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Economics

Short Run vs Long Run Aggregate Supply Shifts

Quick fact

In the short run, a sudden increase in demand can push output above its long-run potential, but in the long run, output always returns to the level determined by resources and technology.

Why this is interesting

Think of an economy like a factory that can run at different speeds—but not all speeds are sustainable. Why does the economy sometimes produce more than its 'normal' capacity, and why can't that last?