Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
The AS curve
Say that nominal wage in year 1 (at a particular point in time) is equal to 1000. On the horizontal part of response curve, real wage is constant and equal to its maximum value. Let's say that (W/P) MAX = 10. On horizontal part P1 = 100 where P1 is the price level in year 1. Firms will use at most LB at this real wage. For firms to hire more than LB, P1should be higher than 10. We realize that AS curve at this point in time, AS1 will look like before. First, it's horizontal along P = 10, then for higher Y. it is upward sloping.
Assume that ΠW is equal to 10%. Subsequent year, nominal wages would be equal to 1100. Wages in year 2 are determined by ?Wthat is an exogenous variable, making wages in year 2 exogenous. As maximum real wage is given and equal to 10, we determine that P2 is equal 110 on the horizontal part of response curve and that P2> 110 on the downward sloping part. AS2 glides upwards up by 10% as given by wages inflation. Using same argument, P3 = 121 on horizontal part of the response curve at year 3 and so on.
Just like AD curve, AS curve is to glide downwards or upwards depending on whether ΠW < 0 or ΠW > 0 when we allow for inflation. As for AD curve, AS curve is applicable only at a specific point in time if ΠW ≠ 0. At another point in time, we should draw a new AS curve.
Figure: AS curve gliding if ΠW ≠ 0
Define the term- inflation Inflation between two points in time is defined as the percentage increase of price index between these two points in time.
the classical model assumes that consumption depends positively on disposable income. now suppose that consumption also depends on the real interest rate. a) sketch the loanable
unplanned changes in inventory are counted as inventory spending by firms.say true or false and justify
I am trying to figure out how to calculate the eqilibrium level of income and the multiplier
A nursing home contracts with an HMO for skilled nursing care at $2.00 PMPM. If costs are expected to average $120 per day, what is the maximum utilization of days per 1,000 member
Engineers sometimes add chlorine to pipes to disinfect water. It is desired to achieve four logs of kill. This means that the effluent concentration of microorganisms is 10 -4 tim
For retirement planning, you decided to deposit $1,000 per month and increase your deposit by $100 per month. How much will you have at the end of 10 years if the bank pays 3% annu
with help of is-lm technique explain the process of integration of money market and goods market by way of keynesian approach
Ashley can join a club for an annual fee of $20. if she can purchase golf balls at 40% off the retail price. Draw ashly's budget constraint if she joins and if she does not join th
Relation between nominal interest rate, real interest rate and inflation If we denote the nominal interest rate by R, the real rate by r and the expected inflation by p e then
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd