Aggregate Supply

Aggregate supply (AS) represents the quantity of goods and services producers are willing to supply at any given level of prices.

It also reflects the amount of labor and capital that households are willing to offer into the marketplace at given real wage rates and cost of capital.

The long-run equilibrium level of output is referred to as the full employment, or natural, level of output. At this level of output, the economy’s resources are deemed to be fully employed and (labor) unemployment is at its natural rate.

A natural rate of unemployment assumes the macroeconomy is currently operating at an efficient and unconstrained level of production.