Question

What are the three zones of the short-run aggregate supply (SRAS) curve? Explain.

What are the three zones of the short-run aggregate supply (SRAS) curve? Explain.

Homework Answers

Answer #1

The short run aggregate supply curve has 3 important zones:

1. Horizontal Keynesian zone:

  • It is the portion of SRAS curve on the left
  • It is relatively flat
  • In this zone the equilibrium level of real GDP IE far below potential GDP
  • The economy will be in recession
  • Cyclical unemployment is high

No much inflationary price pressure

2. Vertical neoclassical zone:

  • Vertical portion on right hand side of SRAS curve
  • Equilibrium is near potential GDP
  • Cyclical unemployment is low
  • To increase real GDP the aggregate supply must shift to right

3. Intermediate zone :

  • Upward sloping
  • Present between the other two zones
  • If AD curve crosses this portion the unemployment and inflation move in opposite direction
  • A shift of AD to right moves output close to potential GDP
  • Hence reducing unemployment
  • But it leads to higher price level and upward pressure on inflation

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
What are the three zones of the short-run aggregate supply (SRAS) curve? Explain.(200 Words)
What are the three zones of the short-run aggregate supply (SRAS) curve? Explain.(200 Words)
Draw a basic short run aggregate supply (SRAS), aggregate demand (AD) and long-run aggregate supply curve...
Draw a basic short run aggregate supply (SRAS), aggregate demand (AD) and long-run aggregate supply curve (LRAS) that shows the economy in long-run equilibrium.
An increase in expected inflation causes the short-run aggregate supply curve (SRAS) to increase (shift down...
An increase in expected inflation causes the short-run aggregate supply curve (SRAS) to increase (shift down and to the right). False True
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
Explain why the short-run aggregate supply curve is upward sloping.
Explain why the short-run aggregate supply curve is upward sloping.
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.
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.
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....
43)When the aggregate demand curve and the short-run aggregate supply curve intersect, Select one: a. The...
43)When the aggregate demand curve and the short-run aggregate supply curve intersect, Select one: a. The long-run aggregate supply curve must also intersect at the same point. b. Inflation must be increasing. c. Structural and frictional unemployment equal zero. d. The economy is in short-run macroeconomic equilibrium.
Suppose the money supply expands. What will be the shape of the short-run aggregate supply curve...
Suppose the money supply expands. What will be the shape of the short-run aggregate supply curve that yields the largest short-run increase in real GDP? a. 45 degrees b. vertical c. relatively flat d. steeply sloped
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT