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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

Suppose, after five years of sluggish growth, the European Union's economy picks up speed. What would be the likely impact on the U.S. trade balance, GDP, and 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?

In your view, is the economy currently operating in the Keynesian, intermediate or neoclassical portion of the economy’s aggregate supply curve?

The AD/AS model is static. It shows a snapshot of the economy at a given point in time. Both economic growth and inflation are dynamic phenomena. Suppose economic growth is 3% per year and aggregate demand is growing at the same rate. What does the AD/AS model say the inflation rate should be?

Explain why the short-run aggregate supply curve might be vertical in the neoclassical zone of the SRAS curve. How might we tell if we are in the neoclassical zone of the AS?

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