Explain the says law, Macroeconomics

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Q. Explain the Says Law?

GDP, and Say's Law

Aggregate supply

YS = f(L, K) in the classical model where L is concluded in the labor market while K is exogenous

Aggregate supply YS is stated as the amount of finished services and goods firms in a country will want to sell under given conditions. In the classical model aggregate supply is concluded by production function, YS = f (L, K). 

The amount of capital in classical model is an exogenous variable; it isn't determined within the model though presumed to be given. However we typically presume that K is constant - which is reasonable in the short run - it need not to be constant. K may increase over time though we should know K at any point in time. 

Amount of labor, though, is an endogenous variable which is determined in the labor market. This concludes that YS is determined completely by the labor market in classical model. The below chart explains. 

1299_Explain the Says Law.png

Figure: Determination of aggregate supply


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