4-2b Three Segmented Aggregate Supply
We will be using what is known as the ‘three‐segmented’ Aggregate Supply curve. The three sections are: 1) Horizontal or Keynesian Range, 2) Intermediate Range, and 3) the Classical or Vertical Range. The curve and it’s ranges are seen in the graphs below. We smooth out the kinks to make it easier to draw, but know where they are. An economy at Full Employment has an equilibrium in the Intermediate Range, Recession would be in the Keynesian range, and Inflation would be in the Classical Range.
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