IB Economics 3.2.3: Long-Run Aggregate Supply in the Monetarist / New Classical Model

Does the economy fix itself? In this IB DP Economics Unit 3.2.3 lesson, we dive into the Monetarist/New Classical Model. We explain why the Long-Run Aggregate Supply (LRAS) curve is vertical at the level of Full Employment, how the Natural Rate of Unemployment works, and the "magic" of the Automatic Self-Adjustment Mechanism.

00:00 - Introduction to the Long-Run Aggregate Supply in the Monetarist / New Classical Model
00:50 - Explain the monetarist / new classical perspective on the long-run aggregate supply curve (LRAS)
01:17 - Explain that in the monetarist / new classical model macroeconomic equilibrium in the long run is determined at full employment
03:17 - Explain that when the economy is at long-run equilibrium unemployment is equal to the natural rate of unemployment
03:51 - Draw the LRAS curve and macroeconomic equilibrium in the long run
04:05 - Explain inflationary and deflationary gaps
06:35 - Explain how the monetarist / new classical perspective automatically adjusts to full employment output

🚀 Next Lesson (Unit 3.2.4 Keynesian Aggregate Supply): https://youtu.be/6y6NS2AHhzg
📚 Full IB Economics Unit 3 Macroeconomics Playlist: https://youtube.com/playlist?list=PLxXPxL_gb833D4_FcNNchsa1m2pvhcB6k&si=fiCCcH0oSh8BFS3A
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Видео IB Economics 3.2.3: Long-Run Aggregate Supply in the Monetarist / New Classical Model канала Kevin Means Business