Introduction to Economics 2 Deneme Sınavı Sorusu #349937

According to Keynesian economists, why is the supply curve is horizontal?


The economy is underemployment GDP level.

 

The economy is at a low level of production.

 

The economy is always at full of employment.

 

The demand is in decrease.

Stabilization policies are effective.


Yanıt Açıklaması:

There are different approaches among economists regarding the shape of the short-run aggregate supply curve, in other words, the slope of the short-run aggregate supply curve. Classical economists argue that the short-run supply curve is completely vertical or rather steep because the economy is always at full of employment as a result of dynamics of the market mechanism. According to this view, since the economy is in full employment, it is not possible to increase the total output even in the short-run. Keynesian economists argue that the supply curve is horizontal because the economy is underemployment GDP level. According to this view, it is possible to increase the total production without changing the general price level. When the economy moves from underemployment to full employment due to the increase in production, the general price level will start to rise.

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