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macro in a nutshell
The SAS curve

The SAS curveThe short-run (or surprise) aggregate supply (SAS) curve is a positively sloped line in a diagram with inflation measured along the vertical and income measured along the horizontal axis. This line indicates how much output all firms are willing to produce at different inflation rates.

The SAS curve draws together the production function and the employment decisions obtained at differed inflation rates (or price levels) in the labour market. The SAS curve is derived in two steps:

Step one
combines the production function and the labour market to obtain the AS curve. The AS curve indicates how much output firms produce at different price levels.

Step two
shows how the AS curve, which has the price level on the vertical axis, can be redressed as an SAS curve, which has inflation on the vertical axis.

Further reading on pp. 167-168.


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