Aggregate Supply

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…