The Long-Run Aggregate Supply Curve
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- เผยแพร่เมื่อ 24 เม.ย. 2017
- The long-run aggregate supply curve is actually pretty simple: it’s a vertical line showing an economy’s potential growth rates. Combining the long-run aggregate supply curve with the aggregate demand curve can help us understand business fluctuations.
For example, while the U.S. economy grows at about 3% per year on average, it does tend to fluctuate quite a bit. What causes these fluctuations? One cause is “real shocks” that affect the fundamental factors of production. Droughts, changes to the oil supply, hurricanes, wars, technological changes, etc. can all have big and potentially far-reaching consequences.
Next week, we’ll dig into why wages are considered “sticky,” or slow to change.
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Hello. I just want to say I recently discovered your channel and I love it. I am a medical student from Greece but I want to learn economics in my free time. Your channel makes it easy to understand economic concepts. Thank you very much for that. However, I have questions from time to time (from old videos or my own curiosity on certain matters). Is there an e-mail address that I can send questions? Also do you have any suggestions for books for beginners?
Modern Principles of Economics - By Tyler Cowen and Alex Tabarrok
Thank you!
@@sporos325 Economics in one lesson By Henry Hazlitt
thanksa lot for all those vedios which helps me a lot with my exams!
Awesome content, thank you!
Hello, great video. I wanted to ask whether you subtract the rate of inflation from the real GDP growth to know if the growth rate is any good for the citizens. It seems weird to do as the word real already takes inflation into account, right??
Thank you so much
I love this video :)
Can I ask a qn? How does increase in availability of natural resources shift lras? When the qty of labour and technology is constant. Wudnt there be no labour or capital to produce these extra resources? So how does increase in qty shift the lras(maximum production capacity)
is it good if we have low/reduced inflation rate?
Good video, i have two question thought. You talk about LRAS as an ever moving and changing thing, something that can be changed and moved easily. Surely its better to describe shocks as effecting the SRAS, seeing as atleast 1 factor of production is fixed. When describing, for example, hurricane sandy; surely that shock will only effect the SR, as factors of production like as land (natural resources) and enterprise are both fixed, but the LRAS will remain largely uneffected? Also, you used a classical (straight line) LRAS curve in the video, would a better model for the US economy not be a keynesian LRAS curve, as the US economy will never achieve full employment of factors of production (in particular labour) as govt policy's like the minimum wage prevent the labour market reaching free market equilibrium price?
On the first question, Hurricane Sandy affects the LRAS. The essence of LRAS is that it is determined by real factors, and in turn, determines real growth. Sandy is a real factor. It is better to forget for a moment that "LRAS" means "long run" growth of output. It is called that way only to suggest that inflation (the growth of price level) only affects output in the short run, not the long run. The fact that LRAS is vertical is a way to show that the real supply of goods, does not really depend on the growth of price level (plotted on the Y axis). No matter what inflation rate is, LRAS determines the same growth of output. Also, the fact that LRAS is always changing, does not mean that the LRAS can be be easily changed if the government wants to. It is always changing as a consequence of natural phenomena which the government cannot control.
On the second question, every economy has a LRAS. The LRAS is not necessarily Keynesian, it is a concept that goes across economic schools of thought. It is also good to remember that full employment - which means literally that everyone is employed - is not a market equilibrium. Even on a free market, for some people it is optimal to stay at home and rest for a year or two; also, for others it is optimal to search for options of employment, or think about what they want to do with their life. These processes take time.
Ion Sterpan If people take the year off, or aren't working because they are deciding about what to do with their lives, the do not count as "unemployed" because the are not actively looking for work.
4:25 Why do Real Shocks move the LRAS line not the AD line?
Good question !
This supports the business cycle theory
The graph shows that a negative shock increases long-run inflation. Is there a video that explains WHY? Is it because the fed prints currency and this has long-run inflation implications?
Thank you!
Gonzalo Kevin O'Neill Penagos Because negative shocks increases prices. By inflation here they don’t mean the classical term, they mean an increase in prices
Thank you @@tommyrosati9326 !
great video. when the next video?
Next Tuesday! We release new videos every week. :) -Meg
Who's Meg?
Thanks for the info! Great channel
Thanks, Tizio! I'm one of the behind-the-scenes folks on the MRU team. -Meg
Marginal Revolution University you guys are awesome and i also love the two professors