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ECN 211 L16 AS_BB

ECN 211 L16 AS_BB - ECN 211 Macroeconomic Principles L16...

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10/05/09 1 ECN 211 Macroeconomic Principles L16: Aggregate Supply and Equilibrium.
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Short-run Vs Long run Short-Run – Costs of production (inputs) are held  _________ – Wage contracts etc have been determined and can not  change. Nominal wages are ________ – Resource prices  ____________ Long-Run – All costs of production (inputs)  ________ 10/05/09 2
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10/05/09 3 Aggregate Supply (AS) ……The aggregate supply curve shows the amount of  _______  (real GDP) produced (supplied) at  ____________________________
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Why the (short run) AS curve slopes upwards In the short-run we are assuming the costs of production  (inputs)  ____________ As the price level ( of output __________  businesses  will  produce  __________  output. Profit motive creates an incentive for firms to _________  production. The  “real wage”  paid by firms to workers has  _________ 10/05/09 4
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10/05/09 5 The (short-run) AS Curve SRAS Price level Real GDP (dollars) P O Q 1
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10/05/09 6 The (short-run)AS Curve- Alternative look SRAS Price level Real GDP (dollars) P O Q 1
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Determinants of SRAS Resource/Input prices – The SRAS is drawn for a  given set of ____________ – If input prices  increase
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