![]() Therefore, it is perfectly vertical, reflecting economists’ belief that the changes in aggregate demand result in a temporary difference in an economy’s output. ![]() The long-run aggregate supply (LRAS) curve is static. Firms change the supply levels in response to expected economic profits and losses.Īlso, capital, labor, and technology contribute to factors that affect the aggregate supply curve because everything in the economy is assumed to be used optimally. In other words, it is long enough to allow wages, prices, and expectations to adjust but not long enough for physical capital to be a variable input. The long run is the conceptual time period where there are no fixed factors of production. We must differentiate between the short- and long-run aggregate supply curves. Aggregate supply refers to the total amount of goods and services that firms in an economy are both willing and able to sell at a given price level.
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