View
26
Download
0
Category
Preview:
DESCRIPTION
Aggregate Supply: Short – Run & Long – Run. Short-run Aggregate Supply. Aggregate Supply (AS) shows the quantity of real GDP produced at different price levels. Short-run AS slopes upward a higher price level (holding production costs and capital constant in the short-run) - PowerPoint PPT Presentation
Citation preview
1
Aggregate Supply: Short – Run & Long – RunAggregate Supply: Short – Run & Long – Run
2
Short-run Aggregate SupplyShort-run Aggregate Supply
Aggregate Supply (AS) shows the quantity of real GDP produced at different price levels.
Short-run AS slopes upward – a higher price level (holding production costs
and capital constant in the short-run) higher profit margins firms want to produce more.
3
Short – Run Short – Run Aggregate Aggregate Supply: Supply: Constant Constant ReturnsReturns
4
Shape of Short-run AS (SRAS)Shape of Short-run AS (SRAS) In the short-run, the capital stock can’t
change.– the number of factories and machines is
constant– increasing labor input increases output …
but at a diminishing rate• More and more workers are sharing the same
capital stock
Diminishing returns an ever-steeper SRAS curve.
5
Short – Run Short – Run Aggregate Aggregate Supply: Supply: Diminishing Diminishing ReturnsReturns
6
The Shape of Long-run AS (LRAS)The Shape of Long-run AS (LRAS)
Resource costs are NOT fixed in the long-run.– As prices rises, workers demand and get higher wages
Profits don’t rise with price The amount of capital is NOT fixed in the long-
run– firms can build new plants and buy new equipment
over the long-run. AS is set by production possibilities in the long-
run– LRAS is not affected by prices– LRAS is vertical: higher prices cannot elicit more
output in the long-run.
7
Long-Run Long-Run Aggregate Aggregate Supply: Supply: Potential Potential Real GDPReal GDP
8
Determinants of Aggregate SupplyDeterminants of Aggregate Supply
9
Determinants of Aggregate SupplyDeterminants of Aggregate Supply
10
Determinants of Aggregate SupplyDeterminants of Aggregate Supply
11
Shifting the Long-Shifting the Long-Run Aggregate Run Aggregate Supply CurveSupply Curve
Growth occurs as the labor force and capital stock grow and as technological innovation improves production efficiency.
12
Changes in Changes in Short-Run Short-Run Aggregate Aggregate SupplySupply
13
Effects of a Effects of a Change in Change in Aggregate Aggregate SupplySupply
Cost-push inflation: cost increases push AS to the left causing price level increases (inflation).
14
Aggregate Aggregate Demand - Demand - Aggregate Aggregate Supply Supply EquilibriumEquilibrium
15
Aggregate Aggregate Demand and Demand and Supply Supply EquilibriumEquilibrium: : Short-run and Short-run and long-run long-run responses to responses to increase in increase in aggregate aggregate demanddemand
16
Economic Economic Insight: Insight: OPEC and OPEC and a decrease a decrease in in aggregate aggregate supplysupply
Recommended