Ranges On The As Curve

Ranges on the AS Curve December-03-08 8:39 AM

Ranges on the AS Curve AS AD1 Income Price

Classical Range

AD0

Y1 P1 Y0 P0

Intermediate Range Keynesian Range

Full Employment, Full Output

Q0 E0

Q1 E1

OUTPUT EMPLOYMENT

• Keynesian Range: is known as the horizontal section of the aggregate supply curve. It is referred to as the Keynesian section because there is substantial unemployment level occurring at that point. Recall John Maynard Keynes came to fame in the time period of the great depression. • Intermediate range : In the intermediate section of the aggregate supply curve there is a direct relationship between employment and income levels. • Classical range : is known as the vertical section of the aggregate supply curve. In this section, classical economists' concern themselves with the belief that the economy will operate at full employment which will result in full output

Unit 3 - Fiscal Policy Page 1