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Shifts of Aggregate Demand Curve on Potential Output

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Lit three factors that can change the economyâ??s potential output. What is the impact of shifts of the aggregate demand curve on potential output? Illustrate your answers with a diagram

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Three factors that can change an economy's potential output are the three inputs into the production function: labor, capital, and technology. Potential output is defined to be the output at full employment. If there are more workers in the economy then the full employment quantity of labor will be higher, and so will be the ...

Solution Summary

This solution exemplifies the impact of shifts of the aggregate demand curve on potential output.

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