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Unformatted text preview: curve is a vertical line, as output is dictated by the factors of production alone. But what does the equation for the aggregate supply curve mean? Basically, this equation means that output deviates from the natural rate of output when the price level deviates from the expected price level. The constant, a, shows how much output changes due to unexpected deviation in the price level. It is also important to notice that the slope of the aggregate supply curve is (1/a). Figure %: Graph of the aggregate supply curves depicts the short-run aggregate supply curve and the long- run aggregate supply curve. Notice that the axes are the same as for the aggregate demand curve. The vertical axis is the price level. The horizontal axis is output or income. Also notice that the short-run aggregate supply curve is downward sloping with slope equal to (1/a) while the long-run aggregate supply curve is vertical with no slope....
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This note was uploaded on 02/09/2012 for the course ECO ECO2013 taught by Professor Jominy during the Fall '08 term at Broward College.
- Fall '08