1. Module Aggregate Supply: Introduction and Determinants KRUGMAN'S MACROECONOMICS for AP* 18 Margaret Ray and David Anderson

2. Modules 18 & 19 Aggregate supply and equilibrium Reading

3. What you will learn in this Module : How the aggregate supply curve illustrates the relationship between the aggregate price level and the quantity of aggregate output supplied in the economy What factors can shift the aggregate supply curve Why the aggregate supply curve is different in the short run from in the long run

4. The relationship between the price level and the real GDP supplied Aggregate Supply

5. Short-Run Aggregate Supply Curve (SRAS) Why does it slope upwards?

6. Sticky Nominal Wages Nominal wage = what you get paid in current dollars. Not real wage. Why are nominal wages “sticky”? What would you do if prices went up by 1% this month.

7. Sticky Nominal Wages Price level increases. Nominal wages don’t rise as fast. Business profits increase. Hire more workers, produce more.

8. Sticky Nominal Wages Price level decreases. Nominal wages don’t fall as fast. Business profits decrease. Layoff workers, produce less..

9. Shifts of the Short-Run Aggregate Supply Curve ∆ Commodity Prices ∆ Nominal Wages ∆ Productivity

10. Team activity – SRAS Shifts Left side shift out, right side shift in. Team 1 – commodity prices Team 2 – nominal wages Team 3 - productivity

11. Individual – SRAS Shifts Activity # 24 – SRAS scenarios

12. The Long-Run Aggregate Supply Curve Flexible Wages Long Run LRAS Potential Output Factors that shift LRAS!

13. What factors shift the LRAS? Create a Word Wall

14. From the Short Run to the Long Run

15. Summary SRAS Change in Quantity of Output Shift in SRASShift in LRAS Sticky nominal wages Business profits. Fluctuations in: Commodity prices Nominal Wages Productivity Exogenous shocks Permanent growth: More resources Human capital Technology

16. Exit Ticket Aggregate Supply Scenarios