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 long-run aggregate supply curve assumes that nominal wages are fixed. Real GDP is below the full-employment level and prices have risen recently. increase in prices of inputs like labour, raw material, etc. The increased price of the factors of production leads to a decreased supply of these goods.
Detailed explanation-2: -long-run aggregate supply (LRAS) a curve that shows the relationship between price level and real GDP that would be supplied if all prices, including nominal wages, were fully flexible; price can change along the LRAS, but output cannot because that output reflects the full employment output.
Detailed explanation-3: -The long-run aggregate supply curve is vertical when a country is at full employment. 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.
Detailed explanation-4: -The only factors that impact the long-run aggregate supply curve are capital, labor, and technology. Since it is vertical in the long-run, the curve may shift to the right due to more capital, more labor availability, and better technology.