

did you get it?

when sras meets ad

did you get it?

(new classical) LRAS is…

• perfectly inelastic

• the full employment level of output (yFE)

• based entirely on the Q&Q of the FoP

what does the new classical SRAS look like

did you get it

what factors affect the Q&Q of Land

Quality: Tech Advancements, Fertilisers, Immigration

Quantity: Land Reclaimation, Increased access to supply of resources, discovery 

what factors affect the Q&Q of Labour+Enterprise

Quality: Education, (Re)Training, apprenticeships

Quantity: Rising birth rates, falling unemployment and immigration

what factors affect the Q&Q of Capital

Quality: R&D, Tech advancements

Quantity: Investment

why isn’t the Keynesian LRAS perfectly inelastic

Keynesian economists think there are extended period where the markets are in low demand slumps````````````

what does the Keynesian LRAS look like

did you get it?

what are the phases of the keynesian LRAS

• widespread unemployment & well below full output

• the economy heats up (resources get utilised)

• full employment output (doesn’t mean 0 unemployment)