Principles of Economics- Mankiw (5th) 695

Principles of Economics- Mankiw (5th) 695 - CHAPTER 31 A G...

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CHAPTER 31 AGGREGATE DEMAND AND AGGREGATE SUPPLY 719 ing about what shifts the short-run aggregate-supply curve, we have to consider all those variables that shift the long-run aggregate-supply curve plus a new variable—the expected price level—that influences misperceptions, sticky wages, and sticky prices. Let’s start with what we know about the long-run aggregate-supply curve. As we discussed earlier, shifts in the long-run aggregate-supply curve normally arise from changes in labor, capital, natural resources, or technological knowledge. These same variables shift the short-run aggregate-supply curve. For example, when an increase in the economy’s capital stock increases productivity, both the long-run and short-run aggregate-supply curves shift to the right. When an in- crease in the minimum wage raises the natural rate of unemployment, both the long-run and short-run aggregate-supply curves shift to the left. The important new variable that affects the position of the short-run
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