Exhibit 14-6 Aggregate supply curve

In Exhibit 14-6, when the economy moves from a GDP of $1,000 billion to a GDP of $1,100 billion,

Question

Exhibit 14-6 Aggregate supply curve

In Exhibit 14-6, when the economy moves from a GDP of $1,000 billion to a GDP of $1,100 billion,

Quizplus · Accepted Answer

According to the aggregate supply curve in the exhibit, an increase in GDP from $1,000 billion to $1,100 billion results in an increase in both real GDP and employment, but only under conditions of price level increases. This is shown by the shift of the aggregate supply curve from AS1 to AS2, indicating that firms are willing to supply more output at higher prices. The increase in real GDP and employment is a result of firms expanding production to meet the higher demand at higher prices.

Exhibit 14-6 Aggregate Supply Curve