00:01
So here we have a question about aggregate demand, aggregate supply.
00:04
And aggregate demand, aggregate supply is a macroeconomic model in two variables, the output, usually on the horizontal, and the price level, usually in the vertical.
00:13
And there's three curves.
00:15
First of all, there's long -run aggregate supply, right? and long -run aggregate supply indicates potential capacity.
00:25
So this is how much oil we have, how many factors.
00:30
We have, how many workers we have, what skills those workers have.
00:36
And crucially, none of that depends on the price level.
00:38
When the price goes up or down, it doesn't mean that factories start blowing up.
00:43
The next part is aggregate demand, right? aggregate demand is how much demand there is, very simply, right? this is my y -equal c plus i plus g plus nx equation.
00:58
Right? and as prices fall, that translates through to demand in various ways that you've properly learned about in intramacro -economics.
01:06
Then there's aggregate supply or sometimes what's called short -run aggregate supply...