Answer to Question #171620 in Macroeconomics for Zaheer

Question

Explain why long-run Aggregate Supply schedules are usually drawn vertically and shortrun Aggregate Supply schedules are normally upward-sloping.

Explain why long-run Aggregate Supply schedules are usually drawn vertically and shortrun Aggregate Supply schedules are normally upward-sloping.

Answer 1

The​ long-run aggregate supply schedule is vertical because in the long​ run, changes in the price level do not affect potential​ GDP, as potential GDP depends on the size of the labor​ force, capital​ stock, and technology.

The short-run aggregate supply schedule is upward sloping because the quantity supplied increases when the price rises. In the short-run, firms have one fixed factor of production (usually capital ). When the curve shifts outward the output and real GDP increase at a given price.