ECONOMICS
AGGREGATE SUPPLY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Yes, I understand this from the notes
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No, I don’t understand this from the notes
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No, I don’t understand this, as I have not read the notes
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None of the above
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Detailed explanation-1: -Excess supply of labour (involuntary unemployment) is a feature of labour markets, even in equilibrium. If economy-wide demand for goods and services is too low, unemployment will be higher than its equilibrium level and may persist.
Detailed explanation-2: -When prices are fixed, aggregate demand affects unemployment: with a higher aggregate demand, firms find more customers; this reduces the idle time of their employees and thus increases their labor demand; and this reduces unemployment.
Detailed explanation-3: -The aggregate supply curve shifts to the right as productivity increases or the price of key inputs falls, making a combination of lower inflation, higher output, and lower unemployment possible.
Detailed explanation-4: -The aggregate labor demand curve-the labor demand curve for the entire economy-is simply the sum of all of the firms’ individual labor demand curves.