2F. Condition of the Economy using the Production Possibilities Curve Points A, B, and C represent full employment (4 to 6% unemployment/ the Rate of Unemployment”). Point D “Natural inside the curve represents high unemployment (not operating at full output). Point E represents an unattainable point in the short-run. Point E can be reached in the long-run through economic growth. Moving from one on the curve to another on the curve necessitates that you give up the production of some capital goods or consumer goods to gain more of the other. (What you give up is your opportunity costs). All of the possible points you can produce at on the curve represents trade-offs. 2G. Three part AS Model (with Keynesian and Classical Thinking) Note: Keynes believed that and prices are sticky downward, and the economy would be slow to self correct because of it. If AD intersects AS in the Keynesian Range we could be stuck in a recession for a long period of time, unless government took action to increase AD by government spending. The Intermediate Range is the standard SRAS Curve in the ADAS Model where wages and prices are more responsive. The Classical Range is the LRAS curve in the ADAS Model indicating full employment.
2F. Condition of the Economy using the Production Possibilities Curve Points A, B, and C represent full employment (4 to 6% unemployment/ the “Natural Rate of Unemployment”). Point D inside the curve represents high unemployment (not operating at full output). Point E represents an unattainable point in the short-run. Point E can be reached in the long-run through economic growth. Moving from one on the curve to another on the curve necessitates that you give up the production of some capital goods or consumer goods to gain more of the other. (What you give up is your opportunity costs). All of the possible points you can produce at on the curve represents trade-offs. 2G. Three part AS Model (with Keynesian and Classical Thinking) Note: Keynes believed that and prices are sticky downward, and the economy would be slow to self correct because of it. If AD intersects AS in the Keynesian Range we could be stuck in a recession for a long period of time, unless government took action to increase AD by government spending. The Intermediate Range is the standard SRAS Curve in the ADAS Model where wages and prices are more responsive. The Classical Range is the LRAS curve in the ADAS Model indicating full employment.
2018-2019_frsg_apmacrofreeresponsestudyguide.docx.docx