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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

Hydraulic fracturing (fracking) has the potential to significantly increase the amount of natural gas produced in the United States. If a large percentage of factories and utility companies use natural gas, what will happen to output, the price level, and employment as fracking becomes more widely used?

How is pressure for inflationary price increases shown in an AD/AS model?

Suppose concerns about the size of the federal budget deficit led the U.S. Congress to cut all funding for research and development for ten years. Assuming this has an impact on technology growth, what does the AD/AS model predict would be the likely effect on equilibrium GDP and the price level?

How is long-term growth illustrated in an AD/AS model?

Would a shift of AD to the right tend to make the equilibrium quantity and price level higher or lower? What about a shift of AD to the left?
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