Aggregate Supply

Aggregate Supply- The level of GDR that firms will produce at each price level (PL)
Long-Run
Period of time where input prices are completely flexible and adjust to changes in the price level. In the long run the level of real GDP supplied is independent of the price level
Short-run
Period of time where input prices are sticky and do not adjust to changes in the price level. In the short run level of real GDP  supplied directly to the price level
The LRAS (long run aggregate supply) marks the level of full employment in the economy (analogous to PPC) because input prices are completely flexible in the long-rin changes firms real profits and therefore do not change firms level of output thid means LRAS is vertical at the economy level of full employment

Changes in SRAS

An increase in SRAS is seen as a shift to the right and a decrease is seen a shift to the left

Determinants of SRAS:

1. Input prices
2. Productivity
3. legal institutional environment 

Domestic resource prices

• wages 75% of business cost
• Cost of capital 
• raw materials

Foreign Resource Prices (FRP)

Increase in FRP shifts SRAS <

decrease in FRP shifts SRAS >

more productivity = lower unit production cost = SRAS >

low productivity = SRAS<

• represents the transactions in an economy 

-Product Market: place where goods and services are produced by businesses 

-Factor Market:  place where households sells resources and businesses buy resources  

-Firms: organization that produces goods and services for sale 

-Households:  a person or a group of people that share their income 

•    sells factor as production to businesses  

Unanticipated Inflation

Who is hurt by inflation:

1. Savers

2 Creditors/Lenders

3.People on a fixed income (Elderly, Welfare)

Who is helped by inflation:

1. People who owe debts

GDP And Unemployment

Gross Domestic Product (GDP) is the broadest quantitative measure of a nation's total economic activity. More specifically, GDP represents the monetary value of all goods and services produced within a nation's geographic borders over a specified period of time.

Other Info on GDP
Real GDP = P X Q
Nominal = P X Q
The value of output produced in current prices can increase from year to year it is the value. In constant based year prices price doesn't change but quantity does it can increase from year to year.

If you want to measure economic growth use real GDP
If you want to measure Inflation use nominal Real GDP adjusted for inflation

GDP deflator- price index used to adjust from nominal to real GDP

 Formula for GDP Deflator *
In base year always equal 100 In years after base year GDP is greater