Booms and recessions (III): aggregate supply and demand - The short-run aggregate supply curve
3 important questions on Booms and recessions (III): aggregate supply and demand - The short-run aggregate supply curve
What is the intuition behind the concept that unexpected price raises result in a positively sloped AS-curve?
Once nominal wages are set, an increase in price level decreases the real wage. Lower real wages means more demand for labour and thus more production.
Why is the AS-curve more accurate in a logarithmic measured P rather than a linear one?
Because fixed changes can give greatly different procentual differences. This is fixed by taking the logarithm of the price levels
What does ρ denote? (AS-curve)
ln P
The ln of the Pricelevel
The ln of the Pricelevel
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