Please note that this is a multi part quesition; thank you so much for your time and effort it means so much to me! Figure 1: Hayek’s (Classical) AD-AS Model (Image normally goes here) Part 1: Why does Hayek’s aggregate supply curve always lead to an equilibrium level of national output equal to the full-employment level of real GDP?
Please note that this is a multi part quesition; thank you so much for your time and effort it means so much to me!
Figure 1: Hayek’s (Classical) AD-AS Model
(Image normally goes here)
Part 1: Why does Hayek’s
Part2: Hayek says that markets will heal themselves and that government should not intervene. How does the AD-AS model reflect Hayek’s idea that governments cannot increase real GDP beyond the level that the free market economy is able to produce?
Part 3: Do you believe that the Hayek’s classical AD-AS model explain the factors that cause changes (shifts) in AS realistically? Why or why not?
1.
As shown in the diagram Yf is the natural rate of output that an economy produces when unemployment at its natural rate, it means that Yf is the full-employment output or potential output.
Yf or potential level of output is determined by the available stock of labor and capital and the level of technology.
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