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SLOPE, LONG-RUN AGGREGATE SUPPLY CURVE: The long-run aggregate supply (LRAS) curve is a vertical line with an infinite slope, reflecting the independent relation between the price level and aggregate real production. A higher price level is associated with the same real production as a lower price level. And this real production is that produced when resources are fully employed, that is, full-employment production. Real production is unaffected by the price level because prices are flexible in the long run. Long-run price flexibility ensures that ALL markets (product, financial, and resource) are in equilibrium.
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Lesson 9: Macro Basics | Unit 2: Macro Problems
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Page: 7 of 16
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- The three major goals of the macroeconomy: full employment, stability and growth, and the limitations to achieve them.
- The three major macroeconomic problems of not reaching the macro goals: production, unemployment and inflation.
- Difficulties in the production of goods and services that result from the demand and supply sides of the economy.
- The problems of unemployment : lost production and personal hardships.
- The problems of inflation: uncertainty, decline value of financial assets, haphazard income and wealth redistribution, and hyperinflation and reduced production.
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UNEMPLOYMENT, PRODUCTION POSSIBILITIES Unemployment is the condition that exists when some available resources are NOT engaged in the production of goods and services. In other words, some resources that could be used for production are not being used. This is indicated in production possibilities analysis by producing a combination of goods that places the economy inside the production possibilities curve.
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It's estimated that the U.S. economy has about $20 million of counterfeit currency in circulation, less than 0.001 perecent of the total legal currency.
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"When you play, play hard; when you work, don't play at all. " -- Theodore Roosevelt, 26th US president
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PPC
Production Possibilities Curve
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