So just like with market demand and supply, we learned how to shift the curves left and right. We already discussed how to shift aggregate demand. Now let's see how we shift our short run aggregate supply. So there's gonna be factors that change other than the price level affecting our aggregate supply. Right? So now we're thinking about our short run aggregate supply curve and what factors can affect it to make it shift left or right. Okay. So aggregate supply is different in the short run and in the long run, and one thing we said about the long run, so over here, I want to say something about the long run, remember that we had this straight up and down curve because it was fixed in the long run, how much we were going to be able to produce based on what's available in the economy. Right? So in general, what we see in the long run is shifts to the right and for the most part over time we see shifts to the right because of things like technology increasing, there's just general increases increases in population, there's just usually more and more, there has to be some sort of event causing it to shift to the left. That'll that'll show shift our long run to the left, right. But in general what we see is it's shifting to the right, just because of a general increase in resources such as labor from more population, better technology, things like that. In the short run we're going to see a few different things coming into play. Okay, so the short run, we um we're gonna deal with this curve, remember that we have in the short run. So I'm gonna draw too two graphs here. And remember we had our short run aggregate supply looking something like this. Right. And what were our our axes on these graphs? We have our price level, remember price level throughout the economy, and Real GDP the quantity of goods and services being produced in the economy. Same thing over here. Okay, so when we talk about um shifting these curves, we're gonna use that same idea of something good happening for short for short run aggregate supply, something bad happening for short run aggregate supply. Right? So let's start over here with something good happening, right? If something good happens, what's gonna happen, we're gonna shift to the right, right? We say good things shift our curve to the right, and if that's our first curve, well, our new curve is gonna be somewhere over here, right, somewhere to the right, and if something bad happens for short run aggregate supply, well, we're gonna shift that curve to the left, so it would go this way, we would have our new short run aggregate supply somewhere to the left, so if this is aggregate one and here's two, right? Um So that's, you should be familiar with that from when we were shifting curves earlier in the course, right? But now we're gonna be dealing with it on the aggregate level. So let's see what could be some of the reasons that this short run aggregate supply could shift to the left or to the right. Cool. Let's pause here and do that in.
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Alright. So now let's see the different things that can affect our short run aggregate supply and cause it to shift right or to the left. Now in the top table it should look familiar to what we saw with long run aggregate supply. These are factors of production. The availability of, factors of production of resources are going to affect us in the short run as well as in the long run. So you can imagine if there's an influx of labor, well that's gonna an influx of labor into the economy. Well that's going to shift us to the right in the short run but also the affect the long run because there's more availability of resources. Right? So in this top graph it's very similar to what we see in the long run and both of those curves are going to be affected by by these types of ideas. So labor if we have, you know, again, immigration into the into the country, immigration to us. So this would shift us to the right right, a good example, something that's increasing the supply in the short run and a bad would shifted to the left. So immigration to the U. S. That would increase it just like before and immigration from the U. S. Well let's do a different example here. What about something with the natural rate of unemployment if the rate of unemployment goes up? Well that would be bad right because there's less labor available. If the rate of unemployment increases, well there's less labor available. So that would decrease our short run aggregate supply about physical and human capital. Now I lump these together because if there's just more of it, if there's more it's a good thing, there's less, it's a bad thing, right? More physical capital. More human capital people being smarter. That's a good thing. And it'll shift us to the right. Um How about natural resources? Again, this is something where if we have more natural resources, it's going to shift us to the right and less is going to shift us to the left right. We we have a new oil reserve, we uh start using some some new protected land that had a bunch of trees on it. And now all of a sudden we can chop them down. Well, that would be good for for our short run aggregate supply and technology. Again, whenever there's new technology, this is gonna be good and a bad example. Well, again, with technology, we generally just see increases. It's hard to have decreases in technology. We would have to be some sort of catastrophe that would be decreasing our technology in general. Alright, so those are our factors of production very similar to what affects our long run aggregate supply curve. But in the short run there's also expectations, expectations are also going to be affecting our curve here. So, if we have expectations of the future price level. So this isn't the current price level. If we think the price level is gonna change in the future. So now firms are saying, we see price levels are, analysis looks like it's going to increase in the future. Well, that's a good thing. They're gonna start producing more to be able to meet that demand at those higher prices. They want, they want to be able to produce more to have uh enough ready to to to meet those higher prices. Right? So that would be an increase uh to the short run aggregate supply when they expect higher future price levels, because it means higher profit with higher prices. Alright. And it'll be a shift to the left if they expect future price levels to decrease. Now, a supply shock, a supply shock. Well, this is an unexpected event. So, this is an unexpected thing that happens. So, maybe we unexpectedly find some new key resource, right? Some oil deposit, find an oil deposit. Well, that could be a good thing for our, for our aggregate supply, right? Because many businesses use oil and now there's more available, which brings down the prices of oil and it'll shift to the right, right? It brings down the cost for the, for the economy, or if there's some sort of um loss of a key resource or spike in the price, right? Some sort of scarcity, scarcity, um that that would be a bad thing. Right? So, this is an unexpected event that's gonna affect us immediately in the short run. Okay. And finally an adjustment for past expectations. So, maybe we had some expectation in the past about the future price level, right? So in the past this is gonna be um the opposite of our current expectations. So maybe in the past we expected the price levels to decrease, right? So we had shifted to the to the left, our short run aggregate supplied shifted to the left, there was less production because of the the lower expected price, but then the price didn't lower as much. So now we're adjusting back up. So unfound lower price expectations would shift us back to the right, because previously we had shifted to the left right, this would have shifted us to the left, and now we're shifting back to the right when those previous expectations weren't met. So this is when other when previous expectations aren't met, and this would be unfound higher prices, right? Because we had previously increased our production and now we're adjusting for what actually happened, okay, would shift us back to the left. So, these are things that could shift our short run aggregate supply, Let's go ahead and see how all of this works together