For the labour market with wage floor, given a price level such that , the aggregate supply is
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2 marks, −0.666666666666667MacroeconomicsAD-AS modelKeynesian and short-run aggregate supplyModerateabout 3 min
DSE 2017 Question 45: AD-AS model
Answer and worked solution
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Plain-text version
For the labour market with wage floor, given a price level P such that 1/2≤ 1-W₀/P, the aggregate supply is (A) f(1/2) (B) f(1-1/2P) (C) f(1-W₀/P) (D) f(1-W₀/2P)
Also written as: For the labour market with wage floor, given a price level P such that 1/2<= 1-W_0/P, the aggregate supply is
AD-AS model has come up 59 times in 7 exams since 2004.
What this question tests
This question is on Keynesian and short-run aggregate supply, part of AD-AS model in Macroeconomics.
Why output responds to demand in the short run: sticky wages and prices, wage floors and upward-sloping supply.
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