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?

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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.

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