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Chapter 24: Q 25. (page 602)

Briefly explain the reason for the near-vertical shape of the SRAS curve on its far right.

Short Answer

Expert verified

The reasons why the SRAS curve is near vertical on its far-right are given below.

Step by step solution

01

Step 1. Definition

The SRAS (short-run aggregate supply) curve is a curve that shows that if there is an increase in price level and you will be moving along the SRAS, there will be an increase in the amount of real GDP which will be produced in an economy.

02

Step 2. Explanation

On its far-right, the SRAS curve is vertical because the main reason is that the economy is doing great and operating at its full capacity.it does not matter what the price levels are because companies are not able to produce more, the reason is that they (workers and companies) already working with their full capability.

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Most popular questions from this chapter

Will the shift of SRAS to the right tend to make the equilibrium quantity and price level higher or lower? What about a shift of SRAS to the left?

How would a dramatic increase in the value of the stock market shift the AD curve? What effect would the shift have on the equilibrium level of GDP and the price level?

How is pressure for inflationary price increases shown in an AD/AS model?

If households decide to save a larger portion of their income, what effect would this have on the output, employment, and price level in the short run? What about the long run?

What is the neoclassical zone of the SRAS curve? How much is the output level likely to change in the neoclassical zone?
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