Short run aggregate supply

An upward sloping curve, relatively flat below the full employment level of output, and relatively steep beyond the full employment level, showing the amount of output a nation’s producers will supply at a range of price levels in a particular period of time. The curve’s shape reflects the fact that output cannot grow beyond the full employment level due to the limited factors of production available in the economy, but when aggregate demand falls output will decline due to the inflexibility of wages in the short run.

« Back to Glossary Index