Question

Exercise 4. The slope of the AS curve. a) Why does the AS curve slope upward? b) If the AS curve were more steeply sloped, how would the economy respond differently to aggregate demand shocks (shocks to a)? aggregate supply shocks (shocks to 5)? sloped? c) If the curve were more steeply sloped, how would the economy respond differently to d) What kind of economic changes in the economy would lead the curve to be more steeply

Answer 1

The Slope o the As Cunve- The As curve slope upuj) an ds means that theγe dinectetathip blw th e Prri CC at ohich the pgtoducer can cell theri product, and the guantity the iy Product that they can and toil cel. cur ve wey more steeply lered, A stoe As Would mean that butput would luu ctua te Less, bet inglati on would llucluate, måe unde AD Shocks I the Cuyve weme steeply A cLeeperroald mean that Loth outpu in latto would uate tes pice Shock. A Steepen AS would mean that oth output and inlaton was les ticky. Co might make businese more y ina that atonal and forwar king when seting pvices might make ing latron les< stick and more bleχ¡ble