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Economics explained
Category:
The macroeconomy
Keynesians LRAS curve
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Keynesians LRAS curve
Keynesians LRAS curve are perfectly elastic at low rates of output, then upward sloping over a range of output and finally perfectly inelastic.
From 0 to Y, output can be raised without increasing the price level. When output and hence employment are low, fi rms can attract more resources without raising their prices.
As output rises from Y to Y1 , fi rms begin to experience shortages of inputs and bid up wages, raw material prices and the price of capital equipment.
When output reaches Y1 , the economy is producing the maximum output it can make with existing resources
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