Investor Glossary-aggregate supplyInvestor Glossary-aggregate supplyInvestor Glossary-aggregate supplyInvestor Glossary-aggregate supplyInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Aggregate Supply

The HTML to link to this page
 

Aggregate supply is the total supply in an economy for a given length of time. Aggregate supply is expressed as the relationship between a general price level and the value of production (usually GDP or GNP). Aggregate supply is graphed either to represent the short run aggregate supply curve (i.e. SRAS) where as prices increase, companies are motivated to increase production. In this case, the aggregate supply is represented by a line slopping upward from left to right. On the other hand, a vertical aggregate supply curve represent the long run aggregate supply curve (i.e. LRAS) where production stays the same even when prices increase.

Economists express the aggregate supply equation as follows:
Y = Yo + a(P - Pe)

Where
Y = Aggregate supply
Yo = Natural level of production (i.e. full employement level of output)
a = Positive constant
P = Price
Pe = Expected price

Aggregate supply is affected by consumer demand, the availability of labor, the availability of materials, the efficiency of production, inflation, and other "natural" economic phenomena. Aggregate supply is also affected by governments which often intervene with pricing regulations, production regulations, taxes and tariffs, and other legislation. The concept of aggregate supply is credited to John Maynard Keynes whose theories on aggregate supply and aggregate demand are the dominant foundation of modern macroeconomics.



Rate this aggregate supply definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: reverse mortgage, diluted share, stock market close, VIX, option premium, 401a, per diem, labor relations, deferred tax, inflation, current ratio, EBITDA, limit order, APR, retained earnings, balance sheet, wholly-owned subsidiary, phantom income, 1031 exchange, average price per share, class C shares, LIBOR, deferred revenue, in escrow, command economy, quality assurance, real GDP, covered put, Zero Cost Collar, minority interest, open position, Key Rate Duration, margin rate, ex-dividend, cancelled check, FICO score, stock split, liquidity ratio, 1035 exchange, dividends payable, 144a, annual return, FTSE, debt service coverage, implied volatility, risk management, irrevocable trust, required rate of return, ex-dividend date


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use