Aggregate Demand and Aggregate Supply 5

Aggregate Demand and Aggregate Supply 5 - 5 Determinants of...

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Unformatted text preview: 5. Determinants of aggregate supply The following graph shows an increase in short—run aggregate supply (AS) in a hypothetical economy where the currency is the dollar. Specifically, the short—run aggregate supply curve shifts to the right from A51 to 145;, causing the quantity of output supplied at a price level of 100 to rise from $200 billion to $250 billion. 2DD 1?5 15D 125 PRICE LEVEL 75 5D 25 D 5D 1flfl ---------+I- I I -----+ 1DD 15D EDD 25D QUANTITY OF OUTPUT 3DD 35D 4DD ® The following table lists several determinants of short—run aggregate supply. Fiii in the tabie by indicating the changes in the determinants necessary to increase short—run aggregate suppiy. Change Needed to Increase AS Inflation expectations Tax raises Technology Lower 1' Decr 1’ Improves 1' INlntSl—li'l ...
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