Say’s Law states that supply creates its own demand. In theneoclassical zone on the graph...

LRAS ADn SRAS ADi ADk En Ei a Pi ----Intermediate zone Ek Keynesian zone Yi Yn Real GDP

Say’s Law states that supply creates its own demand. In the neoclassical zone on the graph above, supply is at its potential GDP, at full capacity. When aggregate supplies have reached their full potential output, what happens if demand shifts to the right?

-The aggregate supply outputs increase and LRAS shifts to the right.

-The aggregate demand prices decrease as AD shifts to the right.

-The aggregate demand prices increase as AD shifts to the right.

Expert Solution

The aggregate demand prices increase as AD shifts to the right.

(Due to increase in demand, AD shifts to the right so aggregate demand prices increase.)

Rahul Sunny answered 2 years ago

supply creates its own demand. explain

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