The Short-Run Aggregate Supply Curve

In this video, we explore how rapid shocks to the aggregate demand curve can cause business fluctuations.
As the government increases the money supply, aggregate demand also increases. A baker, for example, may see greater demand for her baked goods, resulting in her hiring more workers. In this sense, real output increases along with money supply.
But what happens when the baker and her workers begin to spend this extra money? Prices begin to rise. The baker will also increase the price of her baked goods to match the price increases elsewhere in the economy. As prices increase, workers demand higher wages to be able to afford goods at a higher price.
In this example, the increase in money supply initially increased nominal and real wages for the baker and her employees, but as prices begin to rise, real wages begin to fall, and workers can afford less. Overtime, the demand for the baker’s goods will fall to pre-spending levels.
The takeaway? An increase in spending can increase output and growth in the short run, but not in the long run. To model this scenario, this video will show you how to draw a short-run aggregate supply curve. Let’s get started!
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This is easily the most effective and professional economics channel on KZbin. You guys have really nailed it!

[@MarginalRevolutionUniversity]

Thank you! -Roman

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You have saved my interest in my Economics degree, THANK YOU VERY MUCH!!

[@PopStevo]

Awesome series of vids!!! Love how you demistify macro

[@engmac8178]

I love this channel, definitely turning notifications on, keep the videos up, very informative.

[@venjaminschuster2797]

Best Channel! Thanks a lot! This is so great!

[@tylervinton1463]

Teaching econ for the first time and I use these to refresh my memory!

[@TheBIGJake111]

Thank you so much for these videos, I excel with microeconomics (partly thanks to my principles class using your book!) but its been a while since I took any macro and I will be taking intermediate macro next semester, its great to have a easily accessible and free review :D.

[@MarginalRevolutionUniversity]

Glad we could help, Jake! -Meg

[@mathematicssolved]

Keep making these videos! You guys are doing great!

[@ma.eugeniasaliva4878]

Thank you for these videos!! they are sooo clear and so good! Keep up the good work !!!

[@uddek]

Love this channel. I'm a visual learner and these videos nail it.

[@adrianomattia5625]

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[@right-winglibertarian3896]

tizio scemo lol

[@ibrahimalali7436]

😂😂😂😂😂😂😂

[@rishiagrahari4212]

Why do you want to be like the govt? Fuck the economy??

[@faimulahsan3413]

Best channel ever

[@piyushraj4325]

awesome explanation with great teaching way

[@dailtonluizmagnagojunior1321]

Amazing video!

[@ministeriounamanoeneldesie1615]

Hey Professor, nice class.

[@kleocatra9675]

Someone needs to forward this to the Federal Reserve they forgot this.

[@sdarpan]

Does this apply to property market where cheap money (increasing money supply) due to tax concessions, low interest rate etc leading to inflating property prices and growth in short run but then in long run reducing the growth rate and leaving everyone with inflated property prices? I.e. Property bubble?

[@ExcelTutorials1]

Nice video!

[@karolinakiecka3475]

Does downward nominal wage rigidity increase unemployment? I have an exam on Monday on Macroeconomics and one of the questions will be on DNWR and how it affects the outcomes of an expansionary fiscal policy. PLEASE HELP

[@Illawarra13]

If there is generalised spare capacity in an economy, increases in aggregate demand will lead to real growth which is contrary to this particular video!

[@12white1]

Are the prices at 3:10 increasing just because the dollar deprechiates against other currencies? If yes how would that situation behave if we would have one world government with one currency?

[@leinadinside9568]

So, the short run supply curve is also an aggregate of all the marginal cost curves?

[@brownlow3400]

..Eh?! They start by assuming sticky prices and wages along with increased employment/output. Increased money supply is NOT inflationary under those conditions. Then from ~2:55 they throw all that out and make the opposite assumptions. WTF? Also, it's flat false to say workers will be less willing to work overtime if they discover that their real wage has less purchasing power. More like the opposite. Since they must house and feed families, they aren't simply making a trade-off with leisure.

[@NL-tq1yr]

That's Economics for you

[@bashydee4936]

axis are labelled wrongly this isn't the Phillips curve

[@perseustitanslayer3168]

Where do you teach sir?? I want to be taught by you in class

[@MarginalRevolutionUniversity]

George Mason University in Fairfax, VA. There's a MA fellowship where you can both study econ and work at MRU! Details here: learn.mruniversity.com/join-the-team/ -Roman

[@LaureanoLuna]

6:23: "Change in aggregate demand doesn't change the real factors...". Of course, it can change them if part of the increase in demand is investment demand. But even if it doesn't, this does not imply that the real growth effects of increased aggregate demand will vanish in the long run: an increase in aggregate demand may change the rate of employment of the available factors permanently, so leading to a permanent increase in GDP. These professors are lying to us; they know they are making a concealed assumption, namely, that we start from full employment, from the potential output onwards; the mechanism they put forward does not work if we start from lesser than full employment output, hence they are carefully concealing the fact that stimulating aggregate demand can take us from unemployment to full employment and the effect need not vanish.

[@byrdiethemighty]

governments with a fiat currency system under their control can and should print (or create with a few keystrokes in today's digital age) as much money as they need to spend because they cannot go broke or be insolvent unless a political decision to do so is taken.

[@mostaqueali2658]

Rather than the Inflation rate, why not use price------price being the key measure in most graphs (whilst Inflation is rather narrow is a measure of price increase/decrease of a limited basket of goods)

[@28.sevenariyan64]

i get a lil bit confuse here... fock memory :(