2.3 keynesian graph

Question 1

what is Keynesian view of LRAS?

Answer 1

he believes supply is more price elastic at lower levels of national output and perfectly price inelastic at full employment

Question 2

What does Keynesian theory suggest about the shape of the long-run aggregate supply (LRAS) curve?

Answer 2

The LRAS curve is vertical, indicating that in the long run, supply is determined by factors such as technology and resources, not by the price level.

Question 3

True or False: In the Keynesian model, the long-run aggregate supply is affected by changes in the price level.

Answer 3

False

Question 4

Fill in the blank: Keynesian economics emphasizes that in the short run, the aggregate supply curve is _______.

Answer 4

upward sloping

Question 5

What key factors determine the position of the long-run aggregate supply curve in Keynesian economics?

Answer 5

The position of the LRAS curve is determined by the economy’s productive capacity, including resources, technology, and institutional factors.

Question 6

In the Keynesian graph, what happens to the aggregate supply when there is a change in aggregate demand in the short run?

Answer 6

An increase in aggregate demand can lead to higher output and employment in the short run, moving the economy along the upward sloping aggregate supply curve.

Question 7

what happens if ad keeps increasing in Keynesian graph?

Answer 7

as ad increases in the short run when sras is perfectly elastic output will increase but not price but when ad reaches lras prices will start to inflate as the amount of spare capacity decreases.

Question 8

why should productive spare capacity decrease?

Answer 8

so fops can work at full capacity