3.3 Short-Run Aggregate Supply (SRAS)

aggregate supply

the amount of goods and services (real GDP) that firms will produce in an economy at different price levels. That supply for everything by all firms.

• differentiated between short run and long run

Short-run aggregate supply

wages and resource prices are sticky and WILL NOT change as price levels change

Long-run Aggregate Supply

• wages and resource prices are flexible and WILL change as price levels change

Shifts in Short-Run Aggregate Supply (RAP)

• Resource Prices

• Actions of Government

• Productivity

Change in Resource Prices

• prices of domestic and imported resources

• supply shocks

• inflationary expectations

expect higher prices — demand higher wages — wages and cost increase

change in actions of the government

• NOT government spending

• taxes on producers

• subsidies for domestic producers

• government regulations

Change in productivity

• technology