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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

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?

What is the neoclassical zone of the SRAS curve? How much is the output level likely to change in the neoclassical zone?

Table 24.4describes Santher's economy.

a. Plot the AD/AS curves and identify the equilibrium.

b. Would you expect unemployment in this

economy to be relatively high or low?

c. Would you expect prices to be a relatively large

or small concern for this economy?

d. Imagine that input prices fall and so AS shifts

to the right by 150units. Identify the new

equilibrium.

e. How will the shift in AS affect the original

output, price level, and employment?

What is Keynes鈥� law?

Briefly explain the reason for the near-vertical shape of the SRAS curve on its far right.
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