Question

1. For each of the following economic conditions, place an X in the table to indicate the appropriate range in the Aggregate Supply Curve

Condition	Keynesian	Intermediate	Classical
Job openings are near historical highs
Strong GDP growth is accompanied by increasing inflation
The nation is suffering through a severe recession
A mid-point in the business cycle expansion phase
GDP is expanded but prices are stable
Increasing job growth is accompanied by moderate inflation
The nation’s factories are running at capacity

Answer 1

Maximum employment implies that there is full employment equilibrium and it is a part of classical range of aggregate supply

there is a strong GDP growth rate and there is an increasing inflation which means aggregate supply is upward sloping and we are in the intermediate range.

There is a severe recession which means GDP has reduced strongly so we are in the keynesian range

midpoint in the business cycle expansionary face will occur when there is an intermediate range of aggregate supply

GDP is expanded but prices are not changing enough which means we are in the keynesian range

Job growth and inflation both can occur only when they are in the intermediate range

full capacity means full employment level and so we are in the classical range of aggregate supply.