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Chapter 24: Q 21. (page 601)

What is the economic reason why the SRAS curve slopes up?

Short Answer

Expert verified

There are various reasons for the upward shift in this curve.

Step by step solution

01

Step 2. Definition

The SRAS (short-run aggregate supply) curve is a curve that shows that if there is an increase in price level and you will be moving along the SRAS, there will be an increase in the amount of real GDP which will be produced in an economy.

02

Step 2. Explanation

The upward slope of SRAS is due to the two reasons which are the sticky nature of wages and menu costs. When there is an increase in the price level of the output, then the producers have a motive to produce more quantity and earn profits.

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Most popular questions from this chapter

Review the problem in the Work It Out titled

"Interpreting the AD/AS Model." Like the information provided in that feature, Table 24.2shows information on aggregate supply, aggregate demand, and the price

level for the imaginary country of Xurbia.

a. Plot the AD/AS diagram from the data. Identify

the equilibrium.

b. Imagine that, as a result of a government tax

cut, aggregate demand becomes higher by 50at

every price level. Identify the new equilibrium.

c. How will the new equilibrium alter output? How

will it alter the price level? What do you think

will happen to employment?

What impact would a decrease in the size of the labor force have on GDP and the price level according to the AD/AS model?

Economists expect that as the labor market continues to tighten going into the latter part of 2015that workers should begin to expect wage increases in 2015and 2016. Assuming this occurs and it was the only development in the labor market that year, how would this affect the AS curve? What if it was also accompanied by an increase in worker productivity?

What are some of the ways in which exports and imports can affect the AD/AS model?

What is potential GDP?
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