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Retiring the Short-Run Aggregate Supply Curve

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  • S. Kirk Elwood

Abstract

The author argues that the aggregate demand/aggregate supply (AD/AS) model is significantly improved—although certainly not perfected—by trimming it of the short-run aggregate supply (SRAS) curve. Problems with the SRAS curve are shown first for the AD/AS model that casts the AD curve as identifying the equilibrium level of output associated with each price level (as found in most intermediate macroeconomics textbooks). Problems are then shown for the AD/AS model in which the AD curve is more modestly assumed to capture the relationship between the price level and aggregate expenditures (as found in principles of economics textbooks).

Suggested Citation

  • S. Kirk Elwood, 2010. "Retiring the Short-Run Aggregate Supply Curve," The Journal of Economic Education, Taylor & Francis Journals, vol. 41(3), pages 314-325, June.
    • Handle: RePEc:taf:jeduce:v:41:y:2010:i:3:p:314-325
    DOI: 10.1080/00220485.2010.486736
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    References listed on IDEAS

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    1. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
    2. David Colander, 1995. "The Stories We Tell: A Reconsideration of AS/AD Analysis," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 169-188, Summer.
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