AP Macroeconomics AMSCO Guided Notes
3.3: Short-Run Aggregate Supply (SRAS)
AP Macroeconomics Guided Notes
AMSCO 3.3 - Short-Run Aggregate Supply (SRAS)
Essential Questions
- How do employment and production costs affect price and supply in the short run?
I. Short-Run vs. Long-Run
1. What is the difference between the short-run and long-run in economics?
2. Why do producers typically decrease supply in the short run when facing higher production costs?
3. What types of adjustments can businesses make in the long-run that they cannot make in the short-run?
II. The Short-Run Aggregate Supply Curve
1. What does the short-run aggregate supply (SRAS) curve show about the relationship between price level and real GDP?
2. Why does the SRAS curve slope upward?
III. Nominal and Sticky Wages
1. What are nominal wages and why are they considered sticky?
2. Why are companies hesitant to change nominal wages even when economic conditions change?
3. How does the 2019 UAW contract negotiation illustrate that sticky wages are not permanent?
IV. Changes in Pricing
1. What is nominal price rigidity and how does it affect producer behavior in the short run?
2. How do perfectly competitive markets and imperfectly competitive markets differ in their pricing behavior?
3. What is pricing power and how does it allow companies to respond to changes in demand?
V. Shifts in the SRAS Curve
1. What is the difference between movement along the SRAS curve and a shift of the SRAS curve?
A. Changes in Input Cost
1. What are input costs and how do increases in input costs affect the SRAS curve?
2. What economic effects can result from a leftward shift of the SRAS curve caused by rising input costs?
3. How does a decrease in energy prices affect aggregate supply and the broader economy?
B. Changes in Workplace Productivity
1. What is workplace productivity and how does an increase in productivity affect the SRAS curve?
2. What factors can influence workplace productivity?
C. Changes in Government Action
1. How do government policies such as taxes, regulations, and subsidies affect the SRAS curve?
D. Inflationary Expectations
1. How do inflationary expectations affect producer behavior and the SRAS curve?
2. What happens to the SRAS curve when deflation is expected?
Key Terms
short run
long run
short-run aggregate supply (SRAS)
short-run aggregate supply curve
profitability
nominal wages
sticky wages
nominal price rigidity
pricing power