Question

t s 4. The AS curve slopes upward because higher cyclical output both increases costs of production and gives firms a better bargaining position to raise prices. Fale it describe how economic fluctation lilee banned ecossionan affect ecolution of inflation 5. A multiplier effect, making a demand shock have a multiplicative effect on aggregative output, could arise from some consumers responding to temporary income fluctuations.
true or false？explain

Answer 1

Fourth statement is false while the fifth statement is true

Aggregate supply curve slope upwards because of sticky wages sticky prices and misconception theory. accordingly when the prices of the goods and services are increased, nominal wages are not increased but real wages are increased so more labour is supplied which increases production.

However it is true that temporary income fluctuation which means, increase in the disposable income in the short run, will have a multiplier effect because of corresponding rounds of increase in disposable income due to the existence of marginal propensity to consume.