Aggregate Supply

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  • Created by: Lottie
  • Created on: 14-03-12 10:25

Aggregate Supply

  • amount firms are willing to produe at various price levels
  • largely influenced by production factors

Classical view

  • in the long run economy will work at full capacity
  • no unemployed resources
  • AS curve is vertical
  • if there are unemployed resources prices will fall until surplus disappears

Keynesian view

  • equilibrium output can occur bellow full employment level of output
  • AS  curve has  backward bending L shape: spare capacity, bottle necks & full employment
  • D deficiency may mean that…


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