What is an economy is not equilibrium when aggregate demand is not equal to aggregate supply ?
Answers
Explanation:
Explaining Fluctuations in Output
In the short run, output fluctuates with shifts in either aggregate supply or aggregate demand; in the long run, only aggregate supply affects output.
LEARNING OBJECTIVES
Differentiate between short-run and long-run effects of nominal fluctuations
KEY TAKEAWAYS
Key Points
In the short run, output is determined by both the aggregate supply and aggregate demand within an economy. Anything that causes labor, capital, or efficiency to go up or down results in fluctuations in economic output.
Aggregate supply and aggregate demand are graphed together to determine equilibrium. The equilibrium is the point where supply and demand meet.
According to Hume, in the short-run, and increase in the money supply will lead to an increase in production.
According to Hume, in the long-run, an increase in the money supply will do nothing.
Key Terms
nominal: Without adjustment to remove the effects of inflation (in contrast to real).
economic output: The productivity of a country or region measured by the value of goods and services produced.
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