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Shifting Short Run Aggregate Supply definitions

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  • Short Run Aggregate Supply
    Total output firms are willing to produce at various price levels in the short term, influenced by resource and expectation changes.
  • Long Run Aggregate Supply
    Vertical curve representing maximum sustainable output, determined by available resources and technology, unaffected by price level.
  • Factors of Production
    Inputs like labor, capital, and natural resources that determine the economy’s productive capacity and influence supply shifts.
  • Labor
    Human effort available for production; increases or decreases can shift aggregate supply right or left, respectively.
  • Physical Capital
    Machinery, buildings, and equipment used in production; more of it boosts output and shifts supply right.
  • Human Capital
    Skills and knowledge of workers; higher levels enhance productivity and shift supply right.
  • Natural Resources
    Raw materials like oil or timber; discoveries or losses directly impact the economy’s output capacity.
  • Technology
    Innovations or advancements that improve production efficiency, typically causing supply to shift right.
  • Expectations
    Beliefs about future price levels; optimism or pessimism can prompt firms to adjust current output.
  • Supply Shock
    Unexpected event, such as a resource discovery or loss, that immediately alters production costs and output.
  • Price Level
    Average of current prices across the economy, serving as a key axis in aggregate supply analysis.
  • Real GDP
    Total value of goods and services produced, adjusted for inflation, used to measure economic output.
  • Adjustment for Past Expectations
    Correction in supply when previous forecasts about prices prove inaccurate, shifting output to reflect actual conditions.
  • Natural Rate of Unemployment
    Baseline unemployment level; increases reduce available labor and shift supply left.