Short-Run Aggregate Supply- Macro Topic 3.3 [STARTS AT 0:11] The aggregate supply curve is going to show you the production of everything inside the entire country. It's not like the market supply. It's not the supply of one product. It's supply of all products. So right here, we have the price level. Down here, we have the real GDP produced. And we have an upward-sloping, short-run aggregate supply curve. So when the price level increases, producers will produce more output. Like the market supply curve, this curve can shift. It increases to the right, and it decreases to the left. So there's a bunch of things that will shift this curve, things like key resources. So if there's an increase in the price of oil or steel or labor, then that would definitely change the amount we can produce. Another shifter would be productivity. If there's an increase in machines and technology, or just machinery and capital stock, then this aggregate supply curve would shift to the right, because we can produce more. Another shifter might be some sort of government action that affects producers, like taxes or subsidies. I've got four scenarios right here. I want you to figure out which ones will increase or decrease aggregate supply. So go down the line, pause the video, and see how you do. An increase in nominal wages would mean producers can't produce as much because there's an increase in the price of a key resource-- labor. So the aggregate supply curve would shift to the left. An increase in physical capital means we have more tools and more machinery, and so the aggregate supply curve would shift to the right because we can produce more. A significant decrease in corporate taxes means producers would have more money to produce more, and so that would shift the aggregate supply to the right. And for the last one, if everyone expects higher inflation in the future, this is going to decrease the aggregate supply, because businesses are going to have their workers come to them and demand higher wages, because they expect higher prices. So if we expect an increase in inflation, that's going to decrease the aggregate supply. So up to this point, we've been talking about the short-run aggregate supply, but there's also a long-run aggregate supply, which is vertical. Now, to learn about this, you got to watch the next video. Till next time.