Traditional Culture Encyclopedia - Traditional culture - What do each of the three curves of aggregate supply look like?
What do each of the three curves of aggregate supply look like?
1. Classical Curve
In the long run, the level of employment in the economy does not vary with price changes, but is always at full employment, when the aggregate supply curve is the only vertical line. The classical curve is based on the assumption that wages are fully flexible and can change rapidly in response to changes in the supply and demand for labor, so that wages can be adjusted to keep the labor market in a state of equilibrium with full employment.
2. Keynesian Aggregate Supply Curve
The Keynesian Aggregate Supply Curve is a level Aggregate Supply Curve, which suggests that, at a given price level, manufacturers are willing to supply any quantity of a product demanded by society. The Keynesian aggregate supply curve is based on the assumption that when there is unemployment, wages do not change much or at all (i.e., wages are rigid), and thus unemployment persists for a period of time.
3. Normal Curve
The normal aggregate supply curve lies between the two special cases of the classical and Keynesian aggregate supply curves, and in the short run the realistic aggregate supply curve is more likely to be a curve that slopes upward to the right.
Extended information:
Slope of the aggregate supply curve
When aggregate demand shifts. That is, when the aggregate demand curve shifts, the slope of the aggregate supply curve is different, and the resulting changes in prices and national income are different. The slope of the aggregate supply curve reflects the degree to which aggregate supply responds to price changes.
A large slope of the aggregate supply curve (i.e., a steeper aggregate supply curve) indicates that aggregate supply is less responsive to price changes. A small slope of the aggregate supply curve (i.e., a flatter aggregate supply curve) indicates a large response of aggregate supply to price changes.
Baidu Encyclopedia - Aggregate Supply Curve
Baidu Encyclopedia - Long Run Aggregate Supply Curve
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