00:01
So here we're talking about short run aggregate supply.
00:03
Let's start by drawing it just to keep ourselves straight.
00:06
Aggregate supply is a story about prices versus output, and short run aggregate supply is an upward sloping function, right? this represents firm's behavior, right? it says that like a regular supply curve, right? firms need higher prices, need, i don't need the need higher prices to produce more, right? that's what is going on in the short run aggregate supply curve, right? it tells us that the firms who are producing stuff need higher prices to keep producing more and more real output, right? so we want to increase short run aggregate supply, that is we want to shift it up or shift it out, right? this is very slightly weird, right? what is an increase? an increase in aggregate demand, aggregate supply world usually means more why, right? it can be tempting to look at this and think that increase is going up, but an increase in supply means that we are supplying more, right? an increase in supply is supplying more, right? so this is going to say, right, the increase in supply says that for any price, the firms are willing to supply more output.
01:32
For any price, they're willing to supply more output.
01:35
So we need to shift short rate aggregate supply out, right? the first thing it's not, it's not the price level up or down, right? those are the first two choices.
01:49
Those are not it.
01:50
The price level is a movement along the curve.
01:56
Movement along the short run aggregate supply curve.
01:59
As the price level changes, we get different points on the curve, but the curve doesn't shift, right? and when you say an increase in short run aggregate supply, the whole curve is shifting.
02:10
We're not saying an increase in the quantity of aggregate supply, right, or the quantity of supply.
02:16
We're talking about an increase in the whole relationship, right? so the correct answer here is c, right? workers take wage cuts.
02:31
Oh, that was a horrible, right? and the idea is this reduces expenses to the firm, and so they can produce more for less, which is what the outward shift of the short -run aggregate supply curve is saying, right? this is the correct answer...