module 18

module 18

1. Aggregate supply: The relationship between the aggregate price level and the quantity of aggregate output supplied in the economy.

2. Short-Run Aggregate supply: the total production of goods and services available in an economy at different price levels while some resources to produce are fixed.

3. Nominal wage: It's the dollar amount of wage paid.

4. Sticky Wages: Sticky wages are nominal wages that are slow to fall even in the face of high unempoyment and slow to rise even in the face of labor soures.

5. Shift to short-run As: An decrease in short-run AS shifts As to th left. An increase in shrt-run AS shifts AS to the right.

6. Change in commodity prices: Changes in raw material costs and other components. If commodity prices falls short-run AS increases. If commodity prices rise short-run AS decreases.

7. Long run AS: It is 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.

8. Change in Nominal wages: If nominal wages fall, short-run AS increases. If Nominal wages rise, short-run AS decreases.

9. Changes in productivity: If workers become more productive, short-run AS increases. If workers become less productive, short-run AS decreases.

10. The fig 18.2 shows that decrease in SRAs shifts the curve to left and increase in SRAs shift curve to the right.

11. The fig 18.1 shows that a movement of SRAs curve down leads to deflation and lower Aggregate output.

12. The fig 18.5 shows that how SRAs curve shift over time until the economy is at point where both point cross.

13. From SR to LR: AS moves from SR to LR by considering some equilibrium that is the same for both short and long run when analyzing supply and demand.