What does aggregate supply measure in terms of an economy?

Aggregate supply represents the total quantity of goods and services that an economy can produce at a given overall price level in a specific period. It encompasses both the short-term and long-term perspectives, reflecting how an economy can adjust its output capabilities.

In the short term, various factors such as wages, input costs, and demand levels can influence aggregate supply, often resulting in fluctuations due to immediate market conditions. However, the long-term aggregate supply is associated with the economy's potential output, determined by factors like technology advancements, resource availability, and overall labor productivity.

This dual nature of aggregate supply is essential for understanding how economies react to different economic policies and external shocks, as it sheds light on both the immediate responsiveness of production and the sustainable growth potential over time. By measuring aggregate supply, economists can analyze how effectively an economy can expand and respond to changing demands in both the immediate and future contexts.