The cost of exported goods is the factor that cannot shift the aggregate supply curve. Firms decide what quantity to supply based on the profit they expect to earn. Profit, in turn, is determined by the price of the output the firm sells and also by the price of labor or raw materials – the inputs the firm needs to purchase. The aggregate supply curve shows the total amount of output—real GDP—that firms will produce and sell at each price level.
An upward-sloping aggregate supply curve—also known as the short-run aggregate supply curve—shows a positive relationship between the price level and real GDP in the short run. A downward-sloping aggregate demand curve shows the relationship between the price level for output and the quantity of total expenditure in the economy.
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