Aggregate Supply

Aggregate supply is the total amount of goods and services that an economy produces during some period at a given price. Price is important because it determines how much companies are willing to produce at that price. The relationship between price and supply (quantity of output) is visually represented by the aggregate supply curve. The period in which aggregate supply is calculated is often one year. This is because changes in supply will lag changes in demand. There are two types of aggregate supply to consider — short-term and long-term. Short-term supply is impacted most by changes in demand, while long-term supply is most impacted by changes in technology and other changes within an industry.

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