Long-Run Aggregate Supply (LRAS)

Definition

LRAS represents the total amount of goods and services an economy can produce when all resources are fully utilized, and prices have adjusted to their long-run equilibrium levels. It is a vertical line on the aggregate supply curve.

Related terms

Short-Run Aggregate Supply (SRAS): SRAS represents the total amount of goods and services an economy can produce in the short run when some resources are underutilized or not fully adjusted to equilibrium prices.

Aggregate Demand (AD): AD refers to the total demand for goods and services in an economy at different price levels.

Potential Output: Potential output is the level of real GDP an economy can sustainably produce when all resources are fully employed. It is another term used interchangeably with LRAS.