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Draw the long run a agregate supply curve

Assignment Help Macroeconomics
Reference no: EM131486741

Problem -

An aggregate supply (AS) curve is described by the equation Y = YLR + a(P-PEXP), where Y is current output, YLR is the long run level of output, a is a positive constant, P is the current price level, and PEXP is the expected price level. Suppose YLR=50, a=1, and PEXP=40.

a. Draw the long run a agregate supply curve in an AD - AS ( aggregate demand - aggregate supply) diagram.

b. Using the AS equation, find the output corresponding to price levels P=40 and P =80 and place the 2 points on your diagram. Draw the short run AS curve that passes through the two points.

C. identifies the expected price level on your graph.

Reference no: EM131486741

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