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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.
Why is the long run aggregate supply LRAS curve vertical?
The Long-Run Aggregate Supply Curve is vertical at full-employment GDP with respect to the price level. In the long-run the quantity of output supplied depends on the economy's resource endowment, technology, and its governing institutions. The price level does not affect these variables in the long-run.
Can the aggregate demand curve move independently of the aggregate supply curve?
Yes, the aggregate demand curve can move independently of the aggregate supply curve. Factors such as changes in consumer confidence, monetary policy, and fiscal policy can shift the aggregate demand curve without directly affecting aggregate supply. For example, an increase in government spending can boost aggregate demand while aggregate supply remains unchanged in the short term. However, over time, changes in demand can influence supply as businesses adjust to new economic conditions.
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.
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.
Why is the long run aggregate supply LRAS curve vertical?
The Long-Run Aggregate Supply Curve is vertical at full-employment GDP with respect to the price level. In the long-run the quantity of output supplied depends on the economy's resource endowment, technology, and its governing institutions. The price level does not affect these variables in the long-run.
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.
Can the aggregate demand curve move independently of the aggregate supply curve?
Yes, the aggregate demand curve can move independently of the aggregate supply curve. Factors such as changes in consumer confidence, monetary policy, and fiscal policy can shift the aggregate demand curve without directly affecting aggregate supply. For example, an increase in government spending can boost aggregate demand while aggregate supply remains unchanged in the short term. However, over time, changes in demand can influence supply as businesses adjust to new economic conditions.
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.
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.
Is the long run aggregate supply curve upward sloping?
No, the long-run aggregate supply (LRAS) curve is typically depicted as vertical. This indicates that in the long run, the total output of an economy is determined by factors such as technology, resources, and labor, rather than the price level. In contrast, the short-run aggregate supply (SRAS) curve is upward sloping due to price and wage stickiness, allowing for temporary increases in output in response to higher demand.
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 key difference between the classical and Keynesian aggregate supply functions?
Classical Aggregate Supply function is vertical whereas the Keynesian Aggregate Supply function is positively sloped.
Define aggregate supply and describe the conditions underlying each of the three major segments along a short-run aggregate supply curve?
Aggregate supply is just the amount of goods and services a firm will product over a variety of price ranges. The segments of the Aggregate supply curve goes as follows: the horizontal range: producers can increase output without increasing price/cost ( this is known as SRAS -short run aggregate supply it is horizontal because not a lot can change in the short run) countries are usually here during a recession The sloped range: this is the second segment of curve, it shows economic growth. in this part the price increases as output increases. this is the part of the curve where the country lies between recession and inflation. the vertical range: this is also known as LRAS or long run aggregate supply it is completely vertical. the optimal place to be on the curve is where the second and third segment meet. this is because once you hit the vertical range producers no longer can increase output and prices can only increase. this is as you've guessed the inflation part of the graph because prices increase while output stays the same. hope this helps :)
Why is money supply curve vertical?
The money supply curve is assumed to be vertical by many textbooks based on the belief that the supply of money is unaffected by the changes in interest rates.
