14Chp22-Econ3310

14Chp22-Econ3310 - Aggregate Supply Equilibrium Analysis In...

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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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