SRAS: Short Run Aggregate Supply
Time too short for wages to adjust to price level.
Workers may not be aware to change in real wages due to inflation and have adjusted their labour supply decisions and weigh demands accordingly.
Nominal wages in among of money received per day, per hit, or per year.
Sticky wages: nominal wage level is set according to an initial price level and does not vary.
Time too short for wages to adjust to price level.
Workers may not be aware to change in real wages due to inflation and have adjusted their labour supply decisions and weigh demands accordingly.
Nominal wages in among of money received per day, per hit, or per year.
Sticky wages: nominal wage level is set according to an initial price level and does not vary.
1. Keynesian/Horizontal:
- Price Levels and Wage Levels FIXED
- Employment Level FLEXIBLE
- Output depends upon changes in employment
2. Intermediate:
- Price Level and Employment Level FLEXIBLE
- Wage Level FIXED
- Output depends upon changes in price level and unemployment
3. Classical/Vertical
- Price Level FLEXIBLE
- Wage Level and Employment Level is FIXED
- Output depends on changes in price level
Flexible wage and price level
Offset eachother
You did fairly well in explaining the 3 different types of short-run AS. I'm still a little confused on how to differentiate them. Graphs of each and possibly a video would've helped refresh my memory better.
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