In the short run, output deviates from potential output from "summary" of Principles of Macroeconomics by N. Gregory Mankiw
In the short run, the level of output in an economy may not always align with its potential output. Potential output refers to the maximum level of output that an economy can sustain over the long term when all resources are fully utilized. However, in reality, various factors can cause deviations from this potential level of output in the short run. One key factor that can lead to output deviating from potential output in the short run is fluctuations in aggregate demand. Aggregate demand refers to the total demand for goods and services in an economy at a given price level. Changes in consumer spending, investment, government expenditures, and net exports can all affect aggregate demand and, consequently, output levels in the short run. Another facto...
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