The Long-Run and Short-Run Aggregate Supply Curves Reflect Fundamental Differences

question 37

Essay

The long-run and short-run aggregate supply curves reflect fundamental differences between long-run and short-run macroeconomic analysis.
a.Graphically illustrate the long-run and short-run aggregate supply curves. Be sure to label the axes.
b.What determines the level of output in the long run versus the short run?
c.How do prices behave differently in the long run and the short run?

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Definitions:

Price Index

is a measure that examines the weighted average of prices of a basket of consumer goods and services, used to track inflation or deflation.

GDP

Gross Domestic Product is the sum of the market value of all final goods and services made within a country's borders in a given timeframe.

Gross National Product

The total value of all goods and services produced by a country's residents and businesses, regardless of where the production takes place, over a defined period.

Net Domestic Product

The total value of all goods and services produced within a country in a specific time period, minus depreciation.