03/30/2014 Unit 5 SRAS

• SRAS
• Time too short for wages to adjust to the price level because workers may not be aware of changes in their real wages due to inflation, therefore they adjust their labor decisions accordingly as well as wage demands. 
• Nominal wage- The amount of money received per day, per hour, per year. 
• Behavior of the SRAS Curve

• Long run AS- Time long enough for wages to adjust to the price level. 
• Key assumption:
• -wages and price is flexible. 
• -change in wage and price offset each other. 
• -LRAS is represented by a vertical line.