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Ch 22 - Ch 22 Bf;F3KCH Aggregate Supply 1 Growth of...

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Ch 22 Bf;F3KCH Aggregate Supply 1. Growth of potential GDP 2. Inflation 3. Business cycle Real GDP supplied(y) depends on Quantity of labour supplied (L) Quantity of capital(K) State of technology(T) Aggregate production function- Y= F(L,K,T) Macroeconomic long run- time that real GDP= Potential GDP and there is full employment Long Run aggregate supply curve- relationship between the quantity of real GDP supplied and the price level in the long run whne real GDP equals potential GDP (vertical line) Macroeconomic Short Run is a period during which real GDP has fallen below or risen above potential GDP Short run aggregate supply curve- relationship between the quantity of real GDP supplied and the price level in the short run when the money, wage rate, the prices of other resources, and potential GDP remain the same. Changes in potential GDP 1. Change in the full employment quantity of labour 2. Change in the quantity of capital 3. An advance in technology Change both long and short run supply
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