Aggregate supply and the as curve, Macroeconomics

Assignment Help:

Aggregate supply and the AS curve

The AS curve is the aggregate supply as a function of P. It is horizontal when thesupply is low and upward sloping when the supply is high.

From the relationship between L and P we can derive the relationship between YS and P as YS is concluded by L by the production function (the higher L, the higher the). 

693_Aggregate supply and the AS curve1.png

Figure: The relationship between YS and P

Between points A and B prices are constant and firms produce an amount exactly equal to aggregate demand. Here reversed Say's Law and IS-LM model apply. In this interval, AS-AD model is redundant. Between points B and C we have a positive relation between P and YS. Neither reversed Say's Law nor IS-LM model apply. 

It is, though, unreasonable to believe that there would be a 'sharp edge' in the relationship between L and P and between YS and P in real economy. Schedules are drawn this way to simplify the explanation. A more reasonable assumption would be that relationships are smooth curves.

1557_Aggregate supply and the AS curve.png

Figure: More realistic relationships between L and P and between YS and P


Related Discussions:- Aggregate supply and the as curve

Impact will high and variable rates of inflation, What impact will high and...

What impact will high and variable rates of inflation have on the economy? How will they influence the risk accompanying long-term contracts and related business decisions?

Price elasticity of demand, Suppose that quantity demand falls by 30% as a ...

Suppose that quantity demand falls by 30% as a result of a 5% increase in price. What would be the price elasticity of demand for this good?

Monetary sector, If the reserve bank wants to pursue a contractionary polic...

If the reserve bank wants to pursue a contractionary policy, what should it do?

Trade, What is the difference between merchantilism and absolute theory?

What is the difference between merchantilism and absolute theory?

Determine the gross domestic product, Determine the Gross domestic product ...

Determine the Gross domestic product Gross domestic product is the total value of an economy's domestic output of goods and services. Gross national product is the similar as

Money illusion, A significant argument for the augmentation has to do with ...

A significant argument for the augmentation has to do with concept of money illusion. Money illusion means that you care about nominal rather than real amounts. Imagine that your s

Business cycles, Elplain the casual factors of the traditional business cyc...

Elplain the casual factors of the traditional business cycle and its effects on sectors of the economy

NATIONAL INCOME VARIATION, give and explain the different causes of nationa...

give and explain the different causes of national income variation

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd