Chapter 11: Q.38 (page 292)
What is the Keynesian zone of the SRAS curve? How much is the price level likely to change in the Keynesian zone?
Chapter 11: Q.38 (page 292)
What is the Keynesian zone of the SRAS curve? How much is the price level likely to change in the Keynesian zone?
All the tools & learning materials you need for study success - in one app.
Get started for freeDo neoclassical economists believe in Keynes’ law or Say’s law?
Economists expect that as the labor market continues to tighten going into the latter part of 2015 that workers should begin to expect wage increases in 2015 and 2016. Assuming this occurs and it was the only development in the labor market that year, how would this affect the AS curve? What if it was also accompanied by an increase in worker productivity?
Describe the mechanism by which demand creates its own supply.
Table 11.4 describes Santher's economy.
Price Level | AD | AS |
50 | 1000 | 250 |
60 | 950 | 580 |
70 | 900 | 750 |
80 | 850 | 850 |
90 | 800 | 900 |
a. Plot the AD/AS curves and identify the equilibrium.
b. Would you expect unemployment in this economy to be relatively high or low?
c. Would you expect prices to be a relatively large or small concern for this economy?
d. Imagine that input prices fall and so AS shifts to the right by units. Identify the new equilibrium. e. How will the shift in AS affect the original output, price level, and employment?
In the AD/AS model, what prevents the economy from achieving equilibrium at potential output?
What do you think about this solution?
We value your feedback to improve our textbook solutions.