Week5 Discussion ENO

It is important to distinguish between changes that are anticipated and unanticipated because the impact on the economy will differ between the two.  The economy is in long-run equilibrium when the short-run aggregate supply curve, aggregate demand curve, and long-run aggregate supply curve are in equilibrium.   

What are the major factors causing a shift in aggregate demand (inward or outward)?  What are the major factors that will affect short-run aggregate supply?  Long-run aggregate supply?

Review what factors will lead to a shift in the AD, SAS, and LRAS.  An increase in output due to economic growth will increase both short-run and long-run aggregate supply.  Unanticipated changes in either aggregate demand or aggregate supply will disrupt long-run equilibrium and cause current output to differ from the economy’s long-run potential.