Aggregate Production Function Model

Definition

The aggregate production function model is an economic framework that shows the relationship between inputs (such as labor and capital) and outputs (such as goods and services) in an economy. It illustrates how these inputs combine to determine the level of output or real GDP.

Related terms

Inputs: These are the resources used in the production process, such as labor, capital, land, and raw materials.

Outputs: These are the final goods and services produced by using inputs in the production process.

Efficiency: This refers to maximizing output with given inputs or minimizing input usage for a given level of output.