#08.03 -- Long Run Equilibrium and Disequilibrium (5:22)

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Chapter 8 -- Aggregate Demand and Aggregate Supply

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Video #08.03 Long Run Equilibrium and Disequilibrium

Long Run Equilibrium and Disequilibrium:

Long Run Equilibrium and Disequilibrium Specific Content Components Differentiate short run aggregate supply (SRAS) from long run aggregate supply (LRAS). Graphically illustrate the three states of the economy – short run equilibrium, long run equilibrium, and disequilibrium.

AD and SRAS:

AD and SRAS

Short-run Equilibrium:

Short-run Equilibrium

Natural Real GDP:

Natural Real GDP Natural Real GDP is the Real GDP that is produced at the natural unemployment rate. It is produced when the economy is in long-run equilibrium.

Long-Run Aggregate Supply (LRAS) Curve:

Long-Run Aggregate Supply (LRAS) Curve The LRAS curve is a vertical line at the level of Natural Real GDP. It represents the output the economy produces when all economy-wide adjustments have taken place.

Equilibrium States of the Economy:

Equilibrium States of the Economy During the time an economy moves from one equilibrium to another, it is said to be in disequilibrium.

Short-Run Equilibrium:

Short-Run Equilibrium When the quantity demanded of Real GDP equals the (short-run) quantity supplied of Real GDP. Where the aggregate demand curve (AD) intersects the short-run aggregate supply (SRAS) curve.

Long-run Equilibrium:

Long-run Equilibrium The condition that exists in the economy when wages and prices have adjusted to their (final) equilibrium levels. Graphically, long-run equilibrium occurs at the intersection of the AD and LRAS curves.

Long Run Equilibrium and Disequilibrium:

Long Run Equilibrium and Disequilibrium Specific Content Components Differentiate short run aggregate supply (SRAS) from long run aggregate supply (LRAS). Graphically illustrate the three states of the economy – short run equilibrium, long run equilibrium, and disequilibrium.

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