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What determines how much real GDP responds to changes in the price level along the short-run aggregate supply curve?

Short Answer

Expert verified

As the result,a modification in the optimal price level may force the GDP to react quickly.

Step by step solution

01

Step: 1 Short run supply curve:

In the short run, the price of production factors affect just how GDP responds to price fluctuations. The supply curve is steeper, implying that people are better informed in the short run and prices respond more quickly.

02

Step: 2 Result:

In above disscussion the result as,a modification in the optimal price level may force the GDP to react quickly.

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Most popular questions from this chapter

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Consider a country with an economic structure consistent with the assumptions of the classical model. Suppose that businesses in this nation suddenly anticipate higher future profitability from investments they undertake today. Explain whether or how this could affect the following:

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dCurrent equilibrium saving

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Suppose that the Keynesian short-run aggregate supply curve is applicable for a nation's economy. Use appropriate diagrams to assist in answering the following questions:

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