Notes for "Business Cycles, Aggregate Demand and Aggregate Supply"
The business cycle period that coincides with the maximum obtainable GDP for a given point in time.
The business cycle period that coincides with the lowest GDP for a given point in time.
Long-run aggregate supply is assumed to be constant in the long-run as in the long-run resources are assumed to be used optimally, leaving no potential for increasing capacity. LRAS is a vertical curve.
Aggregate Demand (AD)
Total amount of goods and services demanded in an economy at a specific point in time and at a prevailing price level.
Refers to prices that do not easily move below threshold value even though theory would anticipate a decline to re-establish market equilibrium.
Short-run aggregate supply is assumed to maintain the positive price and quantity correlation; more can be produced through increased resource utilization, technological improvements or other factors. SRAS is an upward sloping curve.