Short-Run Aggregate Supply (SRAS) Curve
Definition
The SRAS curve shows the relationship between real GDP produced and price levels in an economy in the short run when resource prices are fixed. It depicts how businesses respond to changes in demand by adjusting their production levels while keeping input costs constant.
Analogy
Think of the SRAS curve as a restaurant's menu. Just like how a restaurant adjusts its production and output based on customer demand while keeping ingredient prices constant, the SRAS curve shows how businesses respond to changes in demand while holding resource prices steady.
Related terms
Long-Run Aggregate Supply (LRAS) Curve: The LRAS curve represents the relationship between real GDP produced and price levels in an economy when all input costs can vary.
Aggregate Demand (AD): The total amount of goods and services demanded in an economy at different price levels.
Sticky Wages: A concept that suggests wages do not adjust immediately to changes in economic conditions, leading to short-run fluctuations in employment and output.
"Short-Run Aggregate Supply (SRAS) Curve" appears in:
Practice Questions (6)
- What causes a rightward shift in the Short-Run Aggregate Supply (SRAS) curve?
- Which of the following is an example of a supply shock that would shift the Short-Run Aggregate Supply (SRAS) curve to the left?
- Which of the following is a likely result of an increase in the money supply on the Short-Run Aggregate Supply (SRAS) curve?
- What is the impact of an increase in government spending on the Short-Run Aggregate Supply (SRAS) curve and the price level in the short run?
- Which of the following would cause a leftward shift in the Short-Run Aggregate Supply (SRAS) curve?
- Which of the following is true regarding the concept of sticky wages in the context of the Short-Run Aggregate Supply (SRAS) curve?
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