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Chapter 11: 28 (page 292)

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

Short Answer

Expert verified
When the aggregate supply curve changes to the right, a bigger amount of real GDP is created at every price level.
When the SRAS curve changes to the left, the amount of real GDP produced at each price level decreases.

Step by step solution

01

Introduction 

Short-run aggregate supply (SRAS) is a graphical model that depicts the positive link between an economy's aggregate price level and the amount of aggregate output it produces.

02

SRAS curve representation

The curve is

Real GDP is plotted on the x-axis, while price level is plotted on the axis in the diagram above.

03

Shift of SRAS

Equilibrium E0is achieved by intersecting AD and SRAS0.
Y0represents output, whereas P0represents price level.
Equilibrium changes from E0to E1when the SRAS curve moves leftward from SRAS to SRAS1.
Price level climbed from P0to P1as a result of the shift to the left, but GDP declined from Y0toY1.

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Most popular questions from this chapter

How would a dramatic increase in the value of the stock market shift the AD curve? What effect would the shift have on the equilibrium level of GDP and the price level?

How is recession illustrated in an AD/AS model?

If households decide to save a larger portion of their income, what effect would this have on the output, employment, and price level in the short run? What about the long run?

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

Name some factors that could cause the SRAS curve to shift, and say whether they would shift SRAS to the right or to the left.
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