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Aggregate supply

Aggregate supply, also total output, is the total amount of goods and services supplied or produced by an economy in a given period of time, usually a year, at a given overall price level. It can be drawn in a schedule as a curve representing all possible AS and price level combinations, showing in positive relationships.

Factors affecting AS includes technological innovations, changes in wages, production costs and so on.

Aggregate supply is a reflection of productive capacity, production costs and overall price level, representing the supply side performance of an economy. While long-run aggregate supply is determined by potential productive capacity, or established technology plus the total quantity of factors(land, labor, capital) available for production, short-run aggregate supply vibrates by reason of fluctuations in demand. In short-term, producers respond to demand shift by either increase quantity of inputs(land, labor, capital) or decrease it. But as you see, they are all limited in a given period of time, so short-run AS always come and go not far from the long-run AS.

Aggregate demand and aggregate supply are the 2 driving forces of all economies.

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