MACROECONOMICS
MACROECONOMICS
14th Edition
ISBN: 9781337794985
Author: Baumol
Publisher: CENGAGE L
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Chapter 17, Problem 1TY
To determine

To illustrate: That fluctuations happens only in inflation.

Expert Solution & Answer
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Answer to Problem 1TY

The supply curve has been explained.

Explanation of Solution

When the supply curve is vertical, the change in price adjusts any types of fluctuation in growth of aggregate demand, which is explained in the below shown figure. In the figure xaxis gives the measure of output while yaxis provides the price level.

The output supply is fixed, for which the supply curve will be vertical. There is a shift in the demand curve from D1 to D2 according to increase in the aggregate demand. Also, the price level increases from P1 to P2 with the increase in demand, and the supply curve is vertical. There will be no change in the output, which remains at OQ level.

  MACROECONOMICS, Chapter 17, Problem 1TY

Economics Concept Introduction

Introduction: The relationship between supply of quantity and cost of goods or services, when represented graphically, it is called a supply curve.

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