Economics 1022A/B Lecture Notes - Lecture 7: Real Wages, The Foreign Exchange, Aggregate Demand

• School: Western University
• Department: Economics
• Course: Economics 1022A/B
• Professor: Jeannie Gillmore

Document Summary

The exchange rate and the balance of payments. There are 2 time frames for aggregate supply: Long-run aggregate supply (las) relationship between the quantity of real gdp supplied and the price level when the money wage rate changes in step with the price level to achieve full employment. Quantity of real gdp supplied - the total quantity of goods/services, valued in constant dollars, that firms plan to produce during a given time period. Potential gdp quantity of gdp at full employment. So the las is the relationship between the quantity of real gdp supplied and the price level in the long run when real gdp equals potential gdp. A movement along the las curve means that 2 sets of prices are changing: Because both the price level and factor prices change, the real factor prices remain constant. The real wage rate remains at the level that achieves full employment of labor.