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Economics A Level

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Question:

Explain what happens when AD increases with a Keynesian AS Curve

Author: go kys



Answer:

-AD Increasing can lead to Different outcomes, depending where the AD originally Started from. -If AD started when the LRAS was Perfectly Elastic, then an Increase means that Output Rises while Prices remains the Same. This suggests the Economic is in Depression -If AD started when the LRAS was Curving, then an Increase means both Output and Prices rise. Suggests the Economy is below Full Capacity -If AD Rises when its Perfectly Inelastic, only Price will Rise. This suggests the Economy is in Full Capacity.


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-AD Increasing can lead to Different outcomes, depending where the AD originally Started from.
-If AD started when the LRAS was Perfectly Elastic, then an Increase means that Output Rises while Prices remains the Same. This suggests the Economic is in Depression 
-If AD started when the LRAS was Curving, then an Increase means both Output and Prices rise. Suggests the Economy is below Full Capacity
-If AD Rises when its Perfectly Inelastic, only Price will Rise. This suggests the Economy is in Full Capacity.
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go kys
go kys