Question

A typical Keynesian aggregate supply (AS) curve _______________ and a typical Keynesian Phillips curve _____________. is vertical; is vertical slopes downward; slopes downward slopes upward; slopes upward slopes upward; slopes downward

Answer 1

Answer: Option (D) is correct.

Explanation:

Keynes aggregate supply curve is upward sloping because of law of supply. Law of supply states that there is a positive relationship between the price of a commodity and supply of a commodity. So, if there is an increase in the price of a commodity, then as a result the supply for that commodity also increases and vice-versa.

Keynes Phillips curve is downward sloping because of the trade off between inflation and unemployment. There is an inverse relationship between the inflation and unemployment in an economy. If an economy wants to reduce inflation then they have to accept higher unemployment.