Unformatted text preview: Aggregate Supply Equilibrium Analysis In the long run wages are ﬂexible: P ↑→ W ↑
Output is determined solely by amount of capital and labor
and the available technology
Vertical at the natural rate of output Y n generated by the
natural rate of unemployment, i.e. where the economy settles
in the long run for any price level Long-run aggregate supply curve (LRAS) Wages (W ) are sticky.
Generates an upward sloping SRAS as ﬁrms attempt to take
advantage of short-run proﬁtability when price level rises,
i.e. for higher P, proﬁts are higher and ﬁrms produce more. Short-run aggregate supply curve (SRAS) Aggregate Supply Aggregate Demand ...
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