ECONOMICS (CBSE/UGC NET)

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ECONOMICS

AGGREGATE SUPPLY

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Section 2 on the Keynesian LRAS curve is when the curve begins to slope upwards. Here there are bottlenecks in supply with s shortage of labour or certain raw materials.
A
Yes, I understand this from the notes
B
No, I don’t understand this from the notes
C
No, I don’t understand this, as I have not read the notes
D
None of the above
Explanation: 

Detailed explanation-1: -The aggregate supply curve slopes up because when the price level for outputs increases while the price level of inputs remains fixed, the opportunity for additional profits encourages more production.

Detailed explanation-2: -Keynesian long run aggregate supply curve Keynesians believe that at low levels of output and employment, there would be spare capacity in the economy which would enable firms to increase their output without increasing the cost per unit produced. Here the LRAS curve will be horizontal.

Detailed explanation-3: -For example, the short-run aggregate supply curve slopes upward due to the lag between product prices and resource prices that makes it profitable for firms to increase output when the price level rises. The long-run aggregate supply curve is vertical when a country is at full employment.

Detailed explanation-4: -The Sticky Price Theory The sticky price theory states that the short-run aggregate supply curve slopes upward because the prices of some goods and services are slow to adjust to changes in the overall price level.

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