4 good questions and answers: "The AD-AS Model - shifts of the SRAS Curve"

Reminder: what are the determinants of the SRAS curve?  What are the events that shift the SRAS curve called?
  • Changes in commodity prices
  • changes in nominal wages
  • changes in productivity
the events that shift the SRAS curve are called supply shock
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When does a shift of the SRAS curve to the right occur? And what happens to the SR equilibrium aggregate price level and SR equilibrium aggregate output? In which direction do they both move?
  • a shift of the SRAS curve to the left occurs when there is a Positive supply shock
  • this will decreases the production costs, and it will increase the quantity producers are willing to  supply, leading to a rightward shift of the SRAS curve.
  • here they move in opposite directions, the aggregate price level decreases and the aggregate output increases
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What do we call the falling of aggregate output?
Stagnation
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What do we call the combination of inflation and stagnation? And how do we describe it?
the combination of inflation and stagnation is called stagnation
stagnation occurs when the fall in output leads to rising unemployment, while purchasing power of consumers is squeezed by rising prices
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