ECO 1302 Chapter Notes - Chapter 10: Aggregate Supply, Output Gap, Aggregate Demand
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5 Mar 2017
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The e(cid:272)o(cid:374)o(cid:373)y"s agg(cid:396)egate supply (cid:272)u(cid:396)(cid:448)e (cid:396)elated the (cid:395)ua(cid:374)tity of goods a(cid:374)d se(cid:396)(cid:448)i(cid:272)es that (cid:449)ill (cid:271)e supplied to the price level. It normally slopes upward to the right because for the principle of increasing costs. As it becomes harder to produce more, unit costs rise, inducing firms to raise prices. The position of the aggregate supply curve can be shifted by changes in money wage rates, prices of other inputs, technology, or quantities or qualities of labour and capital. The equilibrium price level and the equilibrium level of real gdp are jointly determined by the i(cid:374)te(cid:396)se(cid:272)tio(cid:374) of the e(cid:272)o(cid:374)o(cid:373)y"s agg(cid:396)egate supply a(cid:374)d agg(cid:396)egate de(cid:373)a(cid:374)d s(cid:272)hedules. The most o(cid:271)(cid:448)ious dete(cid:396)(cid:373)i(cid:374)a(cid:374)t of the agg(cid:396)egate supply (cid:272)u(cid:396)(cid:448)e"s positio(cid:374) is the (cid:374)o(cid:373)i(cid:374)al (cid:449)age (cid:396)ate. Wages are the major element of cost in the economy (more than 60% of all inputs) An increase in the money wage rate shifts the aggregate supply curve inward, meaning that the quantity supplies at any price level declines.
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