ch11Aggregate Supply

ch11Aggregate Supply - Aggregate Supply Chapter 11-3...

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Aggregate Supply Chapter 11-3 Aggregate Supply
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Aggregate Supply The aggregate supply curve shows the relationship between the aggregate price level and the quantity of aggregate output.
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Aggregate Supply Curve Aggregate Supply is the amount of real GDP that will be made available by sellers at various price levels. Aggregate Supply looks different in the Long Run and the Short Run : In the Long Run , classical economists assume the economy operates at full employment (maximum output), independent of the price level. In the Short Run , businesses will increase supply if the price level increases.
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Positive Relationship There is a positive relationship in the short run between price level and the quantity of aggregate output supplied.
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The SAS is positively sloped because: Auction markets Prices are determined by demand and supply prices profits quantity supplied Posted-price markets Prices are set by producers and don’t often change Firms respond to changes in demand by adjusting output instead of prices
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Sticky Nominal Wages The short-run aggregate supply curve is
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This note was uploaded on 01/13/2012 for the course ECON 101 taught by Professor Smith during the Fall '09 term at Harvard.

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ch11Aggregate Supply - Aggregate Supply Chapter 11-3...

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