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Long Run Aggregate Supply definitions

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  • Long Run Aggregate Supply
    Vertical line in the AD-AS model showing maximum output at full employment, unaffected by price level, determined by available resources.
  • Real GDP
    Measure of total goods and services produced, adjusted for inflation, reflecting actual output rather than changes in price.
  • Factors of Production
    Inputs like labor, capital, natural resources, and technology that determine the economy’s productive capacity.
  • Labor
    Human workforce available for production, influencing potential output and shifting aggregate supply when its quantity changes.
  • Physical Capital
    Factories, equipment, and infrastructure used to produce goods, increasing productivity and potential output.
  • Human Capital
    Education, skills, and training possessed by workers, enhancing productivity and shifting aggregate supply.
  • Natural Resources
    Raw materials like oil, wood, and minerals available for production, affecting the economy’s output capacity.
  • Technology
    Innovations and advancements that improve efficiency and productivity, expanding potential output.
  • Full Employment
    State where all available labor resources are utilized, representing the economy’s maximum sustainable output.
  • Vertical Line
    Graphical representation in the AD-AS model indicating output is independent of price level in the long run.
  • Economic Growth
    Increase in potential output over time, often resulting from improvements in resources or technology.
  • Scarcity
    Limitation of resources, constraining the maximum output the economy can achieve in the long run.
  • Productivity
    Efficiency with which inputs are converted into outputs, influencing the economy’s capacity for production.
  • Market Equilibrium
    Point where aggregate supply and demand intersect, determining output and price level in the economy.
  • Aggregate Demand-Aggregate Supply Model
    Framework used to analyze fluctuations in output and price level, incorporating both short and long run perspectives.