2 in order to hire more workers firms need to offer

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2.In order to hire more workers, firms need to offer higher wages (increase wages more quickly).3.To protect profit margins, firms need to raise prices (in order to compensate for higher wages).
1115-41The Short-run Aggregate Supply CurveBecause the short-run Phillips curve embeds sticky wages and prices.1.The short-run aggregate supply curve also embeds sticky wages and prices.2.The more flexible wages and prices are, the more inflation responds to the output gap, the higher the value of and, the steeper the short-run aggregate supply curve.γ15-42The Short-run Aggregate Supply CurveIf wages and prices are completely flexible in the short-run, then:1.γ= and2.The short-run aggregate supply curve becomes vertical, and 3.The short-run aggregate supply curve and the long-run aggregate supply curve are indistinguishable.15-43The Short-run Aggregate Supply CurveThe SRAS curve will shiftif there is:1.A change in expected inflation, ∆πe, and/or2.A price or supply shock, ρ, and/or3.An output gap, Y – Yp0.15-44The Short-run Aggregate Supply CurveYπLRAS0SRAS0(πe= π0)π0YP
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The short-run Aggregate Supply CurveThe SRAS curve will shiftif there is:
)A change in expected inflation, ∆πe, and/or2.A price or supply shock, ρ, and/or3.An output gap, Y – Yp0.15-48The Short-Run Aggregate Supply CurveYπLRAS0SRAS0(πe= π0π0YP
The SRAS curve will shiftif there is:1.A change in expected inflation, ∆πe, and/or2.A price or supply shock, ρ, and/or3.An output gap, Y – Yp0.15-48The Short-Run Aggregate Supply CurveYπLRAS0SRAS0(πe= π0π0YP
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1315-49The Aggregate Supply CurvesCombining the short-run and long-run aggregate supply curves with the aggregate demand curve provides a model of short-run fluctuations in:1.Economic output, Y, and 2.Inflation, π.15-50The End

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