The Long-Run Aggregate Supply Curve

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.

[sporos]

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?

[LynX-ohlh]

thanksa lot for all those vedios which helps me a lot with my exams!

[karannchew]

4:25 Why do Real Shocks move the LRAS line not the AD line?

[TabOutGamingChannel]

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?

[rematan]

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)

[manitsahu]

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??

[arfasaif]

is it good if we have low/reduced inflation rate?

[joecurran]

This supports the business cycle theory

[gonzo]

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!