As LF and CS increase firms will supply more output at every price level and

As lf and cs increase firms will supply more output

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As LF and CS increase firms will supply more output at every price level and the SRAS will shift right Increases in Labor Force and Capital Stock: Increase in productivity reduces the firms' costs of production and allows them to produce more output at every price level SRAS curve shifts to the right As positive technological change takes place the productivity of workers and machinery increases which means firms can produce more goods and services with the same amount of labor and machinery Technological Change: If workers and firms believe that the price level is going to increase during the next year, they will try to adjust their wages and prices accordingly If firms expect the price level to increase by a certain percentage, the SRAS curve will shift by an equivalent amount holding constant all other variables that affect the SRAS curve Expected Changes in the Future Price Level: Lesson 9 Page 75
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curve Workers and firms sometimes make incorrect predictions about the price level If workers and firms across the economy are adjusting to the price level being higher than expected, the SRAS curve will shift to the left If they are adjusting to the price level being lower than expected the SRAS curve will shift t the right Adjustments of Workers and Firms to Errors in Past Expectations about the Price Level: Often caused by unexpected increases or decreases in the prices of important natural resources that causes firms' costs to be different from what they had expected Oil prices can be particularly volatile Supply shock: an unexpected event that causes the short-run aggregate supply curve to shift Unexpected Changes in the Price of an Important Natural Resource: Summary: An increase in… Shift SRAS curve…. Because… Labor force or the capital stock Right More output can be produced at every price level Productivity Right Costs of producing output falls Expected future price level Left Workers and firms increase wages and prices Workers and firms adjusting to having previously underestimated the price level Left Workers and firms increase wages and prices Expected price of an important natural resource Left Costs of producing output rises 13.3: Macroeconomic Equilibrium in the Long run and Short run: The economy has no been experiencing any inflation. The price level is currently 110, and workers and firms expect it to remain at 110 in the future 1. The economy is not experiencing any long-run growth. Potential GDP is %17.0 trillion and will remain at the level in the future 2. These assumptions are simplifications because in reality the US economy experiences some inflation every year since the 1930s, and potential GDP increases every year Recessions, Expansions and Supply Shocks: Recessions: Decline in investment will shift the AD curve to the left Rising interest rates cause firms to reducing spending on factories and equipment and cause household to reduce spending on new homes
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