Short-Run Aggregate Supply

The short-run aggregate supply (SRAS) curve is upward-sloping, and the aggregate demand (AD) curve is downward-sloping. The vertical axis is measured using the average price level. While the horizontal axis is still measured using quantity, there is another layer of detail to understand here regarding gross domestic product, or GDP.

To review, Gross Domestic Product, or GDP, is the sum of all final goods and services produced in an economy during a given time period, usually a year. Real GDP is GDP accounting for inflation, or the change in average price level during that time period.

The horizontal axis is measured using Real GDP because it effectively represents the aggregate quantity produced/consumed in the economy.