课 8, 主题 2

In Progress

← Previous Next→

equilibrium-levels-of-real-national-output

课 Progress

0% Complete

Real National Output Equilibrium

Short-run equilibrium

Real national output equilibrium occurs where aggregate demand intersects with aggregate supply

Graph showing AD and SRAS curves intersecting, indicating equilibrium at price level AP1 and real GDP Y1, with axes for average price level and real GDP. — A diagram showing the Classical short-run equilibrium in an economy resulting in an equilibrium price of AP1 and real output of Y1

According to classical theory, this economy is in short run equilibrium at AP₁Y₁
Any changes to the components of AD will cause the AD curve to shift left or right creating a new short-run equilibrium
Any changes to the determinants of SRAS will shift the SRAS curve left or right creating a new short-run equilibrium

Long-run equilibrium

Classical and Keynesian economists have different views on the long-run equilibrium of real national output
- Classical economists believe that the economy will always return to its full potential level of output and all that will change in the long-run, is the average price level
- Keynesian economists believe that the economy can be in long-run equilibrium at any level of output

Economic graph showing LRAS, SRAS, and AD curves intersecting. Y-axis: Average Price Level (£), X-axis: Real GDP. Dashed line at AP₁. — A diagram that shows the Classical view of long-run equilibrium which occurs at the intersection of long-run aggregate supply (LRAS), short-run aggregate supply (SRAS) and aggregate demand (AD)

Diagram analysis

The LRAS curve demonstrates the maximum possible output of an economy using all of its scarce resources
The SRAS intersects with AD at the LRAS curve
This economy is producing at the full employment level of output (Y_FE)
The average price level at Y_FEis AP₁

Graph showing Long-Run Aggregate Supply (LRAS) curve, Aggregate Demand (AD) curve, average price level (AP1), and Real GDP at Y1 and YFE. — A diagram that shows the Keynesian view of long-run equilibrium which occurs at the intersection of long-run aggregate supply (LRAS) and aggregate demand (AD)

Diagram analysis

The vertical portion of the LRAS curve corresponds to the classical view of LRAS
- The Keynesian view believes there is a maximum level of possible output
The LRAS curve becomes elastic at a certain price level as prices cannot fall further
- Possibly due to minimum wage laws, the existence of trade unions, or long-term employment contracts preventing wage decreases
Real output national equilibrium can occur at any level of output
- In this case equilibrium is at the intersection of LRAS and AD (AP₁Y₁)

Changes in the Equilibrium Price Level & Real National Output

Changes using the classical approach

1. An increase in Aggregate Demand (AD)

Economic graph showing SRAS, AD1 and AD2 curves, average price level (£) on vertical axis, real GDP on horizontal axis, with price rise from AP1 to AP2. — A diagram showing the Classical representation of an increase in aggregate demand (AD)

Diagram analysis

The initial equilibrium level of output was at AP₁Y₁
An increase in one of the components of AD (e.g. consumption) causes the AD to increase AD₁→AD₂
Average prices in the economy rise to AP₂ and the real level of output increases to Y₂
The new short-run equilibrium is at AP₂Y₂

2. An increase in short run aggregate supply (SRAS)

Graph showing shifts from SRAS1 to SRAS2, affecting average price levels and real GDP, with AD, LRAS lines, and equilibrium points at Y1, Y2, YFE. — A diagram showing the Classical representation of an increase in the short-run aggregate supply (SRAS)

Diagram analysis

The initial equilibrium level of output was at AP₁Y₁
- This equilibrium represents a recessionary or negative output gap equal to Y₁Y_FE
An increase in one of the determinants of SRAS (e.g. productivity)

Responses