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):    • IB Economics 3.2.4: Keynesian Aggregate Su...   📚 Full IB Economics Unit 3 Macroeconomics Playlist:    • Master IB Economics Unit 3: Macroeconomics...   🔔 Subscribe to Kevin Means Business for clear, syllabus-aligned IB Economics lessons!    / @kevinmeansbusiness   #ibeconomics #macroeconomics #newclassical #economicgrowth #kevinmeansbusiness #economics #economicsrevision #ib #ibdp #selfstudy #educational