Problem 25

Introduction

A Short-run aggregate supply in a curve that illustrates the relationship between the average price level of goods and services in a country and the quantity of total output that firms will wish to produce in the short-run (fixed-wage period). Wages are fixed in the short run because of things such as labor contracts, minimum wages laws, and worker expectations. When an economy experiences stagnant growth and high inflation at equal time supply shock and their events move towards both the curves i.e, short-run and long-run aggregate supply.