Question

Explain why the aggregate supply (AS) curve slopes upward in the short-run. Explain how the concept...

Explain why the aggregate supply (AS) curve slopes upward in the short-run. Explain how the concept of “full employment” is related to a vertical AS curve in the long-run.

Homework Answers

Answer #1

In the short run, wages are sticky. So, as price level increases (decreases), ceteris paribus profit of firms increases (decreases) because higher (lower) output price increases (decreases) revenue without increasing (decreasing) labor cost. As a result, quantity supplied by each firm increases (decreases). At an aggregate level, aggregate supply increases (decreases). Therefore AS curve is upward rising in short run.

In the long run, production capacity of all firms is limited by availability of resources, factors of production and existing state of technology. Therefore output is fixed at potential output level. As a result, long run AS curve is vertical.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Explain why the SAS (short-run aggregate supply) curve slopes upward and the LAS (long-run aggregate supply)...
Explain why the SAS (short-run aggregate supply) curve slopes upward and the LAS (long-run aggregate supply) curve is vertical
Question 11 pts The aggregate supply curve is vertical in the short run. slopes downward because...
Question 11 pts The aggregate supply curve is vertical in the short run. slopes downward because of sticky wages and prices. is vertical in the long run. slopes downward largely because of the trade effect and wealth effect. Flag this Question Question 21 pts The aggregate supply curve is vertical in the short run. slopes downward because of sticky wages and prices. is vertical in the long run. slopes downward largely because of the trade effect and wealth effect. Flag...
Explain why the short-run aggregate supply curve is upward sloping.
Explain why the short-run aggregate supply curve is upward sloping.
Explain why nominal wage is "sticky" in the short run, and why the short-run aggregate supply...
Explain why nominal wage is "sticky" in the short run, and why the short-run aggregate supply curve is upward sloping? Explain why the long-run aggregate supply curve is a vertical line. Part b (10 points) In labor macroeconomics, the process to determine nominal wage between the employer (firm) and the workers, commonly known as the wage determination process is often illustrated as the following graph. Explain in words the wage determination process. Hint: The wage determination process indicates how an...
If all prices are stuck at a predetermined level, then when a short-run aggregate supply curve...
If all prices are stuck at a predetermined level, then when a short-run aggregate supply curve is drawn with real GDP (Y) along the horizontal axis and the price level (P) along the vertical axis, this curve: a) is vertical. b) is horizontal. c) slopes downward and to the right. d) slopes upward and to the right.
Explain why the SAS curve slopes upward and the LAS curve is vertical.
Explain why the SAS curve slopes upward and the LAS curve is vertical.
with the use of Aggregate demand and the short run and long run aggregate supply curve,...
with the use of Aggregate demand and the short run and long run aggregate supply curve, explain and illustrate how policy marker can use fiscal policy to get the economy out of recession and stop inflation.
Why is the long-run aggregate-supply curve vertical?
Why is the long-run aggregate-supply curve vertical?
Assume that the long-run aggregate supply curve is vertical at Y = 3,000 while the short-run...
Assume that the long-run aggregate supply curve is vertical at Y = 3,000 while the short-run aggregate supply curve is horizontal at P = 1.0. Suppose that the country experiences an important crop failure due to severe tornadoes. What will be the immediate impact following the shock? Select one: a. the short-run aggregate supply curve shifts up, the price level rises, and output falls. b. the price level falls, output falls, and the short-run aggregate supply curve shifts down. c....
If the economy begins at a short-run equilibrium below potential output, then there would be upward...
If the economy begins at a short-run equilibrium below potential output, then there would be upward pressure on wages but not prices upward pressure on prices but not on wages downward pressure on wages but not on prices downward pressure on both wages and prices If the economy is at a short-run equilibrium above potential output, which of the following would occur upward pressure on wages because the labor market is operating above full employment upward pressure on wages because...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT