An adjustment "asymmetry" in aggregate supply is
A)the concave shape of the AS curve.
B)the convex shape of the AS curve.
C)the difference in speed of a rightward shift versus a leftward shift (when wages adjust to output gaps).
D)the difference in speed of increases in factor prices versus wage rates.
E)the difference in speed of decreases in output levels.

Question

Quizplus · Accepted Answer

An adjustment "asymmetry" in aggregate supply refers to the difference in speed of a rightward shift versus a leftward shift in the short run AS curve. This occurs because wages (or other input prices) adjust faster to positive output gaps than to negative output gaps, leading to a slower adjustment process when shifting the AS curve to the left. This can cause temporary periods of inflation or recession when there is a shock to the economy. Therefore, the correct choice is C.

An Adjustment "Asymmetry" in Aggregate Supply Is