AggregateSupplyandTimeFrameAggregate supply refers to the quantity of goods and services thatfirms are willing and able to supply.The relationship between this quantity and the price level is differentin the long and short run.: So we will develop both a short-run and long-run aggregatesupply curve.Long-run aggregate supply curve: A curve that shows therelationship in the long run between the price level and the quantity ofrealGDPsupplied.@2015PearsonEducation,Inc.16
© 2015 Pearson Education, Inc. 16 Aggregate Supply and Time Frame Aggregate supply refers to the quantity of goods and services that firms are willing and able to supply. The relationship between this quantity and the price level is different in the long and short run. • So we will develop both a short-run and long-run aggregate supply curve. Long-run aggregate supply curve: A curve that shows the relationship in the long run between the price level and the quantity of real GDP supplied
Long-Run Aggregate Supply CurveIn the long run, the level ofreal GDP is determined bythe number of workers,PricelevelLRAS2013LRAS2014LRAS2015(GDP deflator,the level of technology2009=100)andthecapitalstock(factories, machinery,117etc.).10797Noneoftheseelementsare affected by theprice level.So the long-run aggregatesupply curve does not0$16.7RealGDP17.017.4(trillionsofdepend onthepricelevel;2009dollars)it is a vertical line, at theFigure 13.2The long-run aggregatesupplycurvelevel ofpotentialorfull-employment GDP.172015Pe8arsonEducafion.lnc
© 2015 Pearson Education, Inc. 17 In the long run, the level of real GDP is determined by the number of workers, the level of technology, and the capital stock (factories, machinery, etc.). • None of these elements are affected by the price level. So the long-run aggregate supply curve does not depend on the price level; it is a vertical line, at the level of potential or fullemployment GDP. Long-Run Aggregate Supply Curve The long-run aggregate supply curve Figure 13.2