Aggregate Supply
 |
Definition of 'Aggregate Supply'The total supply of goods and services produced within an economy at a given overall price level in a given time period. It is represented by the aggregate-supply curve, which describes the relationship between price levels and the quantity of output that firms are willing to provide. Normally, there is a positive relationship between aggregate supply and the price level. Rising prices are usually signals for businesses to expand production to meet a higher level of aggregate demand.Also known as "total output". |
 |
Investopedia explains 'Aggregate Supply'A shift in aggregate supply can be attributed to a number of variables. These include changes in the size and quality of labor, technological innovations, increase in wages, increase in production costs, changes in producer taxes and subsidies, and changes in inflation. In the short run, aggregate supply responds to higher demand (and prices) by bringing more inputs into the production process and increasing utilization of current inputs. In the long run, however, aggregate supply is not affected by the price level and is driven only by improvements in productivity and efficiency. |
Related Definitions
Articles Of Interest
-
Why You Can't Influence Gas Prices
Don't believe the water-cooler talk. Big oil companies aren't to blame for high prices. -
Explaining The World Through Macroeconomic Analysis
From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone. -
Cost-Push Inflation Versus Demand-Pull Inflation
Gain a deeper understanding of aggregate supply and demand, forces which raise the price of goods and services. -
Economics Basics
Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more! -
Introduction To Treasury Inflation-Protected Securities (TIPS)
If you want to protect your portfolio from inflation, all you need are a few TIPS. -
Nobel Winners Are Economic Prizes
Before you try to profit from their theories, you should learn about the creators themselves. -
Breaking Down The Balance Of Trade
The balance of trade is a key indicator of a nation’s health. Investors and market professionals appear more concerned with trade deficits than trade surpluses, since chronic deficits may be ... -
The Nash Equilibrium
Nash Equilibrium is a key concept of game theory, which helps explain how people and groups approach complex decisions. Named after renowned mathematician John Nash, the idea of Nash Equilibrium ... -
Open Market Operations Explained
The term “open market operations” refers to a monetary policy tool in which central banks buy and sell bonds to regulate the money supply in the economy. The United States employs open market ... -
Why High-Income Earners Are Not Safe From The Threat Of Bankruptcy
Few people have much sympathy for the woes of those earning six figure or more each year. But, given that high-income earners drive economic expansion, the risks and problems facing high earners ...
Free Annual Reports