3.10 LRE Recessionary Gap and Inflationary Gap AP Macro

[@yadira9793]

searched so many videos and this was the only one that helped me SO THANK YOU !

[@CareyLaManna]

Yadira Peña glad it helped!

[@supersonic2778]

So in terms of unemployment, equilibrium is not the best outcome?

[@nirutmokharat4058]

thank you for simply and clearly explaining the concept.

[@monazhu6044]

thank you very much, it was very clear and didn't skip anything I want to know!

[@krismerful]

Thanks for your videos! Very clear. However, I do have a question. How is it possible that an economy can produce above its LRAS? Thanks :)

[@CareyLaManna]

Basically in the short run there has been either a positive supply or positive demand shock. Either one will cause suppliers to want to produce more because they have an opportunity to make greater profit. To produce more than potential output, though, they need to hire more workers. The key is that in the short run WAGES ARE STICKY, meaning they don't rise quickly despite the increased demand for labor. So for a Short time they will be producing more than potential output as they pay additional workers the same wage as before. Over time as wage contracts expire the wages will become flexible and in this case that means they will rise, which will shift the SRAS curve back to the left. Hope this helps.

[@krismerful]

Yup, it does! Thanks so much :)))

[@rahilshah9967]

Legit helped me so much cheers mate

[@Ceebabi92]

Is the the keynesian perspective?

[@CareyLaManna]

+Cassandre D (Cass) Keynesians agree with this, but the idea of output gaps and LRE have reached consensus far beyond Keynesians to essentially any perspective that has an upward sloping SRAS curve; most of the disagreement comes next: what should policymakers do (if anything) as a response?

[@nomagugusiwela8769]

This is amazing thank you

[@Delawayo]

thank you for your vid and explanation. You've help me alot thanks to you. THANKS :-))