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In: Economics

if the short run aggregate supply curve intersects the aggregate demand curve to the right of...

if the short run aggregate supply curve intersects the aggregate demand curve to the right of potential GDP wages will rise?

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Expert Solution

SHORT RUN AGGREGATE SUPPLY CURVE

The short run aggregate supply curve is upward slopping curve, it is because of the reason that there exists a direct proportional dependence between the quantity supplied and the price. Which means that the quantity supplied will increase with the increase in price.

AGGREGATE DEMAND CURVE

The aggregated demand curve is downward slopping in nature. The aggregate demand curve is the total demand for the quantity of goods arise in an economy. And there exists an Inverse relationship between the quantity of goods and price level or in other words vice-versa to the supply curve.

When the short run aggregate supply curve intersects the aggregate demand curve to the right of potential GDP then the result will be that: there will be rise in wages. And this will also push the short run aggregate supply curve to the left and the GDP to the back or the previous stage. Hence the answer is that there will be a rise in the wages.

Rahul Sunny answered 2 years ago
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