ECON 102 1st Edition Lecture 25 Outline of Last Lecture 1 The Aggregate Demand Curve a Factors influencing shifts Outline of Current Lecture I The Aggregate Supply Curve a Short run Aggregate Supply Curve b Long run Aggregate Supply Curve Current Lecture REMEMBER The aggregate demand curve shifts because of o Changes in expectations o Wealth o The stock of physical capital o Government policies Fiscal Policy Monetary Policy The aggregate supply curve shows the relationship between the aggregate price level and the quantity of aggregate output in the economy Profit per unit of output Price per unit of output Production cost per unit of output The short run aggregate supply curve is upward sloping because nominal wages are sticky in the short run o A higher aggregate price level leads to higher profits and increased aggregate output in the short run o The nominal wage is the dollar amount of the wage paid o Sticky wages Nominal wages that are slow to fall even in the face of high unemployment and slow to rise even in the face of labor shortages Changes in commodity prices nominal wages productivity leads to changes in producers profits and shift the short run aggregate supply curve Changes in Commodity Prices These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute o If commodity prices fall short run aggregate supply increases o If commodity prices rise short run aggregate supply decreases Changes in Nominal Wages o If nominal wages fall short run aggregate supply increases o If nominal wages rise short run aggregate supply decreases Changes in Productivity o If workers become more productive short run aggregate supply increases o If workers become less productive short run aggregate supply decreases The long run aggregate supply curve shows the relationship between the aggregate price level and the quantity of aggregate output supplied that would exist if all prices including nominal wages were fully flexible
View Full Document
Unlocking...