ECN 211 L11 AS_BB

ECN 211 L11 AS_BB - ECN 211 Macroeconomic Principles L11...

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05/07/09 1 ECN 211 Macroeconomic Principles L11 Aggregate Supply and Equilibrium.
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Short-run Vs Long run _____________ – Costs of production (inputs) are held  _________ – Wage contracts etc have been determined and can not  change. Nominal wages are fixed – Resource prices  _______________ ___________ – All costs of production (inputs) can vary. 05/07/09 2
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05/07/09 3 Aggregate Supply (AS) ……The aggregate supply curve shows the amount of  ______  (real GDP) produced (supplied)  _______________________
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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) increases businesses  will  produce more _____________ Profit motive creates an incentive for firms to increase  production. The ____________paid by firms to workers has fallen. 05/07/09 4
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05/07/09 5 The (short-run) AS Curve Price level Real GDP (dollars) P O Q 1
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05/07/09 6 The (short-run)AS Curve- Alternative look Price level Real GDP (dollars) P O Q 1
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05/07/09 7 Shifts in the (short-run) AS Curve SRAS 1 Price level Real GDP (dollars) SRAS 2 SRAS 3
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ECN 211 L11 AS_BB - ECN 211 Macroeconomic Principles L11...

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