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: -The Short-run aggregate supply curve (between Keynesian and intermediate range) will be inverted l-shaped because of effects of expansionary monetary policy on relationship between price level and output.
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: -The Keynesian aggregate supply curve shows that the AS curve is significantly horizontal implying that the firm will supply whatever amount of goods is demanded at a particular price level during an economic depression.
Detailed explanation-4: -The long-run aggregate supply curve is vertical because, in the long run, resource prices adjust to changes at the price level, which leaves no incentive for firms to change their output. In the long run, prices and wages have no effect on the aggregate supply curve.