Long-run aggregate supply curve (LRAS)

Definition

The LRAS represents the level of real GDP that an economy can produce when all resources are fully utilized and there is no inflationary or deflationary pressure in the long run.

Related terms

Short-run aggregate supply curve (SRAS): Represents the relationship between price levels and output in the short run, taking into account sticky wages and prices.

Aggregate demand (AD): Shows the total spending on goods and services in an economy at different price levels.

Potential output: The maximum sustainable level of real GDP that an economy can produce without causing inflation.