Aggregate Supply Curve
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I am struggling understanding the following:
Why does the aggregate supply curve become very steep after potential output is reached?
What does it mean for inflation when the demand curve shifts and crosses into this steep portion of the supply curve?
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This solution discusses an aggregate supply curve.
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The aggregate supply curve indicates the quantity produced at a given price level. Since price level in on the y axis, we will see a steeper curve when price levels are increasing rapidly. So, what we're really looking for is a reason why price levels would be increasing more rapidly with the same increase in ...
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