Aggregate supply in macroeconomics
Aggregate supply reflects billions
of production decisions made by:
consumers when they decide which
products to purchase
households and firms, because they
each demand goods and services
the largest firms and largest
households
households, which demand resources,
and firms, which supply resources
resource suppliers and firms
In the long run, equilibrium output:
occurs when the economy has high
levels of unemployment
equals aggregate supply, and the
equilibrium price depends on the aggregate demand curve
is when actual aggregate
expenditures equal real GDP
occurs when inventories of goods and
services are increasing
occurs when wages are sticky
If the MPC
disposable income increases by $2,000, the household’s consumption will:
increase by less than $2,000
increase by $2,000
decrease if the family was wealthy
before the income change
remain the same unless the change in
income significantly affects the household’s wealth
remain the same