Question

a. Describe the short-run determination of equilibrium real GDP and the price level in the classical model. b. Discuss the essential features of Keynesian economics and explain the short-term aggregate supply curve.

Answer 1

агу 05 WEDNESDAY 6th Week 036-330 7 / / TT February 0 The classical mooled led by ne with J. b gay Daud nicanolo, Marshall etc. believes in the inusible hand on the process of self adjustment of the mannet. 30 accandings to the classical model the equilibat un neal GDP and the price level in the economy is determined by the two Important mannet fonces such a bemand to supply fonce a esta . "The two main blocks of classical model are the sayslaw of mannete & the Quantity theony of money, originally presented by David heme and refined & and modified by Irving fishen in 194. - The says how of manyet believes Podelioved in mage pouce flexility that supply creates its own demand... which will automatically ensune Full employment in the economy.

UU February THURSDAY THURSDAY 6th Week 037-329 February The ere og econom on Shont we can suplain that the equilibrian price and plantity is ar determined by the interaction betueen 10. AD raggregate demand E AS (Aggregate Sipples Cine) .. Burow s a und 2 wogo et And as we know classical as alivaye believed that there will be full employment in the economy in the longchen, so the Longrun & As is vertical 02:22) Yenido RAST olella ols tech A anale the 03 we lame ca 1 real Cup . )

qg of қоцоо дом, The essential features of keyne o economics are : 10 unden employment equilibrium. & wage puce rigidity. o government intervention in the man (4 Short-nun analysis 6 keynesian analegur contin technique of a compernative statics" 02 0 Marey plays a crucial role in his at analeffical framework, the discussed a the stone value of money in this analysis. we n analegue conforms to th 1 / O The Shont-nun aggregate suppey Cume is an upuand stepping are leade to shows that a highen price level leads to mone output of ISRAS SAN ATLAS 8 price ford f 2020 MARCH WK M T W T F.SS 9 30 31 10 2 3 4 5 6 7 8 Total output