G Explain the agg.S curve in SR, LR

Question 1

Agg. S (relates Plevel and Q real Y supplied; represents the Q that firms will prod. at different Plevels)

Answer 1

(relates Plevel and Q real Y supplied; represents the Q that firms will prod. at different Plevels)

Question 2

VRS AS CURVE (wages, input costs, prices = fixed)…

Answer 2

…; producers can + or - Q w/o affecting Prices; Perfectly elastic

Question 3

SR (output prices change in prop. to Plevel but some input prices are stick;dont adjust in Plevel in SR) AS CURVE

Answer 3

When Q +’s, then Plevel +’s, but firms see no change in input prices in the SR

Firms respond by increasing Q in anticipation of greater profits from higher output prices. Result is an upward-sloping SRAS curve.

Question 4

LR AS CURVE (Potential GDP or full-emp GDP)

Answer 4

Perfectly inelastic; Wages and other input prices change proportionally to the price level, no Plevel has no LR effect on Agg.S