Long run aggregate supply
Definition. Long run aggregate supply shows the total output an economy can produce when all resources are fully and efficiently employed, determined by the quantity and quality of factors of production and the state of technology rather than by the price level. It represents the economy productive capacity.
On the classical view, long run aggregate supply is vertical at the full employment level of output. It shifts rightward when supply-side improvements raise productive capacity, for example through investment, education or technological progress.
This term belongs to Supply Side Policies in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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