aggregate supply

Examples of aggregate supply in the following topics:

• Introducing Aggregate Supply

  • In the short-run, the aggregate supply is graphed as an upward sloping curve.
  • The short-run aggregate supply curve is upward sloping because the quantity supplied increases when the price rises.
  • In the long-run, the aggregate supply is graphed vertically on the supply curve.
  • The equation used to determine the long-run aggregate supply is: Y = Y*.
  • The long-run aggregate supply curve is static because it is the slowest aggregate supply curve.

• The Slope of the Long-Run Aggregate Supply Curve

  • The long-run aggregate supply curve is perfectly vertical; changes in aggregate demand only cause a temporary change in total output.
  • The long-run aggregate supply curve is static because it shifts the slowest of the three ranges of the aggregate supply curve.
  • For the short-run aggregate supply, the quantity supplied increases as the price rises.
  • The equation used to calculate the long-run aggregate supply is: Y = Y*.
  • This graph shows the aggregate supply curve.

• Macroeconomic Equilibrium

  • In economics, the macroeconomic equilibrium is a state where aggregate supply equals aggregate demand.
  • When the aggregate supply and aggregate demand shift, so does the point of equilibrium.
  • The aggregate demand curve shifts and the equilibrium point moves horizontally along the aggregate supply curve until it reaches the new aggregate demand point.
  • This graph shows the three stages of aggregate supply.
  • Changes in aggregate supply cause shifts along the supply curve.

• Shifting the Phillips Curve with a Supply Shock

  • Stagflation caused by a aggregate supply shock.
  • The stagflation of the 1970's was caused by a series of aggregate supply shocks.
  • As aggregate supply decreased, real GDP output decreased, which increased unemployment, and price level increased; in other words, the shift in aggregate supply created cost-push inflation.
  • In this example of a negative supply shock, aggregate supply decreases and shifts to the left.
  • Give examples of aggregate supply shock that shift the Phillips curve

• Explaining Fluctuations in Output

  • In the short run, output fluctuates with shifts in either aggregate supply or aggregate demand; in the long run, only aggregate supply affects output.
  • The level of output is determined by both the aggregate supply and aggregate demand within an economy.
  • Aggregate supply and aggregate demand are graphed together to determine equilibrium.
  • In the long-run, the aggregate supply curve and aggregate demand curve are only affected by capital, labor, and technology.
  • This AS-AD model shows how the aggregate supply and aggregate demand are graphed to show economic output.

• Graphing Equilibrium

  • An economy is said to be at equilibrium when the aggregate expenditure is equal to the aggregate supply (production) in the economy.
  • In economics, the aggregate supply (AS) is the total supply of goods and services that firms in an economy produce during a specific time period.
  • The aggregate supply and aggregate demand determine the output and price for goods and services.
  • The aggregate expenditure and aggregate supply adjust each other towards equilibrium.
  • Demonstrate how aggregate demand and aggregate supply determine output and price level by using the AD-AS model

• Supply Schedules and Supply Curves

  • A supply schedule is a tabular depiction of the relationship between price and quantity supplied, represented graphically as a supply curve.
  • The supply curves of individual suppliers can be summed to determine aggregate supply.
  • One can use the supply schedule to do this: for a given price, find the corresponding quantity supplied for each individual supply schedule and then sum these quantities to provide a group or aggregate supply.
  • Plotting the summation of individual quantities per each price will produce an aggregate supply curve.
  • In theory, in the long run the aggregate supply curve will not be upward sloping but will instead be vertical, consistent with a fixed supply level.

• Aggregate Expenditure at Economic Equilibrium

  • An economy is said to be at equilibrium when aggregate expenditure is equal to the aggregate supply (production) in the economy.
  • An economy is said to be at equilibrium when aggregate expenditure is equal to the aggregate supply (production) in the economy.
  • The economy is constantly shifting between excess supply (inventory) and excess demand.
  • As a result, the economy is always moving towards an equilibrium between the aggregate expenditure and aggregate supply.
  • On the aggregate expenditure model, equilibrium is the point where the aggregate supply and aggregate expenditure curve intersect.

• Reasons for and Consequences of Shift in Aggregate Demand

  • A short-run shift in aggregate demand can change the equilibrium price and output level.
  • The aggregate supply-aggregate demand model uses the theory of supply and demand in order to find a macroeconomic equilibrium.
  • The shape of the aggregate supply curve helps to determine the extent to which increases in aggregate demand lead to increases in real output or increases in prices.
  • Likewise, if the monetary supply decreases, the demand curve will shift to the left.
  • The Aggregate Supply-Aggregate Demand Model shows how equilibrium is determined by supply and demand.

• The Impact of Monetary Policy on Aggregate Demand, Prices, and Real GDP

  • Changes in a country's money supply shifts the country's aggregate demand curve.
  • This brings us to the aggregate demand  curve.
  • The aggregate demand curve assumes that money supply is fixed.
  • Altering the money supply impacts where the aggregate demand curve is plotted.
  • In addition, the increase in money supply would lead to movement up along the aggregate supply curve.