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What happens to the aggregate supply curve as the price level increases?
Wiki User
∙ 7y ago
Firms have more of an incentive to increase output
Wiki User
∙ 7y ago
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What happens to the income multiplier if the aggregate supply curve is vertical?
the multiplier is zero.
Fiscal and monetary policies are used to shift the aggregate supply curve or the aggregate demand curve?
Aggregate demand curve.
Is demand needed in equilibrium?
Yes. Equilibrium is created at the intersection of the Demand curve and Supply Curve. Equilibrium can be shifted if the Demand curve increases or decreases, and the same happens when the Supply curve increases or decreases. Without demand, you would just have a Supply curve.
The quantity of full employment occurs when aggregate supply reaches what range?
This happens when the employment is somewhere between 2% and 13%. This range is necessary in order to control the levels of inflation in the country.
Why the aggregate supply curve has its particular shape?
The aggregate supply curve is positively sloped because at a higher price level, producers are more willing to supply more real output.
According to aggregate supply curve what happens as the price level increases?
firms have more of an incentive to increase output
What happens to the income multiplier if the aggregate supply curve is vertical?
the multiplier is zero.
Fiscal and monetary policies are used to shift the aggregate supply curve or the aggregate demand curve?
Aggregate demand curve.
Is demand needed in equilibrium?
Yes. Equilibrium is created at the intersection of the Demand curve and Supply Curve. Equilibrium can be shifted if the Demand curve increases or decreases, and the same happens when the Supply curve increases or decreases. Without demand, you would just have a Supply curve.
Aggregate demand and Aggregate supply curve?
The aggregate demand curve show what consumers are willing to buy at a given price level, whereas the aggregate supply curve shows what producers are willing to produce at a given price level.
The quantity of full employment occurs when aggregate supply reaches what range?
This happens when the employment is somewhere between 2% and 13%. This range is necessary in order to control the levels of inflation in the country.
Why the aggregate supply curve has its particular shape?
The aggregate supply curve is positively sloped because at a higher price level, producers are more willing to supply more real output.
Ceteris paribus the price level will fall when A The aggregate supply curve shifts to the left B The aggregate demand curve shifts to the left C The aggregate demand curve shifts to the right?
b
What is the meaning of the intersection of three curves the AD curve and the short run AS curve and the long run AS curve?
Using the AD-AS model, start with a long-run equilibrium and assume velocity V is constant, then analyze the following case: The pandemic recession is the result of adverse Demand and Supply shocks. a. What happens to the Aggregate Demand curve and What happens to the Aggregate Supply curve? b. What happens to output Y and the price level P in the short run? c. What short-run problems are created for the labor and goods markets? d. What kinds of stabilization policies are required to stimulate recovery? Describe the 5 specific tools and their directions of change to be used.
Why does the slope of the aggregate supply curve change from the short run to the long run?
Aggregate supply is a measure of the total goods and services produced by an economy at various price levels, either in the short run or in the long run. Short run aggregate supply curve is assumed to be upward sloping. Higher prices for goods and services means more profit for suppliers, so they will produce more goods and services. Long run aggregate supply curve is assumed to be vertical. Short run aggregate supply curve is curved because prices can change. A change in the price level means a movement along the short run aggregate supply curve. An increase in costs results in a fall in aggregate supply because the output is less at every price level. A decrease in costs results in a rise in aggregate supply because the output is more at every price level. In the long run, the aggregate supply is assumed to be independent of price level. In other words, the economy is at the maximum output possible. Full employment level has been reached and real GDP has reached its maximum potential, so the long run aggregate supply curve must be drawn as vertical. Increases in the quality and number of factors of production will cause the productivity of the suppliers to increase, and the long run aggregate supply will shift right.
Using the AD-AS framework what is the impact on equilibrium price and output when there are increase in aggregate demand and aggregate supply simultaneously?
AD-AS represents aggregate demand curve (AD) and aggregate supply curve (AS). "In the aggregate demand-aggregate supply model, each point on the aggregate demand curve is an outcome of the IS-LM model for aggregate demand Y based on a particular price level. Starting from one point on the aggregate demand curve, at a particular price level and a quantity of aggregate demand implied by the IS-LM model for that price level, if one considers a higher potential price level, in the IS-LM model the real money supply M/P will be lower and hence the LM curve will be shifted higher, leading to lower aggregate demand; hence at the higher price level the level of aggregate demand is lower, so the aggregate demand curve is negatively sloped
In which range of the aggregate supply curve is the price level constant?
Horizontal.
