Aggregate Supply
Aggregate supply is an economic term that refers to the total amount of goods and services that businesses in a country are willing and able to sell at a given price level in a given period of time. It is the total amount of goods and services that firms are willing to supply at a given price level in a given period of time. Aggregate supply is the total amount of goods and services that firms are willing to produce and sell at a given price level in a given period of time.
History of Aggregate Supply
The concept of aggregate supply was first introduced by John Maynard Keynes in his 1936 book, The General Theory of Employment, Interest and Money. Keynes argued that aggregate supply is determined by the level of aggregate demand, which is the total amount of goods and services that consumers are willing and able to buy at a given price level in a given period of time. Keynes argued that aggregate demand and aggregate supply interact to determine the level of economic activity in an economy.
Keynes’ theory of aggregate supply and demand was further developed by economists such as Milton Friedman and Robert Lucas. Friedman argued that aggregate supply is determined by the level of aggregate demand, while Lucas argued that aggregate supply is determined by the level of aggregate demand and the level of economic activity in an economy.
Comparison of Aggregate Supply and Aggregate Demand
| Aggregate Supply | Aggregate Demand |
|---|---|
| Total amount of goods and services that businesses are willing and able to sell at a given price level in a given period of time. | Total amount of goods and services that consumers are willing and able to buy at a given price level in a given period of time. |
| Determined by the level of aggregate demand. | Determined by the level of aggregate supply. |
| Determined by the level of aggregate demand and the level of economic activity in an economy. | Determined by the level of aggregate supply and the level of economic activity in an economy. |
Summary
Aggregate supply is an economic term that refers to the total amount of goods and services that businesses in a country are willing and able to sell at a given price level in a given period of time. It is the total amount of goods and services that firms are willing to supply at a given price level in a given period of time. Aggregate supply is determined by the level of aggregate demand, which is the total amount of goods and services that consumers are willing and able to buy at a given price level in a given period of time. For more information about aggregate supply, please visit the websites of the Federal Reserve Bank of St. Louis, the International Monetary Fund, and the World Bank.
See Also
- Aggregate Demand
- Gross Domestic Product (GDP)
- Inflation
- Monetary Policy
- Fiscal Policy
- Business Cycle
- Price Level
- Interest Rates
- Exchange Rates
- Unemployment
