Supplementary resources for high school students
Definitions and Basics
Aggregate supply, at Wikipedia
In economics, aggregate supply (AS)… is the total supply of goods and services that firms in a national economy plan on selling during a specific time period. It is the total amount of goods and services that firms are willing and able to sell at a given price level in an economy….
Aggregate Supply and How It Works, at Answers.com
Aggregate supply is the total of all goods and services produced by an economy over a given period. When people talk about supply in the U.S. economy, they are usually referring to aggregate supply. The typical time frame is a year….
Inflation, from the Concise Encyclopedia of Economics
Nonmonetary theories of inflation traditionally separate “demand-pull” sources from “cost-push” factors like oil, monopoly power, or wages. A surge in the demand for goods and services in general (“aggregate demand”) is thought to “pull” prices up across the board, especially when “aggregate supply” is held back by inertia or capacity limitations. Skeptics rightly question how demand could constantly outstrip supply. Surely, demand must originate from purchasing power, purchasing power from wealth, wealth from income, and income from the ability to produce (and hence supply) goods and services. This contradiction was understood early in the nineteenth century by Jean-Baptiste Say and others….
In the News and Examples
A Little History: Primary Sources and References
Jean-Baptiste Say, biography from the Concise Encyclopedia of Economics
Say’s Law has various interpretations. The long-run version is that there cannot be overproduction of goods in general for a very long time because those who produce the goods, by their act of producing, produce the purchasing power to buy other goods. Say wrote: “How could it be possible that there should now be bought and sold in France five or six times as many commodities as in the miserable reign of Charles VI?” With this statement Say had the long run in mind. Certainly the long-run version is correct. Given enough time, supply does create its own demand. There can be no long-run glut of goods.
But Say also had a short-run version, that even in the short run there could be no overproduction of goods relative to demand. It was this version that Malthus attacked in the nineteenth century and that Keynes attacked in the twentieth century. They were right to attack it….