Long-Run Aggregate Supply (LRAS)

Long-Run Aggregate Supply (LRAS) represents the total quantity of goods and services an economy can produce when all resources—labor, capital, technology—are fully employed and used efficiently. It reflects the economy’s maximum sustainable output over time, unaffected by short-term changes like price levels. Factors such as technological progress, increases in resources, or improvements in productivity can shift LRAS outward, indicating growth. Essentially, LRAS shows the economy’s capacity to produce at full employment, serving as a benchmark for assessing economic performance and potential growth in the long run.