Economists who view the AS curve as upward-sloping believe that changes on the demand side _______ result in changes in Real GDP
in the short run. Economists who view the AS curve as vertical believe that government changes from the demand side________________ to raise Real GDP in the short run
Economists who view the AS curve as upward-sloping believe that changes on the demand side <u>CAN</u> result in changes in Real GDP in the short run. Economists who view the AS curve as vertical believe that government changes from the demand side <u>CANNOT DO ANYTHING</u> to raise Real GDP in the short run.
Explanation:
In the short run, the aggregate supply (AS) curve is upward sloping because most input prices are fixed in the short run. So a change in the aggregate demand will cause the AS curve to change in the short run. If the demand increases, the aggregate supply will increase, and vice versa.
On the long run, input prices are not fixed, so the AS curve is vertical and any changes in the aggregate demand will not affect it.
In the short run, the aggregate supply curve will react to price level, which means it is upward sloping rather than vertical. If the price level increases, quantity supplied will increase. If the price level decreases, the quantity supplied will decrease.
People need to have [Purchasing Power] in the economy to be able so spend money. Purchasing power means having the financial ability to spend money in buying goods and services.
