Video Transcript: Lesson 9

We'll discuss aggregate supply in this Unit Three video. Aggregate supply is the  total amount of goods and services that all industries in the economy will  produce at any given price level in a particular time frame. It is essential that the  sum of the microeconomic supply curves of all the industries in the economy.  The key point, in contrast to the theory of aggregate demand, however, we  distinguish between the short run and the long run in looking at aggregate  supply. The easiest way to think about it for now is that in the long run, there is a set amount of capacity in an economy, we can only produce so much. There's  only so much capacity in our economy that, in the long run, we'll only produce a  certain amount, and we can't produce any more. But for the short run, the  economy is functioning right now, so we are trying to push that limit to find out  where we can produce and where that ceiling is. The neoclassical view is the  first of the two schools of thought. Neoclassical economists include a number of  different branches of economists, including monetarists, the supply-side  economists, and economists from the Austrian school, what these economists  have in common is their belief in the efficiency of market forces and the view  that there should be the very minimum of government intervention in the  allocation of resources and the economy. The neoclassical LRAS curve is a  perfect is perfectly inelastic, meaning there is not going to be much variance  from its current state. Now, also we have a Keynesian view. John Maynard  Keynes, English economist during the Great Depression, he was a post industrial revolutionist. Therefore, industrialized nations had spare capacity  already built into the economy.