Lecture+14 - Economics 102 Lecture 14: Aggregate Supply...

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1 Economics 102 Lecture 14 : Aggregate Supply LECTURE 14 AGGREGATE SUPPLY 1 Aggregate Supply § LECTURE 14 AGGREGATE SUPPLY 2 In this lecture, look for the answers to these questions: § What is the slope of the Aggregate-Supply curve in the long run? § In the short run? § What shifts the AS curve(s)?
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2 LECTURE 14 AGGREGATE SUPPLY 3 Macroeconomic Long Run and Short Run § The macroeconomic long run is a time frame that is sufficiently long for the real wage rate to have adjusted to achieve full employment: Output equals natural rate of output. Unemployment is at the natural unemployment rate. The price level is proportional to the quantity of money. LECTURE 14 AGGREGATE SUPPLY 4 Macroeconomic Long Run and Short Run § The macroeconomic short run is a time frame during which some money prices are sticky so that Real output might be below, above, or at the natural rate of output. The unemployment rate might be above, below, or at the natural unemployment rate. LECTURE 14 AGGREGATE SUPPLY 5 Aggregate Supply § The quantity of output supplied , Y , is the total quantity of final goods and services that firms plan to produce during a given period. It depends on (Ch. 12) The quantity of the labor employed The quantity of physical and human capital The quantity of natural resources State of technology § We distinguish two time frames associated with different states of the labor market: Long-run aggregate supply Short-run aggregate supply
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3 LECTURE 14 AGGREGATE SUPPLY 6 Aggregate Supply § Long-run aggregate supply is the relationship between the quantity of output supplied and the price level when output is at its natural rate. The natural rate of output ( Y N ) is independent of the price level (classical dichotomy; Ch. 17). So the long-run aggregate supply curve ( LAS ) is vertical at Y N . Y
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Lecture+14 - Economics 102 Lecture 14: Aggregate Supply...

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