00:01
So here the question is talking about the potential gdp line.
00:03
And implicitly, what they're asking you to do here is to draw a line between gdp and the price level, right? because the potential gdp is something that features in the aggregate demand aggregate supply model, right? in some places you might have heard this referred to as the long run aggregate supply curve.
00:24
So it is vertical, right? why is it vertical? it is vertical because we have to think about what potential gdp is.
00:32
Potential gdp is the economic capacity.
00:37
Our capacity to produce, right? and what goes into our capacity to produce? things like factories, things like farmland, things like skilled workers, right? these are the sorts of things that contribute to our economic capacity.
00:58
The key idea is that none of these are destroyed or created by prices or by price changes, right? my handwriting is going a little bit by price changes.
01:22
If the price goes up, factories don't explode.
01:25
If the price goes down, we don't get more farmland, right? all these real factors of production don't actually depend...