Why the long-run aggregate-supply curve is vertical

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Explain the following :

a) Why the long-run aggregate-supply curve is vertical.

b) Three theories for why the short-run aggregate-supply curve is upward-sloping.

For each part of this question, please indicate whether the economic event works initially (that is, in the short run) to shift the (i) aggregate demand curve, (ii) the short-run aggregate supply curve, (iii) the long-run  aggregate supply curve, or (iv) both the short-run and long-run aggregate supply curves. 

a) The Central Bank increases the money supply. 
b) The country experiences a wave of immigration. 
c) Workers become more concerned about inflation (that is, the expected price level goes up) and are able to 
bargain for higher wages from their employers. 
d) Firms become more confident about future economic prospects. 
e) The government passes a fiscal stimulus bill that increases government spending

 

 

Reference no: EM13833320

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