short run aggregate supply

short-run aggregate supply

aggregate supply curve

total qty of goods firms produce & sell

relationship that depends on the time horizon examined

long run AS

vertical (straight line)

short run AS

upward

sticky wage theory

nominal wages (from employer as employee) are slow to adjust to changing economic conditions

expectation doesnt match reality and leads to uneveness

sticky bc they can’t immediately adjust workers’ contract

sticky price theory

prices of goods are slow to adjust to changing economic activities

menu costs

costs incurred by businesses when changing price, printing, distributing, etc.

misperceptions theory

changes in overall price levels can trick firms (who are quick to decide) about shat is happening in individual market

they get distracted by not seeing the whole picture

relative prices

prices of goods compared to others’ price

shifts from changes in labor

↑ labor = right shift

↓ labor = left shift

shifts from changes in capital

money is not this

↑ capital = right shift

↓ capital = left shift

physical capital

materials used in production (machinery, computers,etc.)

human captial

humans making products, skills people have to make it

shifts from changes in natural resources

not able to be produced by humans

↑ resources = right shift (ex. discovery of new mine)

↓ resources = left shift (ex. change in weather)

supply shock

unexpected disruption (neg) or discovery (pos) in supply of economy

changes in technology

↑ advancement in tech = right shift

↓ advancement in tech = left shift

changes in expected price level

↑ exp. price level = left shift

↓ exp. price level = right shift

firms’ expectation of prices change, if they predict it will be more expensive in the future, they’ll decide to produce less now and more later (to save more)