module aggregate supply: introduction and determinants krugman's macroeconomics for ap* 18...
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![Page 1: Module Aggregate Supply: Introduction and Determinants KRUGMAN'S MACROECONOMICS for AP* 18 Margaret Ray and David Anderson](https://reader035.vdocuments.net/reader035/viewer/2022062516/56649d765503460f94a57532/html5/thumbnails/1.jpg)
ModuleAggregate Supply:Introduction andDeterminants
KRUGMAN'SMACROECONOMICS for AP*
18
Margaret Ray and David Anderson
![Page 2: Module Aggregate Supply: Introduction and Determinants KRUGMAN'S MACROECONOMICS for AP* 18 Margaret Ray and David Anderson](https://reader035.vdocuments.net/reader035/viewer/2022062516/56649d765503460f94a57532/html5/thumbnails/2.jpg)
Modules 18 & 19Aggregate supply and equilibrium
ReadingReading
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What you will learnWhat you will learn
in thisin this ModuleModule::
• How the aggregate supply curve illustrates the relationship between the aggregate price level and the quantity of aggregate output supplied in the economy
• What factors can shift the aggregate supply curve
• Why the aggregate supply curve is different in the short run from in the long run
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• The relationship between the price level and the real GDP supplied
Aggregate SupplyAggregate Supply
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Short-Run Aggregate Supply Short-Run Aggregate Supply Curve (SRAS)Curve (SRAS)
Why does it slope upwards?
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Sticky Nominal WagesSticky Nominal Wages
• Nominal wage = what you get paid in current dollars. Not real wage.
• Why are nominal wages “sticky”?
• What would you do if prices went up by 1% this month.
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Sticky Nominal WagesSticky Nominal Wages
• Price level increases.
• Nominal wages don’t rise as fast.
• Business profits increase.
• Hire more workers, produce more.
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Sticky Nominal WagesSticky Nominal Wages
• Price level decreases.
• Nominal wages don’t fall as fast.
• Business profits decrease.
• Layoff workers, produce less..
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Shifts of the Short-Run Shifts of the Short-Run Aggregate Supply CurveAggregate Supply Curve
• ∆ Commodity Prices
• ∆ Nominal Wages
• ∆ Productivity
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Team activity – SRAS ShiftsTeam activity – SRAS Shifts
• Left side shift out, right side shift in.
• Team 1 – commodity prices
• Team 2 – nominal wages
• Team 3 - productivity
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Individual – SRAS ShiftsIndividual – SRAS Shifts
• Activity # 24 – SRAS scenarios
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The Long-Run Aggregate The Long-Run Aggregate Supply CurveSupply Curve
• Flexible Wages
• Long Run
• LRAS
• Potential Output
• Factors that shift LRAS!
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What factors shift the LRAS?What factors shift the LRAS?
Create a Word Wall
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From the Short Run to the From the Short Run to the Long RunLong Run
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SummarySummary
SRAS Change in Quantity of Output
Shift in SRAS Shift in LRAS
Sticky nominal wages
Business profits.
Fluctuations in:
Commodity prices
Nominal Wages
Productivity
Exogenous shocks
Permanent growth:
More resources
Human capital
Technology
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Exit TicketExit Ticket
• Aggregate Supply Scenarios