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

The aggregate demand curve, The aggregate demand curve shows the combinatio...

The aggregate demand curve shows the combinations of the price level and the level of output at which the goods and money markets are simultaneously in equilibrium. Let us now go o

Explain the long-run phillips curve, Q. Explain the long-run Phillips curve...

Q. Explain the long-run Phillips curve? The long-run Phillips curve The augmented Phillips curve has an important consequence: the long-run Phillips curve must be vertical

Managers could address the challenge, Analyze the ways in which managers co...

Analyze the ways in which managers could use the Federal Register to determine the single most significant challenge associated with its use, and how managers could address that ch

Describe the corresponding equilibrium strategies, Only two identical firms...

Only two identical firms i = A;B, each with marginal cost MCi = 40 and no fixed cost, operate in a market with demand: Q     p 1    160 2    120 3     90 4     70

What is is-lm model with inflation, Q. What is IS-LM model with inflation? ...

Q. What is IS-LM model with inflation? The IS-LM model with inflation  The basic assumption We developed IS-LM model with constant wages and prices. We can now exten

What are the two types of money, What are the Two types of money In mos...

What are the Two types of money In most countries, one can identify two "types of money": Currency and coins Bank deposits Total value of all the money in a

Determine the current in the neutral conductor, A 415V, 3-phase, 4 wires, s...

A 415V, 3-phase, 4 wires, star-connected system supplies three resistive loads as shown in Figure. Determine (a) The current in each line and (b) The current in the neutr

Cumulative external cost of production, A textile mill releases pollution i...

A textile mill releases pollution into nearby wetlands, and the associated health and ecological damages are not considered in the private market. Suppose you observe the following

For high school graduates increase the wage, Arrow up or down: An increase ...

Arrow up or down: An increase in the wage for high school graduates __________ the opportunity cost of college. A) arrow up B) Arrow down

Describe supply and demand in macroeconomics, Q. Describe Supply and demand...

Q. Describe Supply and demand in macroeconomics? In microeconomics, we are careful to distinguish between demand, supply and observed quantity. The first two are hypothetical c

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