Question

Read the statement below carefully, and decide whether it is true or false. And then EXPLAIN your answer (whether “true “ or “false”).

The Keynesian range of the aggregate supply curve applies when the economy is at or near full employment.

Answer 1

The aggregate supply curve is divided into three ranges , the horizontal range , the intermediate range , the vertical range .

The horizontal range is the Keynesian range where large amount of spare capacity is available in the economy . So the supply curve is elastic in nature . Hence , the economy is not at or near full employment at this range . At the intermediate section the economy approaches towards full employment .

FALSE