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Explain why the long-run aggregate-supply curve is vertical. • Explain three theories for why the short-run aggregate-supply curve slopes upward. • What variables shift both the long-run and short-run aggregate-supply curves? • What variable shifts the short-run aggregate-supply curve but not the long-run aggregate-supply curve?

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Principles of Economics (MindTap C...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305585126

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Chapter
Section
BuyFindarrow_forward

Principles of Economics (MindTap C...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305585126
Chapter 33.4, Problem 4QQ
Textbook Problem
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Explain why the long-run aggregate-supply curve is vertical. Explain three theories for why the short-run aggregate-supply curve slopes upward.What variables shift both the long-run and short-run aggregate-supply curves?What variable shifts the short-run aggregate-supply curve but not the long-run aggregate-supply curve?

Sub part (a):

To determine
Why long-run aggregate supply curve is vertical.

Explanation of Solution

The supply depends upon the price level in the economy. When the price level is higher, the suppliers will be receiving higher income and this would incentivize them to increase the supply in the economy and vice versa. The aggregation of the supply curves of all the firms in the economy is known as the aggregate supply curve.

In the short run period, the aggregate supply curve represents the relationship between the price level in the economy and the supply by the firms. In the long run period, the aggregate supply curve represents the relationship between the price level in the economy and the quantity of real GDP supplied by the firms in the economy...

Sub part (b):

To determine
Why long-run aggregate supply curve is vertical.

Sub part (c):

To determine
Why long-run aggregate supply curve is vertical.

Sub part (d):

To determine
Why long-run aggregate supply curve is vertical.

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