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Difference between SRAS and LRAS

Aggregate Supply (AS) Curve

❶Recession of Figure

The Long Run

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22.2 Aggregate Demand and Aggregate Supply: The Long Run and the Short Run
What is 'Aggregate Supply'?

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Long run aggregate supply (LRAS) — Over the long run, only capital, labour, and technology affect the LRAS in the macroeconomic model because at this point everything in the economy is assumed to be used optimally. In most situations, the LRAS is viewed as static because it shifts the slowest of the three.

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Aggregate supply, also known as total output, is the total supply of goods and services produced within an economy at a given overall price level in a given period. It is represented by the aggregate supply curve, which describes the relationship between price levels and the quantity of output that firms are willing to provide.

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Classical view of long run aggregate supply The classical view sees AS as inelastic in the long term. The classical view sees wages and prices as flexible, therefore, in the long-term the economy will maintain full employment. What are the main causes of shifts in aggregate supply? The main cause of a shift in the aggregate supply curve is a change in business costs – for example: in unit labour costs - i.e. labour costs per unit of output. 2.

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The long run aggregate supply curve (LRAS) is the long run level of real output which is sustainable given the current quantity and quality of the economy's scarce resources. Real output in the long run is not determined by the price level, and the long run AS curve will be vertical - short run changes in the price level do not alter an economy’s long-term . In the long run, though, since long-term aggregate supply is fixed by the factors of production, short-term aggregate supply shifts to the left so that the only effect of a change in aggregate demand is a change in the price level.