Abstract
Macro-economics is the part of economics studying regional economy as a whole. By doing so, it uses 'aggregate indicators' such as GDP, unemployment and so on. 'Aggregate supply' is one of these aggregate indicators and it represents the whole supply of an economy, assuming that there is only one good in the economy. Aggregate supply can be calculated in two forms, SRAS (standing for short run aggregate supply) or LRAS (standing for Long Run Aggregate Supply). The relation between these two concepts and GDP gives information on economy by the means of output gaps, which describe the difference between potential and the real GDP. What is the difference between LRAS and SRAS and how can policy makers respond to different output gaps?
