Describe the long run average supply curve

Reference no: EM133438954

Questions:

a. Describe the Long Run Average Supply Curve, the factors it depends upon, and its slope.
b. Describe three theories of why the Short Run Aggregate Supply is upward-sloping?
c. Draw a single diagram showing the Long Run Aggregate Supply Curve and Short Run Aggregate Supply Curve together.
Define and draw an Aggregate Demand Curve and explain the three reasons it slopes downward.
e. Suppose that a decrease in the Aggregate Demand for goods and services pushes the economy into recession. What happens to the price level? If the government does nothing, what ensures that the economy eventually returns back to the natural rate of output? Illustrate your answer with diagrams.
2. Assume a closed economy. Suppose the government changes the tax laws to give firms an incentive to increase investment. With the aid of diagrams:
a. Explain how this would affect Aggregate Demand.
b. Explain how this would affect Aggregate Supply.
c. Explain how this would affect the price level, and real GDP, in the short run.
d. Explain how this would affect the price level and real GDP, in the long run.

Reference no: EM133438954

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