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Aggregate Supply in the Short Run and in the Long Run [AP Macroeconomics Review]
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October 12, 2018
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9:29Now PlayingIn this video Heimler explains all you need to know about aggregate supply in the short run and aggregate supply in the long run.
Short Run Aggregate Supply (SRAS) behaves much the same way that the regular supply curve behaves, except it's measuring ALL goods supplied in an economy (GDP) as opposed to one good or market. As the aggregate price level increases, so does the quantity of aggregate supplied. As the aggregate price level decreases, so does the quantity of aggregate supplied.
The short run aggregate supply curve can shift because of the following determinants:
Changes to commodity prices
Changes in nominal wages
Changes in productivity
But the long run aggregate supply curve tells a different story. Wages are sticky in the short run, but in the long run wages are fully flexible. That means that the long run aggregate supply curve (LRAS) is unaffected by aggregate price change and is therefore perfectly vertical.
And just in case you're wondering, this video fits into the AP Macroeconomics curriculum under Unit 3.
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